TNAG-0240-FCO40-276-Entitlement-of-Hong-Kong-to-generalised-tariffs-preferences--1970 — Page 129

CONFIDENTIAL

(a)

contrary to the general sense of the second sentence of paragraph 6 of Jones' letter, I should have thought Hong Kong's economic value to Japan as a trading partner would not continue regardless of heavy damage to her capability;

Yes

(b) Hong Kong is crucial to the growth of the Chinese economy,

at least in the next few years, and therefore to the growth- of Japan's trade with China;

(c) given Chinese political attitudes, particularly but not

only during the life of the present Japanese Government, the Chinese would not be prepared to accept substantial dependence upon Japan (for instance through long-term credit) as a substitute for the loss of foreign exchange earnings through Hong Kong. As was shown very clearly by the break with the Soviet Union in 1959/60, the Chinese prefer to accept large-scale economic sacrifices rather than significant restrictions on their freedom of political

manoeuvre.

Yours

Jom

owds eve

ever

(J.B. Denson)

c.c. D.J.C. Jones, Esq.

Geneva

A.F. Maddocks, Esq. Hong Kong

Commercial Section

Tokyo

J.G. Morrison, Esq. Board of Trade

CONFIDENTIAL