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was informed that the combative measures taken by the various steamboat companies were directed against the "Lee Hong" and not against the railway. The larger companies thought that the economic pressure they were exerting on this new vessel would quickly drive her off the run. As the year progressed, however, it became evident that the struggle was likely to be a prolonged one, and the railway was forced to take various steps to augment its through passenger receipts which by March had shrunk approximately 40%.
6. The "Lee Hong" ceased to be a British ship on December 6th when an order of the Supreme Court declared the vessel to be the property of the "On Woo Navigation Company". Since that date she has been in the hands of a Receiver and has not run. During her short but eventful career she caused considerable losses to both steamboats and railway by upsetting the economic balance of transport between Hong Kong and Canton. The only redeeming feature from the railway point of view is that it has demonstrated in no uncertain manner its potentialities as a passenger-carrying medium vis-a-vis the river steamers.
7. The charts on pages 2 and 3 show in graphical and tabular form the story of the competition. The large decrease in water-borne passengers, from the middle of November onwards, is attributed to the sudden rise in the price of commodities consequent on the depreciation of the dollar. This rendered impracticable the operation of many smugglers working on a small money margin. With the previous combination of a high valued dollar and an extremely low fare, thousands otherwise unemployed were able to travel to Hong Kong from Canton, purchase a little dutiable material, return to Canton, and sell at a small profit what they managed to smuggle through the Customs. It is true, unfortunately, that low fares between Hong Kong and Canton increase petty smuggling to such an extent that it is impossible to estimate the additional number of bona fide passengers attracted by cheap travel.
8. The railway was approached by the shipping companies, in the middle of December, with a view to fixing minimum rail and steamboat fares. There is reasonable probability that the negotiations now proceeding may lead to general agreement early next year.
9. The most noteworthy event of the year was the introduction of an agreement for the issue of through passenger tickets between Kowloon, and Sam Shui, Sai Nam and Fat Shan on the Canton-Sam Shui Railway. This was signed at Canton on August 30th, by the Administrations of the British and Chinese Sections of the Kowloon-Canton Railway, and the Southern Section of the Canton-Hankow Railway.