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172 Canton and in all parts of the Empire, that they and their ships have free permission to resort to and trade at the port of Hongkong where they will receive full protection from the High Officers of the British nation and that, 'Hongkong being on the shores of the Chinese Empire, neither will there be any charges on imports and exports payable to the British Government.' By these words Captain Elliot appears to assign, as a raison d'être of the port of Hongkong, the topographical fact that Hongkong is situated within the waters of China. It is just possible, though we have no further grounds for the inference, that Elliot may have cherished the notion that the Chinese Government were justified in levying, outside the limits of Hongkong, in Chinese waters, duties on all goods entering or leaving the harbour of Hongkong. If so, he virtually treated Hongkong as an open port of China, whilst admitting the Island to be Her Majesty's Possession. Sir Henry Pottinger subsequently rectified this assumption by a clear distinction of the British Possession of Hongkong from the five ports of China, opened by the Nanking Treaty.

That Elliot now had reason to believe that a permanent settlement on Hongkong Island would eventually receive the formal sanction of the Home Government, appears from the fact that he now advertized (June 7, 1841) a sale, by public auction, 'of the annual quit-rent of 100 lots of land, having water frontage, on Saturday the 12th instant, as also of 100 town or suburburbansuburban [sic] lots.' As many merchants had purchased land from natives. Captain Elliot notified them at the same time that arrangements with natives for the cession of land were to be made only through an officer deputed by the Government and that all native occupiers of land would be constrained to establish their rights. It was originally intended to dispose by this first land sale of a sufficiently large number of lots, situated both North and South of the present Queen's Road, which had been already roughly staked out by this time. But it was found impossible to survey and stake out, in time for the sale (though postponed from 8th to 14th June), more than 40 lots, all situated