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verbally arranged that he should stay on in the flat at the rent of $150 for the months of March and April. The landlords completed a tenancy agreement from the 1st May, 1938, with a new tenant. Subsequently, the tenant learned that his relief had been postponed and desired to remain in the flat until the end of May, 1938. The landlords informed him that they could not agree, as the flat was already re-let. The terms of the correspondence are not free from doubt, but it seems to us that it is capable of the construction that the tenant led the landlords to believe that he would vacate the flat at the end of April, 1938, and we are satisfied that the landlords acted upon that construction in good faith. The landlords' representative told us that he had another flat of a similar size which he was prepared to allow the tenant to occupy until his departure at the same rent of $150, but that the tenant had written to us without applying to the landlords for alternative accommodation. The tenant in this case was an Admiralty Civil Servant, and we refer to this class of tenant later in our Report. We are inclined to believe that fear of loss of face" has deterred some tenants from moving into cheaper premises. In one case the landlord had offered a family a cheaper flat in an adjacent street, but they refused to accept the offer. One witness had still 20 old Chinese tenement flats vacant which he was prepared to let at about $20 per month.

9. In the second place, it should be observed that it is not only landlords who have been through bad times in recent years. There has been a general depression. In trade and commerce there has now been a considerable general improvement. We think that this improvement is not solely accounted for by the present hostilities and the influx of refugees into the Colony. A prominent Chinese member of the com- munity told us that in his view the Colony had shown signs of recovery, after a long depression, quite apart from the Sino-Japanese hostilities. Whatever its cause, the improvement is undoubted. The annual reports of limited companies in general show increased profits, and we believe, although we have no actual figures, that many concerns, and notably the dock companies, are employing considerably more labour. The Inspector of Factories reports that between May, 1937, and February. 1938, 155 new factories were opened as against 46 (mostly small) closed, and that after allowing for closures, approximately 2,200 males and 2,300 females were taken on in factories. The Inspector further reports that there have been considerable extensions to existing factories, with a corresponding increase in employment, but accurate figures of this increase are not available. We were also informed by other witnesses that there had been a considerable increase in wages in certain trades. In the clerical grade of employment, however, there is as yet little or no improvement. Trading concerns have to recover from a severe set back and in view of the prevailing uncertainty a cautious attitude is only to be expected. A witness to whose views we attach particular weight, did not think there had been a long enough spell of good trade to justify increased wages for the latter class of society. Nevertheless it is possible that in the near future an upward tendency will commence, which should in some measure help to solve the problem of higher rents. There is no doubt that at the same time there is a rise in the general cost of living, a condition which always attends economic recovery, but which at present is largely due to the Sino-Japanese hostilities.

PART V.

Possible Solutions.

1. The considerations set out in the last two paragaphs of the foregoing part of this Report may to some extent reduce the problem, but they have not disposed of it. What then are the possible solutions? They seem to us to be two in number-(a) the statutory restriction of rents, and (b) the inception of rapid house construction work. The second solution, whether achieved by governmental action or by private enterprise, has the obvious disadvantage that some time must inevitably elapse before it becomes effective.