TNAG-0067-FCO40-103-Governors--reports-1968 — Page 73

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5.

There then began a period of nearly two months of negotiations between the Chinese and the Portuguese for a settlement. The local Communist leadership in Macau demanded public apologies by the Governor, dismissal of certain officials, and compensation for those killed and injured and those who had suffered loss; while the C.P.G., through the Kwangtung Foreign Affairs Bureau, reinforced these demands and added one of their own, the cessation of Kuomintang activities in Macau and the handing over to China of seven KT agents arrested by the Portuguese in 1963. A policy of conciliation at almost any cost eventually had to be accepted by the Portuguese Government. Towards the end of January an agreement was reached that the Macau Government would issue a formal apology for the two incidents, recognise the guilt of the officials concerned, pay compensation amounting to the equivalent of over HK$2 million, hand over the seven K.M. T. agents and take action to restrict K.M.T. activities in Macau in future. Today, although the administration of the Colony remains nominally in the hands of the Portuguese, it is quite clear that their authority to impose their will, at any rate on supporters of the C.P.G., has almost entirely disappeared.

6.

Although Hong Kong's involvement in all this was minimal, the implications of the dispute for Hong Kong were very much more substantial. It appeared that the C.P.G. still considered that the advantage of having Macau (and hence Hong Kong) under alien administration were too important to sacrifice and that they had deliberately avoided taking back Macau, but had used the opportunity provided by the dispute to secure more limited aims; the elimination of K.M.T. activities and influence in the Province and the imposition of the maximum degree of humiliation on the Portuguese authorities. There were obvious lessons for us here in Hong Kong.

7.

The first demonstration that these lessons of Macau had been learnt by the Communits in Hong Kong came in February and March when, under pressure from the Hong Kong Seamen's Union (H.K.S.U.) the Royal Interocean Line (R. I.L.) management was compelled to apologise publicly and dismiss the captain of one of their ships, who had shot and wounded four Chinese members of his crew whilst in Australia. In April pro-Communist workers in a number of other companies began to put pressure on their managements and a new spirit of militancy amongst the rank and file became obvious. At the same time it became clear that pro-Communist leaders had released the tight control which they had hither to exercised over their union members and were, in accordance with the precepts of the Cultural Revolution, allowing the "masses" greater freedom to "struggle".

The pro- Communist press was also becoming increasingly abusive, attacking the Government on a variety of grounds but particularly over the issue of visits of American ships and servicemen to the Colony.

8.

In these conditions there was grave danger that a comparatively minor issue would start a major conflagration. The spark was provided by a dispute which arose in April in two artificial flower factories where the management

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