ENG-1948 — Page 7

PART I

GENERAL

Relations with China and Macau.

The continuing Civil War in China has necessarily had its reactions on the Colony both as regards its economy, which is closely linked with that of China, and as regards its population, which tends to fluctuate in inverse proportion to the stability of the political, military and economic situation in China.

The

Such help as could be given to China in the difficulties confronting her in the post-war period was freely rendered. finishing touches were put to the Customs (Anti-Smuggling) Agree- ment although there was some delay in bringing the Agreement into force owing to a certain confusion over a map showing the areas where patrols by the Chinese Maritime Customs in British waters would be permitted. When this difficulty had been overcome the final agreement was marked by an exchange of notes between the Chinese Ministry of Foreign Affairs and the British Embassy in Nanking on 18th October. An Ordinance bringing the Agree- ment into effect in the Colony was passed by the Hong Kong Legislative Council on the 21st October.

By the terms of this Agreement the Chinese Maritime Customs are permitted to maintain collecting stations in Hong Kong and Kowloon and to patrol specified areas in Deep Bay and Mirs Bay. These and other concessions represent a considerable derogation of sovereignty on the part of Hong Kong and are a real and con- crete gesture of goodwill towards China in her post-war difficul-

ties.

During September Government introduced a series of measures in an attempt to assist China to maintain the value of the new Gold Yuan currency which had been brought into use in August. These measures were no doubt of some assistance, but naturally the value of the Gold Yuan was governed by events within China. As a further gesture of co-operation and friendliness, Hong Kong responded to an urgent appeal in November for assistance from Shanghai by the immediate despatch on loan of 10,000 tons of

I