Received
Incl.
105
28653
RECP
REC SECTION 5,
This Document is the Property of His Britannic Majesty's Government.]
C.O:
Foreign Office
to
AFFAIRS OF CHINA.
CONFIDENTIAL.
F. O.,
No. 1.
(No. 130.) My Lord,
Sir E. Satow to the Marquess of Lansdowne.-(Received June 5.)
Peking, April 18, 1905. I HAVE the honour to acknowledge receipt of your Lordship's despatch No. 42 of February 24th, inclosing copy of a letter from the Colonial Office with inclosures relating to the proposed railway from Canton to Kowloon.
Mr. Ross, who is mentioned in the second paragraph of your Lordship's despatch, called on me by appointment on the 15th instant, and we discussed the question of the appointment of a negotiator on the Chinese side. I said that our experience of Shêng Kung-pao in connection with the negotiations for the Shanghae-Nanking Railway and for the conversion of the Peking Syndicate's Railway into a Chinese Government line had not been satisfactory. Mr. Ross observed that the preliminary contract was signed by Shêng, and informed me that when passing through Shanghae on his way to Peking he had endeavoured to ascertain confidentially whether Sheng desired to under- take the negotiations for a Final Agreement, but the latter let it be known that he would say nothing on the subject until he was approached officially, and the question had therefore been left in abeyance.
As the draft Loan Agreement together with the draft proposed Agreement between the Government of Hong Kong and the Chinese Government for the joint working of the line between Canton and Port Kowloon are long legal documents the import of which is not to be gathered from a hasty perusal, I requested Mr. Ross to furnish me with an outline of the proposals of which he is the bearer; this I could have put into Chinese, and I would then discuss with the Foreign Board the choice of a negotiator. I think it might possibly be found easier to come to an agreement with the Viceroy of Canton than with Sheng Kung-pao, but the question must largely depend on the view taken by the Foreign Board.
There are two points in the proposed Agreement for joint working which call for remark.
Paragraph 3 (p. 38) provides that the construction of the two sections shall proceed simultaneously, and at such a rate of progress as to be completed and ready to be open at the same time. Mr. Ross informs me, however, that the 101 miles or there- abouts from Canton to the frontier of the leased territory would take about two years to build, while the British portion from Port Kowloon, measuring 24 miles, could not be constructed in much under four years, owing to the difficult nature of the ground, which will require a good deal of tunnelling. Possibly the Chinese portion might take a little longer and the British portion a little less than was at present estimated, but there would certainly be a considerable difference in the time required for the two. This statement has an important bearing on paragraph 16, which provides for the division of the net profits in proportion to the actual cost incurred by the two Govern- ments, in which outlay the cost of land and any commissions are not to be reckoned. In Mr. Ross' opinion the traffic on the Chinese section would not suffice to pay interest on the loan besides working expenses, and consequently provision must be made in fixing the amount of the loan for at least one year's interest, if not for two. As the Hong Kong Government will, no doubt, be able to raise the capital required for the British section much more cheaply than the Chinese Government for theirs, while the land will, no doubt, be acquired more cheaply, and there will be no commissions to pay, the Chinese Government will, it appears, be at a disadvantage if interest is to be allowed only on the amount actually expended on construction and equipment. The inclosed copy of a rough pro formd estimate shows that under this clause, while the amount of the loan is estimated at 1,500,000, only 1,000,0001. of this will rank as entitled to interest in calculating the net profits. The engineer's estimate for the cou- straction and equipment of the British section is put down in the same document at 488,317, but Mr. Ross states that be was authoritatively informed that it would be nearer 600,000. The net profits, if divided according to mileage, would be as four to one, but if divided according to the actual amount of capital expended on con-
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