TNAG-0393-FCO40-439-Diplomatic-reports-from-Sir-Murray-MacLehose--Governor-of-Ho-1974 — Page 13

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of the British Embassy in Peking.

4. The last part of the despatch (from paragraph 11 onwards)

deals with the direct benefit of Hong Kong to the UK. I find

this section disappointing. Hong Kong trades with B ritain, but

the balance of trade is unfavourable to us. It is a centre of

trade in the Far East, but not specifically British trade. The

companies which are expanding their activities from Hong Kong (shipping, textile manufacture etc.) are mostly of Hong Kong

rather than British origin.

5. The Governor himself admits that when the Colony's shop

window is full of foreign goods, this is more harmful to us than

if Hong Kong had been independent. The Mass Transit System is an

important case in point. If people think we have privileges when

we do not, we can only lose.

6. The Treasury position on Hong Kong's remaining £300 million

sterling reserves is that these are not very important in themselves,

but that stories of friction can have a disproportionate effect on

confidence in sterling as a whole. If therefore the official

Hong Kong sterling reserves disappeared quietly (as indeed the

Hong Kong banks' sterling has done), the Treasury would not greatly

mind.

7. It is true that as a vigorous trading community, Hong Kong's

existence benefits world trade, both because of the trading

opportunities it gives to others, and because of the competitiveness

of its own exports. But the UK gains no exclusive trading benefit

from Hong Kong's dependent status.

Indeed the DTI's constant

endeavour is to shift some of the burden of imports from Hong Kong

onto others.

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