0003230
G.F. 323
CONFIDENTIAL
10.
2
Conditions in many areas of China deteriorated during the summer.
Because of the resulting disruption of communications the import into the
Colony of foodstuffs from China was severely affected between July and
September.
Comparative order has been restored in China by the Army though
the disorders in Kwangtung delayed the opening of the Canton Fair by one
month.
11.
There is evidence that the influence of Chou En lai and the moderates
in Peking is increasing.
12.
The Colony's economy has remained unimpaired.
Bank deposits increased
in each of the last four months of the year, and the value of exports rose
by 16.9% over 1966. Imports on the other hand, recorded a slower growth rate
of 3.5%. 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.
CONFIDENTIAL
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