TNAG-0255-FCO40-291-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 74

3

growing population with rising expectations (more than 50 per cent of Hong Kong's population are under 21 years of age) could lead to civil disorder (of which the disturbances in 1966 and 1967 gave a foretaste). And civil disturbances (even if not deliberately fomented by China) could easily reach the poin: where whatever the economic use to China of Hong Kong (and in these circumstances it would rapidly diminish) the Chinese Government might feel that for political reasons it could not stand aside.

Economic

(0)

Unlike countries such as Taiwan and South Korea, Hong Kong cannot fall back on agriculture to provide a subsistence economy for its people in the event of a decline in the Colony':: export trade. Something like 100,000 new jobs will have to be provided each year for school leavers coming into the employment; market; to make this possible an annual increase of about 15 per cent in exports is estimated as the 'minimum required to give the expansion in industry necessary to provide these additional job. Increased taxation (which theoretically would be justified to cover increased defe ice costs! would prejudice the investment needed to secure this annual increas. Moreover, Hong Kong mist "trade-up" (pro luce more sophisticated goods) if the Colony 13 to retain its markets overseas; this in turn means that the Government will be i volved in considerable expenditure on the development of technical education, quite apart from heavy expenditure on essen :ial public works and on other social services such as housing, (there are still some 500,000 squatters, the medical services and the public assistance scheme. Should there be large scale unemployment as a result of failure to increase exports, civil disturbances might well ensue, and in such circumstances the possibility of increased expenditure by HIG cannot be ignored.

(1) A world wide sving to protectionism triggered off by the United States, or a restrictive import policy pursued by an enlarged EEC, could be a serious threat.

Secret

/(e)