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506 any of its shares and which sought to obtain admission for its steamers to ports in China not open to foreign trade, heralded a change in the share which foreign merchants had hitherto enjoyed in the coasting trade, and the movement was viewed by many with serious apprehensions. This Company, which (in 1874) developed into the well-known China Merchants Steam Navigation Company, failed indeed to obtain the privilege of trading, by means of steamers, with ports not opened to foreign commerce, but instead of that monopoly the Company received official recognition and organization and the privilege of carrying 627,000 out of a total of 1,800,000 piculs of the annual tribute rice. There was at the bottom of this movement the vain hope of developing this Chinese Company to such an extent as to drive foreign-owned steamers entirely out of the coasting trade. But although the Company was well supplied with funds, strongly supported by Chinese officials and merchants in every port, and purchased (January 15, 1877) the whole of the steamers, real estate, wharves and plant of the Shanghai Union Steam Navigation Company, it only proved how unfounded was the fear that the whole coasting trade would pass into native hands. This Chinese Company obtained no more than that share in the coasting trade which naturally belongs to the Chinese, and its history demonstrated the truth that it is in the matter of money where the strength of the foreign trade in China lies, and that the greater the share which the Chinese take in the minor portions of the trade, the greater will be the growth of the more important portions of the foreign trade with China, loss in one direction being directly compensated by gain in another.

Sir A. Kennedy was the first Governor of Hongkong who invited prominent Chinese merchants, although they were mostly the servants (compradors) of the principal English firms, to social gatherings and public receptions at Government House. This practice, which was rather distasteful to most English merchants, Sir Arthur stoutly adhered to. He also for some time encouraged the Chinese to bring any public grievances,