TNAG-1037-FCO40-1287-Future-of-Hong-Kong-1981 — Page 125

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confidence, a fall in the Hong Kong Dollar and a

flight of capital from Hong Kong. International

markets and exchanges would be affected.

EEC, Japanese and us

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

Friendly Governments would blame HMG if withdrawal

did not seem unavoidable.

e) We could not leave Hong Kong overnight. There would

have to

/be

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

unless assured of British citizenship the Territory/ The right wing KMT organisations

might organise protests and thereccould be clashes

between them and communists. Heavy reinforcement of

British forces would probably be necessary to

maintain internal security.

30.

The arguments against unilateral withdrawal are thus

very strong. This does not mean that future British Governments

/are

D8 0312000 400M ${PB HMSO BIBŕknell

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