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Hong Kong and South China may fully return to its former prosperity. Can it do this if Hong Kong continues to be outside China's high tariff and the tendency on the part of China continues to be to side-track Hong Kong wherever possible, in spite of the fact that it is the best deep sea-port for South China?
20. As it is generally agreed that really sound and reliable trade cannot be based on smuggling, it is reasonable that we should be prepared to take active measures to combat it to China's advantage, provided that we too can obtain some advantage more permanent and moral than that possibly accruing at the present time from large scale smuggling.
21. We gave this subject considerable time and thought in view of the fact that in our opinion it is the most important question arising under the second and third parts of our terms of reference, viz: to make recommendations for the amelioration of any existing difficulties and for the improvement of the trade of the Colony "
22. We finally agreed that it would be a desirable thing if, without giving up its Free Port status and without surrendering privileges or authority, this Colony could come to an understanding with China which would enable it to have free or preferential entry into China in respect of goods manufactured within the Colony.
23. Further, we were agreed that the Colony of Hong Kong should be prepared actively to co-operate with the Chinese Authorities in safeguarding Customs revenue in return for preferential treatment from China in respect of goods manu. factured in Hong Kong.
24. In order that our suggestions might have the fullest and most careful con- sideration we are of the opinion that they should be frankly discussed with the Chinese Authorities informally and without commitment on either side, so that the ground may be fully explored. We are strongly of the opinion that personal contact and conversation would elicit true facts and a sympathetic understanding of a point of view which correspondence could not achieve.
25. Though there have been newspapaper paragraphs and rumours regarding opposition to measures of this nature, as far as we are aware no discussions have taken place and there has, therefore, been no opportunity for an exchange of views for the purpose of ascertaining whether any mutual concessions could be made or advantages obtained. In our opinion closer connections between Hong Kong and China in the way of informal meetings and discussions would do much to dispel antagonism born out of misunderstanding. Ex parte statements have been made that the interests of Hong Kong and South China are totally opposed. We have endeavoured in the above chapter to show that on the contrary the interests of the whole area are one and that closer collaboration will tend towards increased pro- sperity for that area and the establishment of trade, commerce and industry on a sound and lasting basis. British interests are not opposed to those of China. The British are only too anxious to increase the volume of trade. Success in this direction spells prosperity to China and Hong Kong alike. Inasmuch as Hong Kong is an established trade mart having little or no raw materials for industry whereas South China is a large area having raw materials as yet largely unexploited, it would appear that the future holds out hope of increasing production on the mainland.- For this, capital, machinery and equipment, and marketing facilities are required. With regard to these requirements, given adequate encouragement Hong Kong is in a unique position to assist.
Chapter VI.
HONG KONG'S POSITION VIS-A-VIS THE BRITISH EMPIRE.
1. In the last chapter we viewed the economic position of the Colony as related to China. Here we will take into consideration the fact that Hong Kong is a part of the British Empire.