The Diocesan School and Orphanage for Boys was founded in 1870, by which time, under the influence of the Roman Catholic Bishop Raimondi, the number of Roman Catholic schools had increased to thirteen with over 600 pupils, half of whom were girls. For all this time and till 1871 no financial support was given to missionary schools, but in 1872 a grant was offered to schools belonging to the Christian Missions. A Code was drawn up, containing a condition to the effect that no religious instruction was allowed during four consecutive working hours each day. As a result of this grant the Protestant schools increased from four to eleven between 1872 and 1876. The Roman Catholic schools continued to flourish unaided till the year 1877. The present St. Joseph's College was founded in 1875.
In 1878 the Grant Code was amended and the conditions now stipulated that Code subjects should be taught for four hours daily but otherwise left religious education absolutely in the hands of the managers. Thenceforward Government, Protestant and Roman Catholic schools have worked harmoniously side by side, with but friendly rivalry between them.
Dr. Eitel was appointed Inspector of Schools in 1879 and, as he was opposed to State schools where avoidable, he closed eleven Government schools in 1893 on the ground that they had been rendered unnecessary by the Grant schools.
Dr. Eitel (Inspector of Schools) and Dr. Stewart (Headmaster, Queen's College) were unable to agree in their views with the result that Queen's College was made independent of the Inspector. Thus education in the Colony became a thing of divided counsels for many years.
In 1894 the Grant Code was further amended and provision made for Building Grants.
Important changes in education policy took place in 1901 as the result of the investigations of an Educational Committee, consisting of Mr. A. W. Brewin (Registrar General), Dr. Ho Kai and Mr. E. A. Irving (Inspector of Schools), into the conditions of education in the Colony. This committee, among other things, emphasised the need of introducing oral methods in the teaching of English, modern ideas respecting history and geography and the cultivation by Chinese students of their own language. The system of giving Grants, which had hitherto been entirely and unashamedly by results, was brought more closely into accord with modern ideas and the Grant Code amended accordingly. More practical and better teaching in the Vernacular schools was insisted upon.
In 1907, under the Governorship of Sir Matthew Nathan the Technical Institute was founded and upon the retirement in 1909 of Dr. Wright, who had been Headmaster of Queen's College since 1886, the Education Department was reconsolidated under one head, the Director of Education.
The idea of founding a University in Hong Kong was by no means new, but the rapid advance of English education during the next few years made it a practical possibility and in the Governorship of Sir F. Lugard (1907-1912) the liberality of the late Sir Hormusjee Mody supplied a building. Public interest, not only locally but in China and among Chinese in the Straits Settlements, provided funds, and in 1911 the University of Hong Kong was opened and with it a new chapter of education in Hong Kong.
At the beginning of 1913 the average attendance in all schools, including enrolment at the Technical Institute, was 5,582 in English schools and 10,327 in Chinese schools, and the total nett expenditure on Education $269,144.00 of which $15,000.00 was spent on primary Vernacular schools.