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detriment of the local General Post Office. I was therefore un- -able to accept them as they stood. I was however not averse to granting the Chinese Post Office any reasonable facilities for the receipt and despatch of Union Country Mails to and from the Southern Treaty Ports of which Hongkong is the centre. I there- -fore instructed the Postmaster-General to draw up alternative proposals copy of which is attached. These proposals while grant- -ing the Chinese Post Office the desired facilities in Hongkong for dealing with mail matter received from and sent to Union
Countries, from or to South China. Ports did not admit of the
direct exchange of closed mails with Union Offices by the Chinese Post Office, and thereby safeguarded the interest of the Hongkong Post Office, chief among which was the collection of transit dues. The representatives of the Chinese Post Office informed me that these alternative proposals would be considered and a reply sent later. In due course a reply came to the effect that the Chinese Post Office proposed to make Canton, Swatow, and Amoy the offices of exchange of South China with Union Countries, in other words that the Chinese Post Office had given up the idea of establish- -ing an Agency in Hongkong altogether.
3.
In comection with these negotiations a question of some importance arose concerning the so-called Chinese contract steamers mostly flying the British, foreign and only a few the Chinese flag, which receive rebates of suns paid to the Chinese Customs Authorities at the Treaty Ports for Sunday and holiday permits to work cargo in return for the carriage of Chinese Tails. The Chinese Post Office was very anxious to have direct connection in Hongkong through its Agency with such steaners so that they might be considered as forming one service only from a Treaty Port to Hongkong and from Hongkong onward instead of starting a new service in Hongkong. Thus the Chinese Post Office would have been in a position to get its mails, if despatched from Hongkong by non-subsidized British and foreign
vessels, carried at a much lower rate than the General Post
Office