TNAG-0067-FCO40-103-Governors--reports-1968 — Page 24

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CONFIDENTIAL

Bank deposits

12. The Colony's economy has remained unimpaired. increased in each of the last four months of the year, and the value of exports rose by 16.9 per cent over 1966. Imports, on the other hand, recorded a slower growth rate of 3.5 per cent. The effects of the devaluation of sterling and the revaluation of the Hong Kong dollar, however, were severe.

13. The Communist effort seems to have moved from violence to attempts to increase support by finding popular grievances to exploit. This could be potentially dangerous, but the Communists have much leeway to make up.

14. There is reason to hope that confidence in the Colony will be maintained. Public morale is good, but educated young people in particular are anxious about their future.

Sir,

Hong Kong, 13 February, 1968

I have the honour in this despatch to attempt a review of the principal developments that have taken place in Hong Kong since my last periodic despatch dated 23 June, 1967.

2. Events continued to be dominated by the Communist confrontation which at the time of writing is still with us, although the phase of general violence, bombing and stoppages of work appears for the moment to be over. Although they have had little or no real encouragement from Peking and have succeeded in rousing the overwhelming majority of the people against them, the Communists, depleted as they are, have by no means abandoned their campaign of opposition to the Government.

3. My last despatch took events up to 4 June, 1967; but perhaps I may follow popular precedents by first providing a brief recapitulation of earlier events. The first wave of protests and token stoppages of work in May was organised by 'the Communists as a show of strength. It was followed, in June, by a more or less spontaneous outbreak of stoppages set off by the "poster war". On 1 June the law relating to the display of inflammatory posters was strengthened by emergency regulations and action was taken to remove the extensive crop that had appeared on Government buildings, public vehicles and elsewhere. In the doctrine of the cultural revolution street posters are regarded as the visible expression of the thought of the omnipotent "masses and must not be tampered with. On this issue Communist employees of the Star Ferry Co. stopped work. A minority of the workers at the Tai Koo Dockyard and Engineering Co. also downed tools and surrounded and detained the General Manager and two senior European staff members for several hours. Employees of the Government Mechanical Workshops in Kowloon and of the Hong Kong and China Gas Co. armed themselves with iron bars and other weapons, barricaded themselves in the buildings, and had to be forcibly evicted by the police. There were also similar stoppages of work at the Marine Department and Waterworks.

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4. In mid-June it became apparent that the Communists would risk antagonising the public by a major disruption of the life of the community, and what was called a "general strike" was proclaimed for 24 June. This decision no doubt reflected the views of the more extreme Communist faction, encouraged by the widespread reaction to the removal of posters as well as by a commentary in the People's Daily of 10 June which advocated support by "workers, peasants, the People's Liberation Army and the revolutionary masses' in China for the struggle in Hong Kong ".

5. On the eve of the proposed stoppage, Communist morale must have been shaken by an incident that occurred in Kowloon. After a small party of police were viciously attacked by a gang of men who subsequently retreated into the premises of the Plastic Workers General Union, strong police reinforcements were called up who, after meeting fierce resistance and suffering some casualties, forced an entry into the building and arrested over 50 people. This dramatically brought home the fact that union premises were not, as the Communists had supposed, immune from attack; and the fact that four of those engaged in the fight died from the injuries that they had sustained must have had a depressing effect on Communist spirits.

CONFIDENTIAL