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CONFIDENTIAL
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In 1969 we decided to impose a tariff from 1 January 1972 on cotton textile imports from the Commonwealth (including of course Hong Kong) and further damage is anticipated in the context of our application to join the European Economic Community.
6.
Mr Royle would like to make a gesture which would show the unofficial members of the Executive and Legislative Councils that we do care about Hong Kong. He believes that the psychological effect of the proposed grant would be out of all proportion to the sum involved. In particular, he feels that if we ignore Mr Tang's suggestion, which was made in the presence of the leaders of Hong Kong business and industry, those leaders are bound to take our refusal to follow up the suggestion as yet a further example of our lack of interest in Hong Kong, even when we would be in their eyes primarily helping ourselves in the process of helping the Colony. Mr Royle thinks that this in turn would be bound to colour local attitudes towards Britain and might well create prejudice against the award of contracts to British firms.
7. Although the Colony's revenue is buoyant, Hong Kong needs to increase its exports by about 15 per cent a year if industry is to expand sufficiently to provide oppor- tunities for its school-leavers in the labour market and so avert the risk of further disturbances. (It is estimated that half the total population of the Colony is under 21). We cannot tell whether Hong Kong will be able to maintain its remarkable record of economic growth. If there were to be at some stage a serious recession in the Colony it might become a financial burden on the British Government. These are the circumstances in which I have been pressed to make available from the Aid Programme grants of up to
CONFIDENTIAL
£400,000
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