CO129-493 - Governor Sir Clementi - 1926 [6-8] — Page 341

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be possible for His Majesty's Government to make no immediate reply to the proposal for an enquiry and merely tế make a counter-proposal. If you consider this to be the wisest course, then I suggest a counter-proposal on the following lines:-

"Conditional upon the immediate and complete cessation of the boycott and of all other anti- British manifestations throughout the territory controlled by the Canton Government, His Majesty's Government agrees to construct the junction line between the Kowloon-Canton and the Canton-Hankow railways from Boxer Indemnity funds, and further agrees to make a loan, upon terms hereafter to be settled, for the development of the port of Whampoa. Moreover, if the Canton Government at once puts an end to the boycott and to all other anti-British manifestations throughout the territory which it controls, and if it assumes full responsibility for all liabilities which have hitherto devolved upon the Chinese Government in respect of the territory now controlled by the Canton Government, His Majesty's Government will be prepared to give the Canton Government both de facto and de jure recognition in the area over which it actually exercises undisputed authority."

11.

As regards a grant from Boxer Indemnity funds for constructing the loop-line railway at Canton and as to the suggestion that the Hong Kong Government should make a moderate loan for the development of the port of Whampoa, I refer to your telegram to me dated the 23rd July. You will see from the enclosed proceedings of the boycott conference that the British delegation has already made an offer of a loan of about $10,000,000 for the develop- ment of the port of Whampoa conditional upon the construction of the loop-line railway at Canton.

* No

12./