CO537-3707 — Page 75

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in your letter of the 8th, you would also tell us whether, if the ultimate de- cision' were to be that we should not go either to Court or arbitration, you would favour a compromise solution (and, if so, which of the several which have been suggested)

or whether you would favour the alternative of letting sleeping dogs lie and doing nothing at all, a possible course which, if you remember, was discussed when you and

Stevenson came to see us in September and was again referred to at our meeting on the 26th October.

5. We have not yet had a reply from the Governor to Paskin's telegram No.1115 of the 30th October, but it is not essential T

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to wait for this. It seems to us that we should now inform the Governor of the ultimate decision about the International Court or arbitration (it is not yet taken of course, but for the purpose of considering our future course of action, we can perhaps assume that it will be against going to Court or Arbitration). at the same time giving him an indication of our views as to the remaining choices open to us.

6. We realise that it is perhaps impossible to formulate a view on this question in the present uncertain state of affairs in China and, if indeed you feel this is so, you will no doubt tell us and the present state of affairs (which is in fact a state of doing nothing) will continue for the time being (unless the Chinese think otherwise!) if you feel you can give us your views on the points I have mentioned they would ob- viously be of great assistance to us in helping us to decide on our next step.

But

u.

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