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4. The abuses connected with the navigation of the
inland waters of China by vessels under the British flag
owned by persons of Chinese race have been a source of
grave anxiety in the past. If such vessels were now
permitted to ply from Hongkong under Inland Waters
certificates granted by the Chinese Customs functioning in
Hongkong, any future incidents, similar to those that have
occurred so frequently in the past, might give rise to
friction between the Hongkong Government and the Chinese
Customs Authorities with possibly serious reactions on our
relations with China and on British interests in China
generally. The proposed limitation of inland water
privileges, so far as vessels plying from Hongkong are
concerned, to Chinese-flag vessels, while not seriously
diminishing the benefits conferred on Hongkong trade, seems
calculated to eliminate this source of danger. Mr.Henderson
is inclined to think therefore that the modification
proposed by the Chinese Government, while not substantially
impairing the value of the draft agreement presents definite
advantages, of a different order, and should be accepted.
If the Government of Hongkong attach importance to the matter, it might be reserved for further consideration and possibly
subsequent negotiation, but in view of the great benefits
which the draft agreement confers on both sides and of the
good effect which it is likely to have on British relations
with China generally, Mr.Henderson hopes that the conclusion
of the agreement will not be jeopardised or delayed by reason.
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