21189/26

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3.

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informed that, subject to a settlement being reached

on other points, the Hong Kong Government would be

prepared to permit the Union to be reinstated.

The

extreme "demands" of the delegates, which in the later

stages of the settlement discussions included strike

pay, reinstatement of strikers, and approximately five

months' post-settlement pay for strikers remaining

unemployed, were no doubt prompted by this lenient

action. The Hong Kong Chinese became imbued with the

idea that the Government was afraid of the Union it-

self, or of the political consequences of opposing it;

and the Government's surrender was unfortunate in

providing support for this opinion. Since then this Union has been the champion of organized labour in southern China and has grown steadily more political in character and more extreme in its views, becoming one of the main supports of the labour or mob-platform upon which the Kuomintang has built its tower of Babel. It was thus assured of official support, or at least non-intervention, on the part of the Cantonese authori- ties,in its anti-British activities, when the next trial of strength came in 1925.

4. As I have explained in the enclosure to my secret despatch of the 12th October, 1926, the so- called Shanghai massacre" of the 30th May, 1925, passed almost unnoticed at Canton owing to the bloody doings which at that time inaugurated the Soviet régime in Kuang-tung. But a very carefully fomented agitation, designed to divert the attention of the Cantonese from the reign of terror at Canton in the early part of June, 1925, led to the Shakee incident of the 23rd June, 1925. The history of the last ten

days

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