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In connection with what precedes, I am now author-
ised to approach Your Excellency once more, and enquire whether there is any other concession which China can offer
to Hong Kong, in lieu of the original Inland Waters
privilege outlined in Article V of the Agreement ? And I
may add that I myself have been asked by the Government to
endeavour to effect a modified settlement on the main lines
already drawn up. The matter has engaged my careful attention, and I believe that it is unnecessary for me to emphasize that no one is more anxious to find a satisfactory solution of the question than I am. The amended plan in fegard to Article V that I now submit, with the approval of the Minister of Finance, for your consideration is as follows:
In view of the delicate Chinese political situa- tion and the extreme difficulty of coordinating and reducing to a common factor the various interests of Nanking and Canton, I suggest that Article V be deleted altogether, on
the clear understanding, to be ratified by a formal exchange of notes, that Hong Kong vessels flying the Chinese flag, like Chinese junks, may trade freely under Inland Waters rules to and from Hong Kong and Chinese "Inland" places etc. If Coastal-trade privileges are withdrawn in China it is con-
ceivable
-
in fact it is commonly asserted
G
that most of the foreign coasting vessels will be transferred to the Chinese flag, and, this being so, foreign shipping interests in Hong Kong (the majority of which are controlled by Companies now engaged in the Chinese Coastal-trade) would probably be prepared to adopt a similar policy in order to secure the unquestionable advantages connected with direct Inland trade. In fact, once Coastal-trade privileges are withdrawn from foreign-flag vessels, direct inland trade to non-open places will be permissible only to Chinese-flag vessels; but it should be clearly understood that without
some
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