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here, the text at No.85 has appeared in the Press here, and with Foreign Office agreement we have replied to the Governor's telegram at No.99 authorising him to release the text to the Press in Hong Kong.

Mr. Scarlett told me that they were preparing in the Foreign Office a paper on the Chinese claim to jurisdiction within the "Walled City" setting out the various solutions which have been proposed; he promised to let us see the paper in due course and thought that it might eventually be necessary to refer the matter to the Cabinet, probably under a joint memorandum by the Secretary of State for Foreign Affairs and the Secretary of State for the Colonies.

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In paragraphs 5 to 7 of the telegram of the 17th January (31) the Governor urged that we should take three steps which would have represented passing from "apologetic defence to attack": - (a) request for the immediate withdrawal from Hong Kong of a Chinese newspaper, the "National Times";

(b) demand he withdrawal of the Kuomintang and

a Youth Corps as part of the settlement with China over the Canton indent, and

(c) a demand that the Chinese Government regularize

their official representation in Hong Kong by appointing a regular Consul-General instead of a Special Commissioner who se sphere embraces both the Colony and parts of China.

The Governor's attitude is understandable but it was not to be expected that the Foreign Office could agree to any of these requests in view of the delicate general situation between H.M.G. and the Chinese Government, and particularly in the atmosphere created by the Foreign Secretary's speech last week in the House of Commons. The

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