Created: 7/11/1967

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Intelligence Memorandum

The Situation in Hong Kong


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CENTRAL INTELLIGENCE AGENCY Directorate cf Intelligence7


The Situation ior.t; Kor.c

The border clashuly during which five policemen were killed in an exchange of small arms fire with Cotnnunist militia makes it clear that the Chinese authorities intend to koep the hong Konghot. Peking's official treatment of thethus far, however, does not indicate that the Chinese Communists are aiminghowdown with the British at this time. There will probably be more trouble during the weeks ahead. Riots anddemonstrations inside the Colony appear almost certain and there may be additional border incidents. Given the state of confusion within the Chineseleadership and the pressures generated in the capital, at the provincial level, and within theapparatus in Hong Kong by the latest phase of the "culturalhese could get out of hand and escalateirect confrontation over the status of the Colony. The pattern of eventsthe -ast several months suggests, however, that Peking is operatingonger range plan calculateu tc erode the position of the Kong Kong authorities and thus prepare the ground for an effort by theCommunist apparatus to assume de facto control over Kong Kongoar orthe pattern of the Macao takeover last winter. The resolute stand taken thus far by the British, the demonstratedof control measures adopted by the Hong

Note: This memorandum was produced solely by CIA. It was prepared by the Office of Current Intelligence and coordinated with the Office of Economic Research.


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Kongnd the lack of "revolutionary" enthusiasm shown by the general population in -he Colony, ttW unlikely to encourage Peking tore quickly. The Chinese Cocnottitti can betoperhaps to incrnase--their support of local oppcsiticn in Hone Kong butwill rcirain from actions involving the risk of war, or even moves which would disrupt the Color to such an extent that Peking was denied the vital foreign exchange earnedone third of China's total earnings


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1, The present troubles ir, Hong Kong can be triced backhift in Communist tactics withto the Colony which apparently was adopted around the beginning of this year. Prior to that

There was an increase in industrial unrest during the late winter and early spring, hut the British authorities sought to avoid trouble byclear of "he disputes and leaving them tc be settled by iabcr-xanagenent bargaining. ay, however, violence broke cutactory strike which required police intervention. The Communistin Hong Kong and then on thereacted with charges that the Hong Kong Government had committed "atrocities" and demanded that those responsible be punished.

3. The initial propaganda attack was followed by three days of Communist-inspired rioting which began onay. Onay Peking took formalof the situation byoreign Ministry statement to the Britishdemanding that workers arrested in Hong Kong be released, that those responsible for the arrests be punished, that apologies and compensation be offered, anduarantee be provided against any similar incident in the future. ampaign of harassment againstdiplomatic personnel in China began at this time. Massive demonstrations were staged outside theEmbassy. The British Consulate in Shanghai was forced to close and the officers there were roughly handled by Red Guard hoodlums*


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is still not clear whetheray and the ensuing riots in thethe result of local Corrjnunist initiative orordered by Peking. The nine daythe incident on f- May and the Foreignonay suggests, however, that theoriginated in Hong Kong. The leaders ofapparatus almost certainly felt underpressure to dexonstrate theirof the current demands of the "culturalnay have decided that the time was ripe

toa;.or campaign based on what appear to have been very general instructions toarder line in exploiting labor unrest.

is possible that the local leaderstheir own capabilities, underestimatedof the British to resist pressure, and prean optimistic picture to Peking whichendorsement and direct involvement ofCommunist upport of theirMinistry officials in the capital hadheavy extremist pressure for rronths andhave been inclined to put "politicsover their normal caution.

The British Reaction and its Lffects

encouraged by the Foreignstatement, the Hong Kong apparatus launchedof "Red Guard" type demonstrations andstrikes designed tocripDl^ublics'^^

statement supporting the Hong Kong authorities. The Hong Kong police stood fim and generally were able to maintain order whilerinimum of force.

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ntimidate the Srua-er of then le support they we:

efforts of local Communists itish iegar. to sap their morale expressed disappointmenteceiving from Pekino


he Britishreasonable" judgment that China did not wish to take mmrong .at that time.

re inspi

ficias tw mostocal that

By the end of Hay the Colony had returned lativc calm despite sporadic harassment strikes red by the Communists and financed in parthrough front organizations. Communistn Hong Kong began at this point to sav that truggie against the British could take asears. This situation continued throughout of June. general strike" was called onune he nextenior Communist official in the

party organization admitted to his subordinates the effort hadailure.


9. Communist Chinaumber Of gestures in support of the Hong Kong Communists at this time, but they were little more than token encouragement. On une, the day following the abortive general strike, Poking halted deliveries of water to Hong Kong. This was clearly intended to harass theand to remind them of their dependence onwater supplies. The Chinese took this step only after they had delivered all the water they had contracted to supply under the existing agreement, however, andime of year when the water situation



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Che Colony is normally not critical. Poking is net obligated to sell mere water to Hone Kong until Octcrer and to probe Chinesesuppliess tine.

10. Onune the British charge was summoned to the Foreign Ministry andote protesting alleged overflights of Chinese territory andthe British with "bloody persecution" inthe Hong Kong general strike. The Chinese not< once again called for immediate fulfilf the demands made on IS May butimed no time limit for compliance.

11. The Hong Kong Communistsour-day "food strike" onune and Peking cooperated by banning shipment of meat and produce to the Colony Iron the mainland. The strike proved to bepercent of the vendors were back inby the fourth day--and the ban on food shipxents was ended when the strike collapseduly. cf the banong period would haveardship on tho predominately Chineseof the Colony and Peking waa apparentlyto dc this--or to lose the foreign exchange earningsthe ineffectiveness of the effort by the local organization had been demonstrated.

Current Chinese Attitude

12. The Chinese Communists probably believe that they have committed themselves too far toa complete disengagement from the Hong Kongand Peking probably believes it necessary to provide sufficient political and financial support to maintain pressure and agitation at roughly the present level. It seens likely, however, that Chinese Communist actions will in the nam bey the effectiveness of tho Kong Kong apparatus insupport from the local population. An editorial


re-Liey or.uly emphasized the role ofrganization ir. cor.tir.uinc the struggle. The editorial asserted that tne "worker'a strike" is th* principal weapon in the battlet the British at present and declared theorkers, the oair.eedniting the peculation behind their.

Pecer.t tr.n

13. If the clashuly at the borderof Sha Tau Kok in the Hong Kong Sew Territories was ordered by Peking, it should probably bein thiaa stove to keep theor.c encourage the Local Communist The village straddles the frontier--which runs along its mainprovides an excellent arena for hit-and-run raidsar of nerves. o: of demonstrators. seme cf Shea ir.-rei, oar* over from territory. Police attemptins to eject them were fired upon. Five officers -ere killed and more than eleven were wounded in the unequal exchange whichrevolvers end carbines against infantry weapons in the hands of Ceesnunisc nilita.


The incident was almost certainly prer.edt-taced and the fact that five Chinese army officers were observed inspecting the areamaller demonstration which tcok place two days earlierthat tha Coaumunists plannedire-fight. During tne five hours while the clash was in progress,


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any event Peking's official treatmentclash does not indicate an intention to buildincident. The Foreign Ministry note deliveredBritish charge'uly blasted the Kongand called on the British topunish those responsible, to pay compensation,guarantee that no similar incidents would occur

in the future. The note was not so strongly worded as some earlier Chinese statements on Hcng Kong,no threat of reprisal, and did not set afor compliance with Peking's demands.

9 July Cocxunist zealots in Honga riot in which one policemanumberwere killed. More of the same isin prospect. Communist-controlled schools inare reported to be planning to keep studentsduringinner vacation to take part inactivity. It seems unlikely, however,intends at this time to go much beyondthis kind of activity, possibly accompaniedharassment along the frontier. Chinese military threats to Kong Kong wouldrisk of war, which could develop into athe Use of economic sanctions atoff water supplies and stoppinginflict further damage on theposition with the Kong Kong population andin the loss of vital foreign exchangetrade with the Colony.

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china'5 financial interest5

16* hong konc is cortnunistargest sincle expert miktt. s also china's costsingle source cf foreign exchange, last year the chinese communists earned0 million in hong kong trade, approximately one third of their total earnings of foreign exchange. chinese exchange earnings from kcng kong have increased rapidly,doubling in the last five years end are still growing- almost ail of this would be lost if peking took over the colony,ignificant proportion would go by the board if the chinese communists took action short of seizure, which in effect would put hong kong out cf business. some direct sales to the colony would continue but there wouldarked decline in foreign exchange earnings which woulderious blow to peking, the chinese are obliged to buy some kinds of specialized scientific and



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