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Sir G. Gater.

1. The statement on this question, which Mr.Hall made in the House of Commons on the 1st of May last, is flagged A at No.44 on Part I of the file. While that statement left it open to the Governor to recommend constitutional advance otherwise than through the establishment of a fully representative Municipal Council, it was made clear that the latter was the most likely line of development.

2.

In No.69 Sir Mark Young, after exhaustive local consultations, recommended that the main advance should be through a largely autonomous Municipal Council with no Government representation on it, but he proposed also an unofficial majority (all nominated) on the Central Legislature. The details of the Municipal proposals are summarised in No.73 on this file.

3. In his confidential despatch at No.70 (which is important and should, if possible, be read) the Governor drew attention to and commented upon the wide- spread apathy and certain apprehensions among large sections of the Hong Kong Chinese. He also freely admitted the real risk of wholesale jobbery and corruption under the new Municipal scheme.

4. My own view at first was that, notwith- standing these disturbing factors, the Governor's proposals should be accepted subject to certain points of detail which I discussed in paragraphs 4-12 of my minute of the 12th of December. But at a meeting in your room on the 18th of December (recorded in Miss Ruston's minute of the 19th of December) we were all persuaded that it would be well first to put to Sir M. Young the possibility of abandoning the project for the establishment of a Municipal Council coterminous with the urban area of the Colony and substituting for this a scheme for the considerable broadening of the basis of the Central Government itself through a system of election of a proportion of the Legislature.

5. The draft now submitted gives effect to the conclusions we reached at our meeting. I mentioned this new line of thought to Mr. MacDougall last week and found that his first reaction to it was slightly adverse. But he will be back in the Colony quite soon and Sir M. Young will no doubt take his advice before | replying to the present telegram, should the Secretary

of State decide to send it.

6.

At the end of the Parliamentary statement made on the 1st of May it was said that the aim would be to announce, not later than the end of this year, the principles upon which any constitutional change in Hong Kong should be based. That will no longer be possible; but if the Governor is persuaded by the present telegram, it ought to be possible to agree the terms of an announcement in time for it to be made soon after Parliament reassembles.

The Foreign Office ought to be consulted before any new announcement, such as that proposed at

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