TNAG-0753-FCO40-957-Future-of-Hong-Kong-1978 — Page 14

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principle and will continue to do so. We see KMT

activities here as a diminishing political problem which would only be exacerbated by public statements from us.

Similarly, with the Soviet Union, we have made it clear

that we will keep a close watch on their activities. We allow some visits by Soviet or East European nationals,

but only if these are likely to contribute directly to the

health of the Hong Kong economy or, occasionally, for

innocuous artistic performances. We are willing to co- operate with the Chinese in dealing with any Soviet attempts to carry out espionage against China based on Hong Kong. We do not, however, wish to impose a complete ban on the Soviet Union and its allies. This would not do anything further

to deal with the real problem. It would also damage Hong Kong's reputation and effectiveness as a free port.

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7.