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If these necessary ships cannot be spared to us from the Channel or Mediterranean Fleet, then all that we can say is that the sooner we have a new Naval Defence Act the better, and perhaps, now that Mr. Goschen has resigned, the word of shipbuilders, who positively affirm that they can build more battle-ships for the Government than are at present laid down, will be accepted.
My Committee feel bound to state their most deliberate opinion that our present Naval Strength out here is consider- ably below the margin of safety, especially in view of the fact that there are indications appearing that the French are prepar- ing to pursue a forward policy round and about Canton and gen- erally in the provinces of Kwang-tung Kwang-si and Yun-nan.
We may mention, for your information, that there are 5 French boats at Canton now as compared with one British, and, within the past few days, it is rumoured that French Troops are being transported from Kwangehauwan towards Canton.
The danger of a rupture is seriously increased by the fact that the Boxers and Secret Societies are now fairly active in the neighbourhood of Canton, and accordingly there are suitable materials in existence for giving the French a pretext for interfering, especially now that they see that we are so comparatively weak in these waters.
In connection with these three Southern Provinces, Kwang-tung, Kwang-si and Yun-nan we would beg leave to point out that we in Hongkong have a very special interest in them, because they are the only Provinces of China with which we do any trade in the strict sense of the word, 1.e. the trade of buying and selling. As regards the trade of all the other
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