TNAG-0848-FCO40-1058-Future-of-Hong-Kong-New-Territories-leases-1979 — Page 23

CONFIDENTIAL

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UK/Hong Kong Relations

4.

Over the past 2 years or so, Hong Kong has proved a positive

factor in the development of Sino/British relations. It is also an

important market for British exports (although there is still an

imbalance in trade) and a valuable asset in civil air services.

negotiations. But the British connection with Hong Kong also has

disadvantages, particularly conflicts of our economic interests, and

the potential immigration and other problems which would result if

China were to take over Hong Kong.

5. In fulfillment of our defence responsibilities, four infantry

battalions together with naval and RAF units are stationed in Hong

Kong. Seventy-five per cent of the cost is borne by the Hong Kong

Government.

6.

Relations between Britain and Hong Kong require careful handling.

The British image of Hong Kong is as far removed from the facts as

the view of Britain held by many people in Hong Kong. The impact of

competition from Hong Kong exports, particularly textiles, upon

employment in Britain has aroused strong feelings. In Hong Kong,

there is a widespread feeling that the United Kingdom does not do

enough to defend llong Kong's interests internationally. But there

are no major bilateral problems at present.

Internal Developments

7. Over the past few years the Hong Kong Government has carried out

an important programme of social developments, with housing as the

first priority. The Government has also mounted a major campaign

against corruption. This, and the rapid growth of the Hong Kong Police

Force in recent years, resulted in a near mutiny of the Police at the

end of 1977. The Hong Kong 'economy has made a good recovery from the

recession in the mid-1970s and has sustained high growth rates in the

last few years.

There have recently been problems of over-heating;

corrective measures were taken in the recent budget.

/Current

CONFIDENTIAL