NO.

SECRET

PERSONAL

7e

19

GOVERNMENT HOUSE,

HONG KONG.

August 4th, 1938.

and

201

999

900

Copy to

Leas

1.0.

w.o.

A.N.

admy

22,

Dear N- NacDonald,

I hope that you will not mind my writing again

to you on the subject of my secret letter of June 9th.

I do so because it seems to me a matter of very instant

importance.

In my secret despatch of June 11th I suggested

officially that Great Britain should try to negotiate

with the Chinese Government the sale or a material

extension of the lease of the New Territories. I realize,

of course, that this proposal raises some difficult points

of high policy; nor is it difficult to guess the nature

of some of them.

These are not my concern, however.

My object

in writing is to represent as strongly as I can the risk

We are running of missing our market.

Today, I believe,

the Chinese Government would come in on the deal: once

the present hostilities case that attitude on their part

is much less probable; and if Japan is victorious outright

she might also be able to block it and in another ten

years time China and Japan might and I think very

probably would unite in opposing it.

-

THE RIGHT HONOURABLE

MALCOLM MACDONALD, P.., M.P.,

&C.,

&C.,

&C.

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