TNAG-0753-FCO40-957-Future-of-Hong-Kong-1978 — Page 13

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Chinese Maritime Customs operated in Hong Kong before 1949). However, in practice, we would find it awkward to have Chinese officials operating openly in Hong Kong. They would be particularly difficult to deal with in any time of tension between Hong Kong and China. We should therefore find ways to deal with the practical problems without conceding the

demand itself.

(b) Response. We are willing to make all the necessary arrangements for transhipment of goods to China to be carried out quickly and efficiently. We believe this can be done without the practical problems involved in stationing Chinese customs officials in Hong Kong. When they were so stationed there was a smuggling problem between Hong Kong and China which no longer exists.

8.

The banning of undesirables. The Chinese demand a public assurance that we will not subscribe to a "two Chinas" policy by permitting KMT organisations or individuals to function in Hong Kong. They also demand a public assurance that we will not tolerate any activities here by the Soviet

Union or its allies.

(a)

Comment. The first part is unlikely in the form of a demand for a public statement, unless the Taiwan problem suddenly becomes more serious (e.g. by a Taiwanese declaration of independence). The second demand is also unlikely in the form of public statements. However, both are possible as demands for private assurances. We should be, and are, prepared to control the activities of both the KMT and the

Soviet Union. We could not, however, accept a total ban, particularly in relation to Taiwan, since the economic consequences would be disastrous.

(b) Response. We have already assured the Chinese privately that we will not allow Hong Kong to be used as a base for subversive activities directed against China (Mr Crosland to Ch'iao Kuan-hua, 5 May 1976). We have acted on this

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6.