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(Secret.) Sir,

APPENDIX I.

Despatch of Acting Governor.

Government House, February 12, 1904. I HAVE the honour to transmit the enclosed letter from Major-General V. Hatton, Commanding the Troops in South China, giving cover to the Defence Scheme of this Colony revised to January 1904.

2. I concur in the remarks made in the 3rd and 4th and 14th paragraphs of Major-General Hatton's letter. It would be possible, I think, to print the papers forming the Appendix to the Scheme with due precautions as to secrecy at the gaol, where most of the compositors do not understand the English language. I do not like, however, to take this step without your sanction, and am therefore sending the Appendix with this despatch. I suggest that it be printed forthwith at home in the form of a handbook, and that a sufficient number of copies of it be sent as soon as possible to the Colony for the use of the officers concerned. I have at the same time to request your instructions as to whether a similar course should be adopted ia future, or whether any fresh Appendix may be printed in the gaol with due regard to secrecy.

3. I have carefully considered the question of coolies for transport and other purposes. I am of opinion that this Government may well undertake to provide the coolies required at reasonably enhanced rates of pay. I believe that, in the event of war with any foreign Power except China, the Chinese population would not only be willing, but anxious, to help in any way they could in the defence of the Colony.

4. There are some contingencies, however, which should be provided against. It is conceivable that a Power, with whom England might be at war, might succeed in bribing the heads of the Secret Societies in the Colony, to some one of which every coolie belongs, not to assist the Government. It is also conceivable that the Chinese Government or the high officials in the neighbouring province might be bribed or otherwise induced to issue orders to all Chinese, wherever resident, to preserve a strict neutrality, and help neither side. And it is possible that the Guilds, which rule every trade in the Colony, might demand exorbitaut sums for labour necessary to the defence of the Colony. In such cases it would be of very material assistance to Government to be able to compel the Chinese to give their labour, and to fix reasonable remuneration for the same. They would not in reality need much, if any, actual compulsion, but the very fact of the existence of a law under which in the event of hostilities with any foreign Power the Government could compulsorily call upon them to render services as non-combatants, would give them the excuse so necessary to a Chinese, who must in all matters "save his face." for disobeying the orders of their Society or the Chinese Government. It would even furnish Chinese coolies and others with a useful excuse for giving their services against China itself. Large numbers of coolies would be willing for good wages to coal our warships, and act as transport coolies and engineers and stokers of launches, &c., in the event of war with China, if they could plead compulsion. No physical compulsion would be necessary; the name is all that would be required to justify them in the eyes of their countrymen and of the Chinese Govern- ment. I am therefore strongly of opinion that an Ordinance should be enacted without delay, giving the necessary powers, in case it were found advisable to use them. I have consulted the senior Chinese member of Council in this matter, and he is of opinion that such a law would be regarded by the Chinese community as quite a reasonable and justifiable measure. The Chinese community have now such a large stake in this Colony that they are as anxious as Englishmen themselves to protect it against falling into the hands of any other Power, not excepting China itself. I enclose the draft* of such an Ordinance as I would propose for your consideration. I have made its provisions applicable to all residents, irrespective of nationality. In practice it would probably be applied to Chinese only, as the class of labour that would be required is furnished by the Chinese population. I presume that after the proclamation of martial law forced labour might be resorted to. But martial law is to be avoided if possible, and, in the exceptional circumstances of this Colony, I think an Ordinance such as I suggest might be found necessary before the proclamation of martial law would be really justified. In the meantime, I have informed Major-General Hatton that the Colonial Government will be responsible for the supply of such coolies as the military authorities may require in the event of war with any Power except China. If you approve the draft Ordinance, I see no reason why the assurance should not be extended to cover hostilities with the Chinese Empire.

5. With regard to the question of a refuge for European women and children, I can think of no better one than on board of vessels in the harbour, and I advise that that system be recognized as the one to be adopted should the establishment of a refuge become necessary. I do not anticipate that it will. In my view, little would be gained by having resort to a refuge. For it would still be necessary to protect the valuable property in houses from which the families had been removed, and it would be as easy to protect them with the families in them as empty. I think that the police force, aided by special constables, who could be largely recruited from the ranks even of the better class Chinese, who have as much stake as Europeans in the Colony, would prove quite capable of giving the necessary protection and holding an ill-disposed section of the Chinese population in check,

* Not printed. See Appendix II.—SEC, C.D.C.

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