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of his confidential despatch to the Foreign Office No.
1488 (8-SY), dated the 11th October, 1929. In it Sir
Miles suggests that it would be preferable if the proposed customs agreement could be concluded without any
reference being made to the navigation of Chinese
territorial waters by Hong Kong steamers. But it is
precisely this right which is of great value to the
British and Chinese merchants of Hong Kong, and upon
further consultation with them I find that both alike are
strongly opposed to the grant of the extraordinary privileges asked for by the Chinese Maritime Customs unless a substantial quid pro quo, such as that provided by Article 5, can be obtained by way of compensation. It will interest Your Lordship to know that the Chinese merchants are fully as anxious as are the British merchants that the privileges for trade on the inland waters of China, now accorded to vessels under the British flag, should be retained. They point out that ships under the Chinese flag in the inland waterways of Kwangtung and Kwangsi are liable to be commandeered without compensation or redress by Chinese warlords, that they are subject to attack by pirates and brigands against whom little or no protection can be obtained from the Chinese authorities, and that the goods carried in them are subject to all manner of illegal and harassing ex- actions. They value very highly the protection given by the British flag and would be most reluctant to dispense with it. I fully agree with them and am entirely opposed to the deletion of Article 5, from the draft agreement or to its modification to the extent of
limiting