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CO. 885

COPYRIGHT PHOTOGRA

ALLY WITHOUT PERMISSION OF THE

BE REPRODUCED PHOTOGRAPHIC- NOT TO

24 PUBLIC RECORD OFFICE, LONDON

162

HONG LONG.

2. The instructions conveyed in your telegrams of the 9th and 13th instant I have not as yet were immediately communicated to the authorities concerned. authorized the release of any of the German reservists under arrest, who are, as I explained in paragraph 17 of my despatch under reference, strangers to the Colony, and have been unable to establish their bond fides to the satisfaction of the Government.

I attach a statement* showing the number of reservists and others who are at present under detention as prisoners of war.

I take this opportunity of enclosing a copy of the form of parole* for Germans and Austrians who have been allowed to remain in the Colony.

3.

Your code telegram of the 15th instant is being acted upon. I regret that its receipt was overlooked when my code telegram of the 24th instant was sent.

4. Your code telegram of the 16th August, forwarded by the Governor of Singapore, will form the subject of a special report, for which information is being collected.

5. With reference to your telegram of the 18th August, you will have learned from my despatch of the 12th August† that a Censorship of postal matter was in- stituted as soon as war broke out. I have addressed you separately, under date of the 25th August, on the difficulties created by the use of closed mails

6. Your code telegrams of the 20th and 21st August have been acted upon. 7. I have addressed you at length in my code telegrams of the 15th and 24th instant concerning the policy to be adopted in dealing with the trading of German firms in the Colony, and I was reluctantly obliged to address you again on the subject in my telegram of the 26th instant, owing to the frequent inquiries by shipping firms and merchants as to the delivery of goods consigned from Eng- land to German firms or from Germany to British and Chinese consignees in the Colony. There are many other intricacies of the question, which it is unnecessary to refer to, as, doubtless, instructions will soon be received from you.

8. The only matter connected with preparations for hostilities not alluded to in my despatch of the 12th August is that of the organization of volunteer nurses. This was initiated at the instance of Lady May, and some 150 ladies are at present undergoing instruction partly by the Civil Medical Staff and partly by the Military Medical Staff.

9. The exodus of Chinese has ceased and the Colony remains in an entirely peaceful condition.

41538/8

SIR,

No. 61.

I have, &c.,

F. H. MAY,

Governor.

THE GOVERNOR to THE SECRETARY OF STATE. (Received 27th October, 1914.)

(Confidential.)

Government House, Hong Kong, 7th September, 1914. Wrra reference to paragraph 7 of my Secret despatch of the 26th of August,‡ I have the honour to report that the question of the German and Austro-Hungarian firms established in the Colony, which is of much importance, on account of the number of the German firms and the British allied and neutral interests involved, has been dealt with in accordance with the general instructions contained in your telegram of the 27th August, which was in reply to my telegrams of the 15th and 24th August.

2. The main principles which have been relied upon in working out and applying those instructions may be shortly stated as follows

(a) Enemy subjects allowed to remain in the Colony are, for such time as

they in fact stay, placed in the same position as other resident aliens.

* Not printed. t No. 58. # No. 60.

163

HONG KONG.

(b) Such enemy subjects are, of course, subject to the general law against trading with the enemy, and accordingly they must not, without permis- sion, take part in any transaction which is for the benefit of any person in enemy territory.

(c) In order that firms which are branches of firms in enemy territory, and firms which have a partner in enemy territory, may complete transactions embarked upon before the war, special permission is necessary.

Note: (i) Such permission was thought highly desirable here, owing to the magnitude of the British allied and neutral interests involved, apart from any other considerations.

(ii) It was considered that practically in no local case could it be cer- tain that such current business involved no transaction with enemy ter- ritory, because the German firms are all financed from Europe.

(d) No money must be remitted to enemy territory during the war.

S. The general application of your instructions, with the assistance of the above principles, appears from the two letters copies of which are annexed. That of the 28th August refers to transactions already embarked upon in which persons in enemy territory are interested, and that of the 29th August to new business to be entered upon by enemy subjects allowed to remain in the Colony. The letter of the 28th August is only a model and the permission referred to has been given in other cases as well as to the firms specified therein. I may mention that the reservation of the right of capture at sea had, before the arrival of your telegram, been in- serted in the draft letter, which had been prepared in anticipation of your approval of my proposals.

4. Inquiries are constantly being received with regard to particular trans- actions and these are dealt with as they arise in accordance with your instructions and the above principles.

5. The following general points are now under consideration :-

(a) The execution of export contracts already entered into by firms which

have partners in enemy territory.

(b) Certain cases where it is possible that some such firms have been carry

ing on business under the names of British employees.

(c) The rights of neutral banks in view of the conditions contained in the

letter of the 28th August annexed.

The last is the only point which is likely to cause any difficulty, and that will doubtless be satisfactorily arranged.

6. The reason why the rights of such banks were not dealt with before is that in the information received from the German firms no mention was made of any liabilities to any banks except the three British banks referred to in the letters annexed. The only bank which has raised any objection is the Nederlandsche Handel Maatschappij.

7.

I am informed that as the German firms are financed almost entirely from Europe, and will not be able to obtain credit from the banks locally, the practical result of the conditions laid down in the letter of the 29th August will be to stop almost completely, at least for the present, any future trading by the German sub- jects who have been allowed to remain here. This result, whether desirable or not, appears to be inevitable. Austro-Hungarian commercial interests in the Colony appear to be of little importance.

GENTLEMEN,

I have, &c.,

Enclosure 1 in No. 61.

F. H. MAY,

Governor.

Colonial Secretary's Office, Hong Kong, 28th August, 1914.

I AM directed to inform you that the firms whose names appear at the foot hereof will be allowed to carry on business for the purpose of disposing of their stocks now in the Colony and of goods due to arrive, if shipped before the outbreak of war.

This permission will be subject to the following conditions:- (a) All goods now in the Colony to be placed in possession of the Hong Kong and Shanghai Banking Corporation, the Chartered Bank of India, Aus- tralia and China, or the Mercantile Bank of India, Limited.

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