The life of this small but important British colony was dominated during 1940 by two wars — one in Europe and one in Asia — which tended to converge into a single great struggle as the bonds between Japan and the Axis were drawn closer. Approximately 1,000,000 Chinese refugees continued to subsist in the territory, a few living on the riches they had brought with them and the rest relying on public and private charities. Their presence intensified the potential difficulties of importing adequate foodstuffs and raw materials and finding markets for the colony's exports. These problems, not serious in normal times, became more pressing as Japanese troops moved southward in increasing numbers. In 1939 the invading forces had occupied all the Chinese territory paralleling the Hongkong land border; in 1940 they penetrated into Indo-China under agreement with representatives of the French government at Vichy. More and more completely Hongkong assumed the aspect of an isolated outpost of empire, subject to blockade by land and sea and, in the long run, indefensible.
At irregular intervals Japanese army authorities alternately tightened and relaxed the barriers to communications with the Chinese mainland, synchronizing their actions with alterations in the Anglo-Japanese diplomatic situation. Sea communications were never interrupted, however, since establishment of a blockade would have connoted the existence of a legal state of war with China — which Japan was anxious to avoid. But as the year opened, traffic on the Pearl River, connecting Hongkong with Canton and thus with the Chinese interior, was virtually suspended, except for Japanese coastal vessels sailing under the guise of military and naval transports. Although the River was 'reopened' by the Japanese with much fanfare on April 20, ship movements from Hongkong were still restricted to one British and two Japanese vessels each week.
With the approach of the crisis on the Burma Road question late in June, Japanese forces on the Hongkong boundary were strengthened with the ostensible objective of preventing the colony from supplying materials to the Chinese government. Tension increased rapidly: the local archives were removed to Singapore, and barbed-wire defenses were erected at beaches and anchorages where hostile landings might be attempted. British forces dynamited bridges on the Chinese frontier. Under instructions from London, the local authorities on June 29 ordered the evacuation of women and children of pure British race, numbering some 4,000. These refugees were removed first to Manila and then to Australia. For the remainder of the year they unsuccessfully demanded permission to return. In the Hongkong legislative council, difficulties arose because of the race discrimination which gave a few thousand individuals of British parentage an advantage over 600,000 or 700,000 of Chinese or mixed race in seeking safety. The economic effect of the loss of 4,000 European consumers and wealthy Chinese who left individually was immediately felt, and was greatly heightened by the collapse of business confidence.
These developments presaged a British refusal to close the Burma Road or to guarantee that supplies from Hongkong would not be dispatched to the Chiang Kai-shek government. On July 18, however, Winston Churchill announced in London that the Road would be closed to traffic in munitions and certain other items for three months, and that — although export of arms and ammunition from Hongkong had been prohibited in January 1939 — all the prohibitions applied to Burma would likewise be enforced at Hongkong. The emergency thereupon ended, although shipping continued to be barred from the Pearl River. Japanese airplanes flew over the colony, and there were reports of Japanese espionage activities. While the Burma Road was reopened in mid-October, the Hongkong border remained closed to war shipments for Nationalist China. Nevertheless a considerable volume of trade with the interior was carried on, partly by illegal means.
In local affairs, the population of over 2,000,000 was more directly affected by new defense arrangements than by any other single matter. Heartened by the experiences of Gibraltar and Malta, the military authorities set out to make conquest of the territory so difficult that it would not even be attempted. All male British civilians were given military training and are liable to immediate call. In October the colonial government approved the expenditure of $1,000,000 (Hongkong) for the construction of tunnel shelters in Hongkong's hilly terrain. Civilian preparations to meet air raid dangers have made great progress. A military governor in control of the colony, but subject to orders from Singapore, supervises the entire defense system, which is centered about powerful 12-inch shore batteries, a small but efficient air force, and over 6,000 regular troops. Difficult to reduce except by a lengthy blockade, Hongkong would also be difficult to ignore, for it would presumably be utilized as a submarine base to harass Japanese naval operations in the direction of Singapore. It was reported in October that essential parts for American submarines had been stored at Hongkong. Shipyards there were constructing light naval craft for the British government.
Thus, as it entered 1941, the year of its centenary, Hongkong was in a state of continuous alert. The war on the mainland had cut the ties of many of its inhabitants with their relatives in China and fostered the beginnings of a distinct Hongkong political consciousness. A new generation strongly susceptible to Western ideas was in the making. In the economic sphere, Hongkong's importance as an entrepot had decreased; but it was becoming something of a Far Eastern industrial center. Enjoying imperial preference, it was exporting wearing apparel, electric torches and batteries, rubber footwear and other products to many British territories and even supplying certain military stores to the garrisons in Malaya and Ceylon. While the future was unpredictable, the prospects were by no means dark.
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