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some lean years British exports are picking up, in particular, contracts for the supply of capital goods worth some £564 million have been won by British firms since 1976, most of them very recently. In the civil aviation field, the ability to grant or withhold rights in Hong Kong remains an important asset in air services negotiations.
The economic interests of
4. There are real disadvantages. Hong Kong are not always compatible with those of the UK and sometimes, eg over textiles, run counter to them. This divergence of interest could well increase as the Hong Kong economy grows and becomes more sophisticated. In the field of domestic administration it can be, and sometimes is, embarrassing for the British Government to be answerable in Parliament for the policies of a colonial government which it can influence but not readily direct. the possibility should not be excluded that Hong Kong might again become a serious irritant in UK/China relations, as happened in 1967. Finally, there is the possibility that a severe recession in world trade, accompanied by a reversion to protectionism could lead to an economic crisis and extensive unemployment which the Hong Kong Government could not handle without help from the UK.
5.
Externally,
and
At present the advantages we derive from Hong Kong seem greater than the disadvantages. But even if that was not so, withdrawal from Hong Kong is not a realistic option for the foreseeable future. Unless we withdrew by agreement with the Chinese, and in a way which enabled Hong Kong to maintain its prosperity it is difficult to see how that could be managed the consequences could be very painful for British interests. The bulk of the population would stay, but many, perhaps amounting to hundreds of thousands, would wish to leave and the British Government would
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