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with a view to a settlement.

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H.E. asked us to inform you that the Canton Government may believe in the sincerity of the Hongkong Government to co-operate with the Canton H.E. would Government to effect an honourable settlement. be very pleased to see you that he may personally inform you of his views as to the suggestion of a loan for the purposes of commercial developments in Kuang-tung which may be beneficial to Canton and Hongkong. If your conversation with H.E. proves to be satisfactory, it can be continued in Canton by us with Mr. Wong Ching-wei and other gentlemen. We very much appreciate the frank and friendly manner in which you have talked over this matter with us in Macao and we shall exert our- selves to assist in bringing about an amicable settlement of the labour trouble. We further hope that you will also assist at your side, for which the people of the two places will be grateful to you.

C.8628/26S.

No. 13.

Yours, etc.,

SHOUSON CHOW.

R. H. KOTEWALL.

The Governor of Hongkong to the Secretary of State for the Colonies. (Received 20th April, 1926.)

Secret.

SIR,

Government House, Hongkong, 18th March, 1926.

With reference to the eighth paragraph of, my secret despatch of the 8th March* I have the honour to enclose translation of a letter from Mr. Fu Peng-sheung, dated 12th March, received by Sir Shou-son Chow and Dr. Kotewall in reply to their joint letter of the 5th March. Mr. Fu's letter was brought to Hongkong by the hand of Mr. Wong Kwai-hei, a Chinese merchant, who supplemented it with a verbal statement recorded by Dr. Kotewall in the attached memorandum. The effect of this communication is that Mr. Wong Tseng-wai, the Chairman of the Canton Council of Government considers Mr. Fu Peng-sheung, the Canton Commissioner for Foreign Affairs, too minor an official to enter upon conversations with me in Hongkong; that Mr. Wong would prefer Sir Shou-son Chow and Dr. Kotewall to visit him in Canton for an informal discussion of the situation; and lastly-- this, if true, is very important-that the Canton Government has at last decided itself to negotiate with the Hongkong Govern- ment a settlement of the anti-British boycott in Kuang-tung.

† Enclosure 3 in No. 12.

* No. 12.

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2. I have also received from Sir James Jamieson, H.M. Consul General at Canton, the following telegram dated the 16th March: Strike leaders have let me know through a third party that they are prepared to give in, if sufficiently remunerated. Can you please send up capable Chinese negotiator to conduct conversations? He should have authority to pay two thousand dollars down and go to a limit of three hundred thousand dollars for the final settlement. All demands will then be abandoned. They are acting quite independently from the Government. political situation is most obscure and there are signs of a break-up of the Government.'

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3. On the 17th March I discussed very fully with Mr. E. R. Halifax (Acting Colonial Secretary). Mr. J. H. Kemp (Attorney- General), Mr. D. W. Tratman (Acting Secretary for Chinese Affairs), Sir Shou-son Chow and Dr. Kotewall what reply should be made to Mr. Fu's letter and Sir James' telegram: and to-day I again discussed this matter with the Executive Council. We unanimously agreed to telegraph to Sir James as follows:-" The Hongkong Government cannot consent to any negotiations at Canton except with the Canton Government." This message was despatched to-day. We further agreed that the reply, of which I attach a translation, should be sent by Sir Shou-son Chow and Dr. Kotewall to Mr. Fu Peng-sheung.

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4. The interpretation of Sir James Jamieson's telegram, dated the 16th March, would seem to be that the strike leaders are afraid that the Canton Government may at long last throw them over and open direct negotiations with the Hongkong Govern- ment, ignoring the Canton Strike Committee. The strike leaders, therefore, acting quite independently of the Canton Govern. ment," wish to anticipate any such negotiations by calling off the anti-British boycott themselves, "if sufficiently remunerated." They are, in fact, making a last attempt to blackmail Hongkong. The sum mentioned by them, namely $300,000, is significant, for it is the amount mentioned by Sir Shou-son Chow and Dr. Kote. wall to Mr. Fu Peng-slteung at Macao as the utmost that the Chinese merchants of Hongkong would now be likely to pay; and this sum was then regarded by Mr. Fu as so vastly less than the figure of $14,000,000 demanded by the Canton Strike Committee that he considered further discussion of a settlement on these lines to be hopeless. Either, therefore, in the interval the boycott organisation at Canton has been so undermined that its leaders would be glad to get anything they can, even $300,000, rather than nothing at all: or else the "strike leaders," who approached Sir James Jamieson, are scheming to get the sum of $300,000 for division among themselves without any intention of making a dole from it to the 40,000 unemployed workmen, whom they represent, and whom, of course, so small a payment could not possibly induce to forego their lucrative methods of

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squeeze

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as strike pickets. In either case it is clear that our only safe course is to decline to negotiate with the Canton Strike Com. mittee and to refuse to pay blackmail to the "strike leaders."

PUBLIC RECORD OFFICE

Reference :-

C.O.882/11

PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH—NOT TO

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