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turn for help to Britain rather than to Russia. In this connection I would refer you to my despatch of the 24th December (secret), paragraph 3, my despatch of the 8th January (secret), paragraph 2, and my despatch of the 20th January (secret), paragraph 10. We are, however, decidedly against an annual payment to Canton from Boxer funds. In the allocation of Boxer funds, in our opinion no regard should be had to the Canton situation, and Kuangtung should not receive any payment while the boycott lasts. Delegation should not, in our opinion, proceed to Canton so long as relations between the Government of that place and Great Britain continue to be abnormal. We fear that there is no real desire for conciliation on the part of the Government of Canton, which is only inclined to put an end to the boycott on terms which would be humiliating to the colony and Great Britain.
A settlement would probably be welcomed by the bulk of the population of Canton, but they are terrorised by the Strike Committee and are incapable of giving expression to their wishes. In Central and Northern China anti-British feeling has subsided, but, as the result of Bolshevik influence over the Government of Canton, there has been no improvement in this respect in Kuangtung. The suppression by the local Chinese authorities of the extremist elements in Central and Northern China has rendered possible there the realisation of the policy of conciliation.
The Government in Kuangtung, on the other hand, actually consists of the
extremists.
On the 4th February I stated in the Legislative Council that the Government of Canton is expected and required by my Government to stop the illegal activities of the Strike Committee, that we consider that the responsibility rests on that Government, and that we are still willing to negotiate an honourable and permanent settlement with the Government of Canton. So far the Canton Government has declined to enter into negotiations. If they maintain this attitude in spite of my last offer, and should no success attend the action under the Washington Treaty which I have suggested, we shall have to consider whether the risk involved in In the event of war separate warlike action in Kuangtung should not be taken. becoming unavoidable, I invite reference to my despatch of the 19th January (secret). We hope that in any statement which may be made in Parliament the suggestion in the last sentence of the telegram of the 1st February from His Majesty's Minister at Peking will be emphasised."
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ANNEX XX.
**
Extract from Morning Post of January 14, 1826.
BRITAIN'S CHINA TRADE IN PERIL.
THE fear is growing that the colony and trading centre [of Hong Kong] will be actually lost. 1925 in China has lowered British prestige."
These are extracts
from a telegram we have received from a prominent business man in China. The situation, indeed, so far as Britain is concerned, may be described as desperate.
What that situation is in detail Mr. L. N. Leefe, chairman, and Mr. Stanley The Chinese Dodwell, vice-president, of the China Association, explain below. boycott prevents the carrying of merchandise by British ships. Trade in Hong Kong is at a standstill. British goods can only reach Canton by devious routes. In Swatow any Chinaman touching British cargo is liable to ignominious treatment.
An Incendiary Speech.
A Chinese official, Chou En Lai, has publicly declared that the boycott and strike must be used to destroy imperialism, beginning with British Imperialism, that the life must be wrung out of the colony of Hong Kong, and that the Nationalist Government will help the attacks on the Imperialists.
Complaint is made that British representatives in China have lacked initiative, while Bolshevism has fomented troubles at the expense of Great Britain. A man of strong character is wanted, and hopes are expressed that Lord Willingdon, during his mission to China concerning the Boxer Indemnity, may render help in the very serions emergency.
A Desperate Position.
We have received the following telegram from a prominent business man in 534 China, whose opinions are entiled to the closest attention:-
"British merchants very seriously apprehensive future of Hong Kong, which has been hopelessly defeated in the struggle in South China.
Fear growing colony and trading centre will be actually lost. 1925 in China has lowered British prestige to a large extent unequalled since Dutch guns threatened London in the seventeenth century."
Mr. L. N. Leefe, chairman of the China Association and a director of Matheson and Co., the China traders, issued a grave warning to the country with regard to Southern China in a special interview with a " Morning Post representa- tive last night.
11
The Morning Post telegram is in accordance with the situation as I see it," he said. British prestige and British trade in Southern China are going to be ruined unless the boycott is brought to an end. Trade in Hong Kong has been brought to an absolute standstill. British shipping companies are not trading with Canton and Swatow, and they will have to go out of business altogether unless the British Government does something about it.
One requisite in Southern China to-day for trading is that the trader should not be a British subject. Can anything be more humiliating? British diplomacy has totally failed to deal with the situation. The remedy must necessarily lie with the Foreign Office, but one theory is that negotiations should be carried out through Moscow. Some people go so far as to suggest that the trouble was made by Russia in retaliation for the British Government not ratifying the treaty last year.
The delegation which went from Hong Kong to Canton last week to complete a settlement by monetary payment proved completely fruitless, and thus the situation became further complicated.
"I have just received a letter from a prominent trader in Swatow, the South China port. He is a personal friend of mine, and his description of the situation there is almost past belief. He writes:-
Any Chinese doing any kind of work or service for the British here is promptly arrested by the Seamen's Union pickets, paraded with ignominy, bound and with a paper cap on his head, round the town, and forced to pay a fine and work a period on the street-cleaning gang. You will realise therefore, that it is utterly impossible for us to get any Chinese to work for us openly.
As regards landing cargo with foreign assistance," you must recollect that the foreign community, which is very scattered, exclusive of missionaries, women and children, totals no more than about fifty persons in all, and of these a large proportion are not British. It could not be expected that, say, an American or a Dutchman would volunteer to work British cargo in the hold of a British ship, nor, for obvious reasons, would an Englishman thank us if we requested him to discharge cargo, consigned probably to Chinese, from one of our ships and carry the same to even our nearest godown. It is all that we can manage, with the assistance of British naval ratings, to land stores and provisions necessary to keep us alive, since we can buy no food locally.
"Strike conditions in this port cannot be compared with strike conditions in your port, since we have not a large foreign population to draw on from which bands of volunteers for different jobs can be obtained. Literally, everything has to be done by ourselves or else it is left undone."
I have also just received an English translation of an extraordinary Inflammatory speech made by Chou En Lai, chief of the Eastern Expedition Political Department, which he made at the close of last year. The following are extracts from this speech :-
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"China has suffered from the invasion of International capitalistic imperialism that dwarfs and suppresses the growth of her industries. The worst effect of this aggression is experienced in South China, namely, in Hong Kong, Swatow and Amoy. The value of the trade between Swatow [14166]
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