That is the 'Thermostat Choke'. It is part of the 'Easy Start' system and closes the choke while cold, and opens it while warm. The entire metal arm goes inside the plastic. You adjust it so that when fully warm, the choke is fully open, and fully closed when cold. The adjustment is made by squeezing or opening the metal 'loop' on the thermostat arm.
https://www.youtube.com/watch?v=snDXjJ4hFBk
So, get your governor throttle spring hooked up correctly per the previous post and get the metal arm of the thermostat choke in the right spot, then squeeze the metal 'loop' so there is about 1/4" (6-7mm) of clearance between it and the governor. Pull back on the thermostat arm and when it hits the stops, look at the choke to make sure its fully open. If not, readjust the metal 'loop' until it does.
Now, run your engine and see it the thermostat choke is working by looking at the arm. As the engine warms, it should move against the governor (which maintains idle speed) and open the choke. If the arm does not move, then you have a bad thermostat choke and it needs replacing.
https://www.youtube.com/watch?v=Z3XP5mz59mA