Correspondence on absence of pickets in Canton; conference in Nanking dealing with the organisation of the Nationalist Party and exclusion of the communists; confidential print on the visit of Feng Tso-wan representative of General Li Chai-sum, to restore amicable relations between Hong Kong and Canton; meeting between Viscount Saito, Governor-General of Korea, and Clementi; Clementi's description of China as "not a nation, but a civilization" like Europe, he urges regional government recognition but Amery refuses; military incident at the Japanese concession at Hankow; rift in the Nationalist Party; lack of international anti-piracy action and the Chief Lau Lau; Swatow taken over by peasant forces; formation of a new independent Wuhan Government in disagreement with the Nanking conference; Canton consul receives letter from Canton Foreign Office accusing the senior Naval Officer of accepting a bribe to release the Chinese steamer Tai On; Canton gunboats fail to take Swatow; Chou En-lai appointed HQ staff and Li Li-san, Chief of Police; Clementi attributes failure of anti-British boycott in Canton to the threat of real force made by Brenan; conference on the question of the use of the British flag on vessels in the inland waters of South China after S.S. Tai Miney incident; violation of British territory by the Lung Main at Chinese Shatankok; military and political situation report; Clementi wants Gen. Li Fuk-lam to use his influence to control the Lung Main.