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years," that public works have been executed from current revenue as rapidly as the Surveyor-General's Department, although largely reinforced, was able to get through them. That the revenue is chiefly derived from the Chinese who constitute 98 per cent of the population, and probably contribute nearly a similar proportion of the revenue," that they have made the colony

"the centre of a large local coasting trade, a depôt at which the produce of the north and south destined for consumption in China changes hands."

11. In the truth of these statements, Her Majesty's Government entirely concur, but their natural effect seems rather to support the claim preferred against the colony by the Imperial Government, than to sustain the remonstrance of the colony against that claim. With regard to the complaint of the memorialists, that they are very heavily taxed, I would remind you, that, in Singapore, a settlement which in many respects bears a close analogy to Hong Kong, the rate of taxation in 1861 was 11. 1s. 1d. per head, and in that year it was found necessary to impose a stamp tax on the community which is of a much less wealthy character than that of Hong Kong. The imposition of that tax produced none of those disastrous results which you anticipate from the introduction of fresh taxes in Hong Kong. Again, it is urged that the establishment of the mint gives the colony a peculiar claim to exemption, at least for the present, from the military contribution. On this point, it need only be said, that this establishment was not proposed by the Home Government, but by yourself, acting in the interests of the colony and of the China trade, on which the prosperity of Hong Kong depends.

12. The mint is expected in itself to be a source of considerable profit to the colonial revenue, and the expectation that it will be also profitable to the Imperial Treasury furnishes no sufficient reason why this country should pay for it, even in part. Under all these circumstances Her Majesty's Government is of opinion that in the sum of 20,000l. per annum, assessed by the Duke of Newcastle as military contribution from Hong Kong, a sufficient allowance has been made for any equitable claim of abatement which can be urged. Notwith- standing, therefore, the local opposition to the charge, Her Majesty's Govern- ment considers that the sum of 20,0001. a-year, for the next five years, is a very moderate contribution for the military and naval protection enjoyed by the colony under the British flag.

13. I observe that the memorialists state that the entire withdrawal of the garrison would be very beneficial to the colony. Such a suggestion could not of course be reasonably entertained, but I must explain to you that the with- drawal of a large part of the garrison, if at any time Her Majesty's Govern- ment should consider that withdrawal to be expedient, will not affect the ground on which the charge is made, namely, that it is a very moderate contribution to be made by the colonists in return for the protection they enjoy.

14. It will be, in the first instance, for yourself and the Legislative Council to consider in what manner the claim can be met with least inconvenience to the colony. If you should consider that this may be best effected by the imposition of a stamp tax, your own enquiries into the financial arrangements of Singapore will enable you to judge of the working of such a tax, and the mode in which it may be most conveniently adjusted.

15. I shall address you hereafter respecting your suggestion that the charge on account of military contribution should be imposed by a permanent Order in Council, instead of an annual vote of the Legislative Council.

Governor Sir Hercules Robinson,

&C.,

&c.,

&c.

I have, &c.,

EDWARD CARDWELL.

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