CONFIDENTIAL
Dear Carter,
#
O.D.35
19th May, 1967.
4/28
You will know that we in E.C.G.D. are being asked to back Costsin's negotiations with the Hong Kong Tunnel Company to secure the order for constructing the tunnel. This will be worth some £10a., the work will take some 3 years and there will be a further 7 years credit for repayment. We have, accordingly, to assess the acceptability of sanuming up to a £10m. risk on Hong Kong now, with our risk continuing at a variable figure for some 10 years ahead.
We are fast reaching the stage where Costains are pressing to complete negotia- tions and will require a firm decision from us. In order to give them this we for our part need to take nocount of the now situation brought about by the current political disturbances.
I should explain that we have hitherto regarded Hong Kong as a first-class 'A' risk along with other British colonies not verging on a change of political status. Fe have assumed that mainland China's economic self-interest will make her content to let the existing status of the Colony continue until the Crown lease expires. The current situation makes us now question whether this assumption is firm enough for us to accept a 10 year risk as a reasonable commercial proposition in present circumstances.
We in E.C.0.D. have not seen any cables from Hong Kong or Peking about these developments. I should like in the first place to put our interest on record and ask that we be sent copies of current material. This apart, I should appreciate it if you and the Foreign Office could let us have an urgent assessment of these developments.
We are, of course, concerned to know whether they are believed to indicate any basic change of attitude towards the Colony's status by the mainland authorities. And if they are not, to judge the likelihood of the situation getting out of hand to an extent which may forse the mainland authorities into an active militancy.
W. 8. Carter, Esq., C.V.D.,
Commonwealth office,
8.W.1.
/I
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