TNAG-0344-FCO40-380-Exports-from-Hong-Kong-to-France-1972 — Page 15

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CONFIDENTIAL

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We have to accept that Hong Kong is indefensible and that

if the Chinese wished to take over they could do so by force

at any time. Hong Kong's future therefore is bound in reality

solely by tacit agreement between ourselves and the Chinese.

Legally we maintain that Hong Kong was ceded to us in perpetuity

and the New Territories were leased until 1997. The Chinese

do not accept the legal constraint, but they have recently

made known in a number of ways, that they do not intend to

raise the question of Hong Kong for a long time. In the course

of a private conversation with Mr Malcolm MacDonald in October

1971, Chou En-lai mentioned the expiry of the New Territories

lease, the implication being that China did not intend to take

back Hong Kong at least until then. The Chinese have also

reassured a number of Hong Kong Chinese businessmen that Hong

Kong still has a considerable future.

4. China derives considerable benefits from the Colony which

provides easy access to world markets and serves as an invaluable

base for travel and intelligence activities. Hong Kong

depends heavily on China for essential supplies, especially

food, and so is of direct economic value to China. Between

a third and a half of China's foreign exchange earnings comes

via the Colony. These earnings play a major role in financing

China's trade deficits with other areas of the non-communi st

world.

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CONFIDENTIAL

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