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to existing system. The proper way of mesting this nationalist movement eo far as customs are concerned will in our opinion lie in gradual increase in pro- portion of Chinese in customs personnel rather than by suddenly reverting at present moment to status quo ante 1911.
As regards 3. We do not think that you are correct in holding that attitude adopted three years ago towards Canton claim for share of customs revenue is responsible for present trouble in Hongkong arising out of Bolshevik incitement consequent on Shanghai shooting incident last summer nor do we believe that immediate declaration of new policy in regard to collection of customs revenue would have effect of remedying that trouble. As regards Canton's attitude towards conference negotiations His Majesty's Consul General is of the opinion that local authorities will continue to respect existing foreign loan charges but will insist on receiving proceeds of any tariff in- creases; while extreme Kuo-min-tang elements generally are of course constantly advertising their hostility to holding of conference at all and their insistence on inmediate promulgation of unconditionel tariff autonomy.
We think that conference proposals should be put before Canton as before other semi-independent pro- vincial authorities and if majority of provinces come in and Canton refuse to do so we may then have to con- sider whether it may not be feasible either to ignore
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