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policy to meet any such payment as that proposed by His Grace. Indeed it could only be made at all by the substitution of it for some of the items of expenditure which I have detailed; and I respectfully submit that, even assuming for the sake of argument, the justice of calling on Hong Kong for such contribution it is premature to do so. The colony has been self-supporting only for the last four years, up to which time it was dependent on Parliamentary aid. During that period of depression all the establishments were kept almost below the scale necessary for efficiency, whilst public reforms were postponed and public works allowed to fall into decay. A sudden reaction of prosperity brought with it the necessity for corresponding outlay; and whilst everything is still in a state of transition, and before former shortcomings are made good, it would indeed be a pity if a demand were enforced which must either interfere with the development of the colony or plunge it once more into financial embarrassments.

16. I am unable, however, to concur with His Grace as to the justice of requiring the colony, even if able, to contribute towards the expenses of the troops stationed there. Hong Kong is altogether an exceptional case and bears no analogy to such great producing plantations as "Ceylon, Mauritius, and the principal Australian Colonies," which you inform me are "to be called upon to contribute more liberally towards the support of Her Majesty's troops, which are maintained in those colonies chiefly for the protection of colonial interests." The troops in Hong Kong are stationed there for national and not for colonial objects. They are not, in my opinion, necessary for the protection of any mere colonial trade or interests, or, as is assumed in your despatch as an undoubted fact, "for the security of its European inhabitants." The large local police force which has lately been remodeled at a very heavy expense, and placed upon a military footing together with the Volunteer Artillery recently established, would, I consider, be sufficient, under any conceivable circumstances, for the maintenance of internal order without recourse to Her Majesty's troops. The Europeans all live together, and the population is well The Chinese in hand, being collected within a radius of about 2 miles. population are unarmed, and though addicted to thieving and petty crimes, are not given to emeutes and have now a large stake in the colony. The national characteristic of the people too is a love of order and quiet, and a submission to the powers that be, except under long and unendurable provocation. There are further at all times from 100 to 200 foreign merchant ships, partially armed, laying at anchor off the town, and the harbour being the head quarters of a large naval station, and having a dockyard and docks, is never likely to be totally denuded of men-of-war. These considerations enable me confidently to assert that the presence of Her Majesty's troops in Hong Kong is not necessary for the security of its European inhabitants, or for the protection of colonial interests.

17. Her Majesty's troops are stationed in Hong Kong, I imagine, because England's share in the foreign trade of China is estimated at over 30 millions sterling; because this trade is carried on mostly in British vessels from the open ports in China, at each of which we have British settlements and British subjects for whom we claim exemption from territorial jurisdiction; because in the management of this vast trade, and in the Government of our own subjects scattered along the whole length of the seaboard of China in the foreign settlements, now 14 in number, we are necessarily brought into constant intercourse with the Chinese Government, and there can be no doubt that the presence of a small body of troops somewhere nearer China than India has an excellent effect in averting difficulties, while they form a basis for operations, if misunderstandings should unfortunately arise. Such being the case the only place in the China seas where troops can be permanently stationed is Her Majesty's colony of Hong Kong.

The

18. The connection of the colony of Hong Kong with this foreign trade is very slight and remote. The buyers and sellers do not reside there.

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