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.  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.