Message CANBERRA, 30 MAY 1949

TOP SECRET AND PERSONAL
1. I have received your personal message about Hongkong, and have
discussed with your High Commissioner at Canberra your assessment
of the military position there and the factors which have
persuaded you to send additional reinforcements.

2. It is obviously of the highest importance that the colonies
should be protected against any irregular or regular attack which
might develop in the near future. The United Kingdom Government
has an obligation in this respect by reason of the fact that it is
the administering authority. With this in mind the Australian
Government supports your recent decision to reinforce the Hongkong
garrison.

3. Any requests now or in the future from the United Kingdom
Government for material support in the form of any army, naval or
airforce personnel and munitions for the defence of Hongkong would
have to be considered by Cabinet. I feel Cabinet would not be
prepared to send material support to meet a full scale attack on
Hongkong, for this would most likely involve a full scale war with
the Chinese Government.

4. However, in considering the matter my colleagues and I would be
greatly influenced by the immediate steps that the United Kingdom
Government might have taken to prevent the development of an
attack within the next few months by means of direct negotiation
and agreement with the Chinese authorities now in control of the
large area of China. It seems to us that even though the attack
which might develop within the next few months could be met by the
reinforcements at present proposed, and even though the presence
of these reinforcements were sufficient to prevent the attack
developing, holding Hongkong by force in the years to come may not
be possible and an attempt to do so may easily lead to a major
conflict. In our view the main endeavour to secure the future of
Hongkong should be by positive means based on relations between
the seemingly new Government and the Western countries.

5. This raises the general questions of recognition and trade
relations that were dealt with in my message to the Foreign
Secretary of 25th May. [1] As we see it we shall be forced
ultimately to recognise some kind of Communist regime in China,
and we would hope to be able to carry on normal relations with it.

If a Communist-dominated China should decide to withdraw from all
contact with Western countries and turn its face towards Soviet
Russia, this may prove impossible. But until it is shown to be
impossible we consider that nothing should be done which might
tend to discourage the Chinese Communists from preserving and
cultivating China's normal contacts with Western countries.

6. So far as we are aware the Communists have not yet issued any
positive threat against the integrity of Hongkong. We understand
that they have hinted that their attitude towards Hongkong will be
determined by the attitude of Western countries towards Formosa.

If this in fact represents Chinese Communist policy, there would
seem to be everything in favour of trying to reach a clear
understanding with them on the future of Hongkong as soon as
possible. There should be little difficulty in convincing them
that, so far as British Commonwealth countries are concerned, the
formal restoration of Formosa to China as envisaged at Cairo and
again at Potsdam only awaits the conclusion of a peace treaty with
Japan, and that we already regard Formosa for all practical
purposes as Chinese Territory and would not wish to interfere
there in any way.

7. In addition, we would like to feel that everything possible was
being done to allow Hongkong to perform its rightful function as a
commercial and trade centre. The accumulated experience and
unrivalled facilities of Hongkong as a trade entrepot provide in
our view the best hope that the Chinese Communists will not wish
to disturb it. There is already evidence that the Communists are
prepared to give preferential treatment to well established
interests that can provide them with the goods they need. The more
they are encouraged to enter into commercial dealings with British
and American enterprises, the less likely they are to seek to
integrate the Chinese economy entirely with that of Soviet Russia.

In Hongkong they would find a ready-made and efficient channel
through which they could trade and which could deliver the goods
they need. In short, we consider that more attention to the normal
commercial functions of Hongkong, and less to its defence, may be
found not only to provide the best safeguard for the security of
Hongkong, but also to offer the best chance of establishing a
practical working relationship with the Chinese Communists against
the day when they are in control of all China.

8. We would like to think that these possibilities have been very
carefully considered. In our view they provide a basis for a
positive approach to the problem of Hongkong and indeed China as a
whole, as distinct from the negative one of sitting back and
awaiting developments. If the Communists should come to the point
of deciding to gain control of Hongkong, we are dubious about the
deterrent effect of a reinforced garrison. Even if the Communists
decide not to risk a direct attack, they might well succeed in
undermining British control, particularly in the leased territory,
by insisting on their transit rights under the 1898 Peking
Convention.

9. It seems undesirable that attempts to reach an understanding
with the Communists on Hongkong and to enter into commercial
dealings with them should be left until a Communist Government is
duly established and recognised. On the contrary, there would seem
to be every advantage in undertaking discussions with them as soon
as possible in those areas where they are in control de facto at
the present time. The United States Government should if possible
be persuaded to associate itself in any such discussions.

10. We would like to emphasise that Australia's interest in the
future of Hongkong is in the strictest sense incidental to our
interest in the future of China, and particularly in its long term
relations with the Western powers. From Australia's point of view
Hongkong might be regarded as a potentially valuable link between
a Communist China and the West.