N.B
Vide marginal note on copy of letter to Lampson.
(Itd.) J.W.S.
103
foreign coasting vessels will be transferred to the
Chinese flag, and, this being so, foreign shipping interests in Hongkong (the majority of which are con-
trolled by Companies now engaged in the Chinese Coastal
trade) would probably be prepared to adopt a similar
policy in order to secure the unquestionable advantages
connected with direct Inland trade. In fact, once
Coastal-trade privileges are withdrawn from foreign-
flag vessels, direct inland trade to non-open places
will be permissible only to Chinese-flag vessels; but
it should be clearly understood that without some such
Agreement as the one now under discussion, even Chinese-
flag vessels, coming from Hongkong, would be debarred
from such privileged trade. Seeing that the Chinese
Coastal-trade is in necessaries of life and industry,
it follows that any impediment would be serious. And
while no reasonable person can properly question China's
right to protect and encourage her own shipping, it
must be admitted that for years to come the supply of
purely Chinese-owned vessels will not equal the demand,
and for this reason a transfer of flag on the part of
the foreign Companies seems to me to be inevitable.
And if such a course would be likely to prove profi-
table in China, it would doubtless be equally advan-
tageous to foreign interests in Hongkong. Further-
more, in regard to Chinese produce from a Chinese
Treaty-port transhipped in Hongkong en route to another
Treaty-port, I am now in a position to extend this
provisional concession to the extent of permitting
such goods to be transhipped in Hongkong into junks
or railway trains without forfeiture of status. This
would prove a very considerable stimulus to junk
traffic....