Our merchants, driven from Canton, and warned off from Macao by the Portuguese, who feared the Chinese and were jealous of our trade, took refuge in the roadstead of Hongkong, though the Chinese placed batteries on Kaulun and threatened to fire on the ships. In this way we first came to the island, which was ceded to us by the Treaty of Nanking in 1842. In 1860, at the conclusion of another war, we obtained full possession 8 of the Kaulun peninsula, which we had already leased from the local authorities as being necessary for the security of the harbour. Finally, in 1898, we leased the New Territory at the back of Kaulun, amounting in area to about 370 square miles. This was just as necessary under present conditions as the peninsula of Kaulun had been in the past, since Victoria with its shipping would be at the mercy of long-range artillery mounted on the hills of the mainland. From the first the Chinese people, recognizing the value of the security given by British rule, flocked to the island; so that we now have over 300,000 Chinese residents in the island and peninsula, excluding the leased Territory, and on the native boats and junks, while the European population numbers only a few thousand. The Chinese seem to prefer our system of government to their own. Hongkong is not merely a fortress; it is a free port, except as regards the importation of alcohol, and one of the greatest commercial centres in the world; but without the Chinese its trade could not be carried on for a single day.