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I took the opportunity provided by this approach, which was made on the instructions of Chang Mon-lin, to tell H.C. Kiang how our minds were working in regard to these matters. I adduced all the more obvious points which we have been making over the last several weeks to our various Chinese contacts:- that the transfer covers liabilities as well as assets; that arrangements Hist be made to transfer the juridical personality of the old Shanghai Municipal Council to any new body created; that pensioners would have to receive their pensione; that there are loans and credits outstanding for which the old Municipality was a guarantor; that the Ratepayers' Association would certainly expect, and in a democratic world would be entitled to have, a considerable say in the policy of the Municipality; that the capacity of China to run its owuntry efficiently would in large measure be judged by what happened in Shanghai; that to maintain efficiency it seemed essential to have continuity,

I also said that particularly of expert advisers and technicians, etc., etc. I hoped that provision would be made, at loast in the transition period, for those foreigners who had experience of and had done so much work for Shanghai to be employed under the new Administration, and that in my opinion it would be a great mistake to allow false aspects of nationalism to override the dictates of commonsense. It was clear to all parties that under the Treaty the Concessions would return to the Chinese, that would take place, but I thought the Chinese authorities would be well advised to make this change-over smoothly and sensibly and it the minimum of dislocation of effective service: H.C. Kiang had not, I think, appreciated some of the pointe made; and the fact is that a couple of hours after he left me he rang up to say that he had talked to some of the lawyers who had expressed a desire to come and see ir. Lamb before their departure for Shanghai. In consultation with Mr. Lamb I have arranged luncheon at my house. Unfortunately only Mr. T.T. Tsang can come, but he and H.C. Kiang should make quite a good audience for the views of Mr. Lamb and myself.

I think perhaps we should send a copy of the above Minute to Mr. Ogden at Shanghai and to hr. Kitson at the Foreign Office.

(Igned 0.1.H.

20/9/45

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