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This boundary line is open to great objection. It cuts in two the rich valley of which Sham Chun is the centre, and, while excluding that town, divides the villages in the valley hitherto linked together by family ties and common interests, and at present separated, so far as the river extends, by about 100 feet of a tidal river, and onwards from Sham Chun to Starling Inlet by no boundary whatever. All these villages regard Sham Chun as their central and most important market, where they dispose of their goods and make their purchases, and much difficulty and friction would be certain to arise if the villages on one side of the stream or road come under British jurisdiction whilst those on the other remain under Chinese rule.

Another important reason why Sham Chun should not be excluded from the area to be leased is that it is the seat of the Head Council of the local as opposed to the Imperial Government, represented by the district magistrate, who resides at Namt au. This Head Council controls all the village and other tribunals through- out the Tung Lò or Eastern Division of the San On district, which is that portion of the district included in the Convention, and exercises great influence in every village.

Again, it must be remembered that the chief industry of the villages in the valleys is the cultivation of rice, for which an ample and constant supply of water is necessary. If the boundary line indicated on the Convention map be followed, endless dispute as to water rights between villages under British and Chinese juris- diction are certain to ensue; dissatisfaction will be created; and the task of govern- ment will be rendered more difficult.

The proposed boundary would also render smuggling an easy matter, which, in view of the pledge given to China, ought to be avoided.

The disadvantages of having a Chinese town just outside British territory have been experienced in the case of Kowloon, which for years has been a source of never- ceasing trouble and constant friction between the Governments of Hongkong and China. History will certainly repeat itself if Sham Chun be allowed to remain in Chinese territory.

In the opinion of all those acquainted with the country, whether belonging to the naval, military, or civil services, it is essential, in the interests of good gov crnment, and in order to maintain friendly relations with China, that the town of Sham Chun should be included in the lease.

The boundary between two countries, which leads to least friction, is either a broad and deep river or the ridges of hills forming the watersheds of different valleys. In the San On district there is no broad river such as would form a suitable boundary. But there are ridges of hills which could be utilised for that

purpose.

This proposed line, which includes the important town of Sham Chun and the land to the north and east of Mirs Bay and to the west of Deep Bay, forms a good, natural boundary, running along the crest of the hills, is easy of defence, and would help to check smuggling. It renders unnecessary the separation of villages hitherto united, removes all danger of disputes about water rights, and obviates any interference with the present system of local self-government, on the support of which the success of British administration in the new territory must to a great extent depend.

PREVENTION OF SMUGGLING.

The question of smuggling from Hongkong is one which has given more trouble than almost any other ever since the foundation of the Colony.

The whole difficulty lies in the geographical position of the Colony of Hong- kong, which is so situated that smuggling into China may be checked but can never be altogether prevented. It is obvious that the extension of the Colony will not decrease the facilities for smuggling, especially if a mere stream instead of a well-defined range of hills is selected as a boundary.

Opium has always been the chief article smuggled. To prevent the smug- gling of it, special legislation has been introduced by the Government of Hongkong. If it is considered desirable, in view of the pledge given by Great Britain to China to prevent, so far as possible, smuggling, to still further control the export of opium from Hongkong, I am of opinion that this can be best effected by a bonding system.

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