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14. There should be no difficulty in obtaining the small contingent required for this Dependency from the garrison at Hong Kong, which would not be weakened to any appreciable extent by a reduction in its numbers of two or three hundred men. There can be no doubt that, as the climate of Wei-hai-Wei is so much better than that of Hong-Kong, the change would be of great benefit to white troops, which might be stationed here for periods of twelve months, so as to allow as many men as possible of the white regiment at Hong-Kong to enjoy during their terni of service on this station the bracing climate of this Dependency.

15. As to the question of cost, which so long as Wei-hai-Wei is not self- supporting must remain one of first importance, if my suggestions are approved, there would be practically no increase of Imperial expenditure beyond that required for the transport of the troops for the garrison here to and from Hong-Kong.

On the other hand, if my recommendations are not adopted, and it is decided to raise a large Police Force, the cost would be very great, whilst its efficiency would be very doubtful.

16. If the scheme I proprise is adopted, there seems to be no reason why the whole of the Chinese Regiment should not be disbanded as soon as the garrison recommended by me arrives to take the place of that regiment.

17. I am of opinion, however, that it would be well to retain and attach to the staff of the Cominissioner one of the officers of the Chinese Regiment who is able to speak Chinese, and who has an intimate acquaintance with this locality. He would form a useful link between the Civil and Military Authorities, and would be able to supervise the headman system, and would act generally as Intelligence Officer.

At present this Government has no regular means of obtaining reliable intelli- HOIR. I enclose an extract from the “North China Daily News" of the 25th ultimo, which reports that trouble is brewing in the province of Shantung.

Whilst there may be no truth in this rumour, it is manifest, especially m view of the events of last year in China, that, as this Dependency is situated on the confines of that thickly populated province, this Government should have at its disposal sour regular imachinery for obtaining trustworthy information regarding what may be necurring in its neighbourhood,

I miderstand on enquiry that Captain Johnson is the officer of the Chinese Regiment must conversant with Chinese, and I would suggest that his name be baranght before the War Office Authorities, with a view to his services being retained at Wei-hai-Wei.

18. As regards the policing of Maton, the chief town on the mainland, and The island of Lin Kung, which are the chief centres of population, I do not intend to make any change in the existing Police Force on the Island until I have had an opportunity of ennsulting with Admiral Sir Cyprian Bridge on this subject.

19. With respect to Maton, which is now the seat of Government, but which bas at present no regular police, 1 propose to police it in the same manner as the Island is policed, and I mú auxions to secure as Inspector the services of Sergeant Purdon, one of the non-commissioned officers of the Chinese Regiment, who is able to speak Chinese. Sergeant Pardon is not here at present, having gone home with the contingent of the Chinese Regiment which is to be present at His Majesty's Coronation, but I understand he wishes to obtain employinent in this part of the world now that the Chinese Regiment is to be disbanded.

He will, no doubt, lave to return with the Coronation Contingent, but in aug nase it might be well to let him know that it is desired to employ him as an Inspector of Police.

20. The expenditure on account of the police on the Island and Matou will not be large. I will furnish you with details regarding it when I know whether my scheme for a Polier Force is approved generally,

21. To sum up, I recommend that the present system of policing the territory Generally through headmen should be continned, but that, in order to give a sense of security to the inhabitants of all nationalities and to assist the Civil Authorities in eases of emergency, a small garrison of two or three hundred men should be stationed here; that there should be a small Police Force under European Inspector: on the island of Lin Kung, and at the town of Maton; that the services of an ollicer of the Chinese Regiment acquainted with the Chinese language should be as tained, and that such officer should be attached to the staff of the Commissioner

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19 act as Intelligence Officer, and generally to aid in supervising the police work of the territory.

22. These recommendations are based on a desire to secure the greatest efficiency compatible with the least possible expenditure of public funds. To attain this end it is deemed advisable to utilise for police purposes the village organisation at present in existence throughout the territory, instead of introducing a system of police based on Western methods which, while being much more costly, would not be likely to prove so effective. The people as a whole are ignorant of such methods, and it is almost certain that they will be much more easily policed through their own headmen than through Inspectors of Police, living in Police Stations scattered throughout the territory, who would be unable to communicate with the prople except through interpreters, a system which almost invariably results in abuses and inalpractices,

I have, &c.,

J. II. STEWART LOCKIHART,

Enclosure in No. 102,

**NORTH CHINA DAILY NEWS," May 28th, 1902. RESTLESSNESS IN SHANTUNG,

Commissioner.

According to wivices received from Chirm, the capital of Shantung, it is stated that Boxers are rsport «d to be drilling in the districts bord ring Chihli "provinca, and that it is evident that trouble is browing in Shantung as well as elsewhere.

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~118,

No. 103.

TREASURY to COLONIAL OFFICE.

(Received July 22, 1902.)

[Answered by No. 117.]

Treasury Chambers, July 21, 1902 I AM directed by the Lords Commissioners of His Majesty's Treasury to acknow- folge the receipt of Mr. Lucas's letter of the 11th instant (3754/02),* stating that the Hong-Kong and Shanghai Banking Corporation are prepared, subject to the approval this Board, to open a branch bank at Wei-hai-wei, and that Mr. Secretary Cham- belain is of opinion that the establishment of such a branch would be of great advantage to the dependency.

In reply, I am directed to acquaint you that my Lords see no objection to the proposal, and that they will be prepared upon receipt of a formal application to give heir consent to the establishment in the form required by Hong-Kong Ordinance, No, 29, of 1880.

In the event of the opening of the branch bank my Lords think that the proposal *hat the British dollar should be made legal tender in the dependency may be pro-

edded with as soon as the bank has been established.

In accordance with the scheme of currency legislation for territories which are not British possessions within the meaning of the Coinage Act, 1870, which was approved Mr. Antrobus's letter of the 30th April last (9130/1902),† my Lords suggest, for Mr. Chamberlain's consideration, that the proposed legislation should take the form of rder in Council under the Foreign Jurisdiction Act, 1890, instead of local Ordinance. Such an Order can, if Mr. Chamberlain so desires, be prepared in this Department for submission to His Majesty.

It seems desirable that the Order should provide for the subsidiary, as well as the andard, coins which are to he current in the Protectorate. These were not dealt ith by the draft Ordinance sent to this Department, and I am to enquire what Trections should be given to the draftsman on the subject.

Tam, &c.,

E. W. HAMILTON,

• Xu, 10,

† No. 1 in African (West) No 645.

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