TNAG-1036-FCO40-1286-Future-of-Hong-Kong-1981 — Page 114

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DSR 11C

confidence, a fall in the Hong Kong Dollar and a

flight of capital from Hong Kong.

International

23.

markets and exchanges would be affected.

d) There would be losses by British firms in Hong Kong.

e) We could not leave Hong Kong overnight.

There would

be a transitional period of at least months and

probably years from the first indication of HMG's

intention. During this period the administration

of Hong Kong, still in British hands, would become

progressively more difficult and would be likely to

break down. It would be impossible to retain the

full loyalty of the Hong Kong police or Civil

Service, many senior members of which would leave

the Territory. The right wing KMT organisations

might organise protests and clashes between them and

communists would be likely. Heavy reinforcement of

British forces would probably be necessary to

maintain internal security.

The arguments against unilateral withdrawal are thus

stronger. This does not mean that future British Governments

/are

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Dd 0532000 400 M 5/78 HMSO Bracknell