TNAG-0393-FCO40-439-Diplomatic-reports-from-Sir-Murray-MacLehose--Governor-of-Ho-1974 — Page 22

CONFIDEN TIAL

Reference.

WHO BENEFITS FROM HONG KONG?

1.

I have considerable sympathy for the Governor of Hong Kong and find his despatch stimulating. Certainly no-one who knows Hong Kong can feel anything but pride in this shining example of what can be done with the combination of British Government and stability allied with Chinese industry.

2. I note that the Governor concludes that the local population benefits most from Hong Kong's British connexion followed by the Chinese Peoples Republic. I would not quarrel with either of these conclusions. I do not wish to carp but I think that the section on the United Kingdom is the weakest and that almost all Sir Murray MacLehose's arguments to the advantage of Britain apply equally to any of the other free nations of the West. This, I think, is the crux of the difficulties inherent in the colonial position between ourselves and Hong Kong. We share the benefits but alone shoulder the disadvantages.

3.

The Governor highlights for instance the substantial market which Hong Kong offers to the United Kingdom. But as he remarks later, Hong Kong is a free port and gives the United Kingdom no trading advantages. Similarly it could be argued that Hong Kong reserves would be largely held in sterling what- ever the relationship with Britain. Hong Kong as an international financial and commercial centre is also equally useful to all trading nations. I think therefore that it could be argued as a general point that in respect of trade and commerce the United Kingdom benefits little or nothing in the colonial relationship as compared with our competitors. But the colonial relationship also has the disadvantage for Britain commercially as for instance if the Mass Rapid Transit System contract goes to the Japanese this would be taken as a severe defeat for British industry. The reason being that as Hong Kong is a British colony the implication follows that it is a British commercial preserve; thus if Britain cannot gain such a contract in these circumstances her competitive position must be appalling. No such reaction will be felt by other Western competitors.

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CONFIDENTIAL

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