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7. Boycott of Hong Kong which lasted from June 1925
to the middle of October 1926 failed to paralyse this
Colony and from the point of view of Hong Kong open war
with Canton would be little worse than hidden warfare which
has already lasted so long and still continues. We should
hope as a result to substitute friendly Government at
Canton for our present Bolshevik enemies and to get rid of
the Russians. This would immensely improve trade which
would be in desperate straits if Canton policy were to
continue unchecked for an indefinite time. Already as a
result of Canton activities on Yangtze, Taikoo sugar
refinery in Hong Kong which employs at full pressure 2200
labourers and was till recently employing more than 1000
has been closed down for the present.
8. It is clearly undesirable to retain Shanghai
defence force in China for several years but it cannot be
safely withdrawn until serious threat to British life and
property in China has been removed. We must therefore
stop policy of drifting and decide definitely and quickly
what we mean to defend and how. In the circumstances I
recommend A. Prompt endeavour to reach entente with
Japan and if possible also with France and America as to
coercive measures to be adopted to ensure cessation of anti-
foreign manifestations, maintenance of Treaty rights
pending revision by negotiation in proper form integrity
of Maritime Customs and security of Chinese loan obligations.
B. Failing such an entente independent action by ourselves
nature of which will largely depend on the result of
negotiations with Japan France and America.
9.
Independent action by ourselves will probably
be necessary in the end as British traditional role in
China has been to give the lead to other Powers. Most of our
present
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