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His Majesty's Government would almost certainly be detrimental
to the present friendly relations with Canton. I do not
anticipate difficulties in connection with alleged separatist
tendencies of Cant on. Li Chai Sum left on 3rd July for
Shanghai and probably Peking, and Separatist tendencies appear
at the moment to be in abeyance.
Hong Kong and Shanghai Bank expects money for paying
coupons to be paid into bank by Canton Government and would
only pay on coupons after money received. It is not interested
in method adopted by Canton Government for paying in funds.
The Bank will merely act as agent for lenders and not itself
participate in loan.
Finally Canton is in such need of money that if it cannot
obtain help from British sources it will seek help elsewhere to
the detriment of British interests. I strongly deprecate any
opposition to proposed loan unless interests of paramount
importance are considered to be jeopardised.
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