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reached the Foreign Office indicated that Mr Grayburn thought that
he had grounds for believing that a government guarantee would be
granted. It is on the contrary clear that His Majesty's Government
at no time seriously contemplated giving a financial or any other
kind of guarantee. And in view of the reply of the Portuguese Chargé
d'Affaires of April 12th the question of Japanese action at Macao
ceased to be an urgent one and no further consideration was given to
the question of the suggested guarantee. I am to refer in this connexion to Foreign Office letter F 2345/G of the 15th April.
5. On April 17th information reached the Foreign Office to the
effect that a British firm had secured the contract for the water-
works. Apparently the Chief Manager of the Hong Kong and Shanghai
Banking Corporation had decided to finance the transaction but it is
not know what it was that caused him apparently at the last moment
to reach this decision. In the correspondence enclosed in your
letter under reference the suggestion is made that Mr Grayburn was
influenced by statements made to him by certain officers of His
Majesty's services in Hong Kong. It seems extremely improbable, however, that any such statement could have been of such a character as to justify Mr Grayburn in taking it for granted that a government
guarantee would be forthcoming.
4. In the circumstances I am to suggest that the Hong Kong
Government should be informed that His Majesty's Goverment at
no time contemplated giving a guarantee involving financial liability in respect to the contract for the Liacao Waterworks
and that it is difficult to imagine any set of circumstances
arising in which His Majesty's Government would adopt such a
course. It is impossible therefore for His Majesty's Government
to accede to the request now put forward by Mr Grayburn.
observed, however, that what Mr Grey burn chiefly fears is that
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