CONFIDENTIAL
PAPER NO.39: HONG KONG
1975
1. Hong Kong is Britain's most important remaining Dependent
Whether Hong Kong is overall an asset or a liability to
Territory.
the United Kingdom is finely balanced, but successive British
Governments have accepted responsibility for the protection and
welfare of the 4 million Chinese who have chosen to live in a territory
that has no future apart from the British connection. The retention
by Hong Kong of its present status depends on economic prosperity, on
good relations with China and on the relationship with the UK. It is
a UK interest not to create a situation in which the very numerous UK
and Colonies citizens of Chinese extraction who now live in Hong Kong
should try to come to this country. A reduction of their confidence
in the future of Hong Kong could have this effect.
2. Hong Kong's economic success, based on a very rapid growth of
exports, is now threatened both by higher import prices (particularly
of oil and food) and by the prospect of a recession in world trade.
Employment levels have already dropped, notably in the textile
industry: and real wages, though the highest in the Far East outside
Japan, fell by 11% in the twelve months to May 1974. The Government
is committed to a massive social programme, including plans for rehousing
almost half the population in ten years. It will face difficult
choices if, in the face of an economic recession, public revenue falls
below current projections.
China earns over one-third of
The lease on the New Territories
3. Hong Kong/China relations are good.
her foreign exchange through Hong Kong.
expires in 1997, but the Chinese, who do not recognise the treaties
which define the status of the Hong Kong territories, told Mr Royle in
June 1972 that the Chinese Government did not intend to raise the issue
of the return of Hong Kong "for a long time". Chou En-lai told
Sir Alec Douglas-Home in November 1972 that the British were ruling'
CONFIDENTIAL
/Hong Kong
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