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to get back into normal channels. Wider facilities are also being given for the export to Canton and the Delta of the other prohibited articles, and opportunities are sought to bargain for the sending of a stated commodity on

the condition that food-stuffs are sent in return. For

example the General in charge at Kongmoon, who is strongly

opposed to the Canton communists, has agreed to do what he

can to supply Chinese produce in exchange for coal for the

Sanning Railway, on the takings of which he is largely

dependent for pay for his soldiers. The trade which is

being carried on is very small and precarious as the river

steamers are not allowed to run and junks, which are the

sole means of transport, are liable to the exactions of

soldiers, pirates, and strikers.

5.

A number of ships under Russian, Norwegian,

German, and other flags are running direct to Canton

carrying cargoes of rice, kerosene, and other commodities.

The censorship of Chinese telegrams has been productive of

much information regarding the movements of these dips and

the financing of their cargoes, and steps are being taken

to put difficulties in the way of the trade by stopping

the telegrams. One or two of the ships have called in at

Hongkong to pick up pilots, and they have been allowed to

proceed in spite of the fact that they have been carrying

goods the export of which is prohibited.

6.

I referred in the concluding paragraph of

my despatch of the 24th July to the very serious position

of affairs regarding the general trade of the Colony, and

I have today transmitted to you a telegram drafted by the

Committee of the General Chamber of Commerce. I met the

Committee and discussed the matter with them before the

telegram was despatched. The financial crisis has been

aggravated

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