Kong subscriptions had not been remitted, the subscribers in that Colony had no locus standi, and could not be regarded as shareholders. According to one report the whole of the trouble was being actually fomented by the Hong Kong shareholders. According to this report the monetary affairs of the Company were in order, an the aim of the Hong Kong subscribers was to get the control of things into their own hands. The President tendered his resignation, the acceptance of which was refused, pending the submitting of a clear statement of accounts. The Vice-President left for the Straits, partly to escape the turmoil and partly to acquire some general railway knowledge.
As to the funds subscribed, His Majesty's Consul-General had received confidential information to the effect that some 2,500,000 dollars were invested with the following banks :-
2,000,000 dollars with the Hong Kong and Shanghae Bank.
200,000 dollars with the Deutsch-Asiatische Bank. 200,000 dollars with the Netherland Trading Company. 100,000 dollars with the International Banking Corporation.
At the end of September 1906 a Hankow newspaper exposed that the Yueh-Han Railway share funds appeared to have been misappropriated; that though supposed to be a commercial concern the railway was in reality an official one; that the total amount of the small shares had been published as amounting to 8,000,000 dollars; but that an examination of the amounts deposited in various banks showed only a little more than 3,000,000 dollars. There was no clue to show the manner in which the rest of the money had been misappropriated and wasted. As a result the mercantile community raised a great clamour, and were unwilling to subscribe to the big shares.
On the 23rd October a Hankow native paper published the true statistics of the misappropriation of the railway funds by the Cantonese. It stated that it appeared from Peking papers that a total of 8,000,000 dollars had been subscribed, and that at a shareholders' meeting the Company reported that the amount in hand available for expenditure was actually only 3,450,000 dollars. The sums misappropriated by the officials and expended on bribes amounted to 2,140,000 dollars. The Charity Guilds received shares gratis amounting to 2,000,000 dollars. 100,000 dollars each went to Shanghae and Hankow for trouble taken in transmitting funds and allotting shares. The guilds had opened a private bank, a Water Company, and a public garden at a total cost of 4,500,000 dollars. Hence the estimate of only 3,450,000 dollars in hand.
On the 27th January, 1907, a Hankow native newspaper published in a telegram the result of the investigation into the Canton Railway finances. In it it was reported that several persons failed at first to attend the investigation, and at the first meeting at the Company's offices the investigators were threatened by a mob hired for the purpose. Finally, the required documents
were brought and examined. examination lasted two days, during which 370 accounts were examined, totalling The 6,500,000 dollars. The following items are from the report of the Committee of Investigation:--
1. One man who held shares in the name of a Hong Kong Chinese firm received 2,000,000 dollars from the railway funds. It was not stated on the documents that the money was railway money, although the recipient alleged that it was elsewhere stated. In the event of failure of the firm there was no security for the sum.
2. Six persons, none of them connected with the railway, and not even men of substance, had received 900,000 dollars from the funds, one of them alone 400,000 dollars.
3. Certain houses at Canton, Fatshan, Hong Kong, and Macao, acting as agents, bad banded in accounts, but no money, the money in most cases having been made use of by the agents themselves.
4. All concerned declined responsibility for agents' deficits. The threatened loss amounted to 1,415,000 dollars.
5. The period for repayment of money used by Hong Kong agents had been in every case passed. None of the documents bore Hong Kong stamps. In the event of legal proceedings, the money could not be recovered in Hong Kong Courts. Besides, the majority of the documents had neither signature of heads of firms or Managers.
6. The Company, on the 28th of the 8th moon, advertised in the money due had been collected. The Board of Commerce then telegraphed to the Hong papers that all Kong banks that they were not to sell any more time drafts, but in the 9th and 10th
moons, in spite of these orders, there were several hundred three-month bills out, not only to banks, but to miscellaneous firms. These also were without the necessary signatures. Excepting errors in calculation and wrong returns, the bills outstanding, in defiance of the Board's orders, amounted to over 3,000,000 dollars.
At the end of June 1900, a Hankow native newspaper reported that the Viceroy of Wuchanz had decided to raise 6,000,000 dollars in shares, and that he had directed the Hupei Government Bank to undertake the collection. The shares were in brisk demand.
The Hunan Chinese Chamber of Commerce took railway matters up warmly, and held special meetings on the subject of the railway being intrusted to traders. Over 2,000,000 dollars of share and capital were promised, and the idea became popular. Hunan's section of the line extends 400 miles, and requires capital of over 20,000,000 dollars (2,250,0001). The Chamber of Commerce drew up a prospectus and urged co-operation. The first two rules of the prospectus dealt with the perpetual manage- ment of the Railway Company by merchants, and the holding of shares only by Chinese, any transfer to foreigners to cancel the shares.
On the 27th September a native newspaper at Hankow reported that it was proposed to open a railway lottery, and that regulations had already been drawn up, the first prize to be 60,000 dollars, and the drawings to be quarterly.
His Majesty's Consul-General reported on the 9th October that the railway shares were not being taken up in any great number-6,000 only were said to have been sold there and that there was a rumour that the Company would have to seek foreign capital unless the expedient of a quarterly lottery proved popular. Hunan seemed equally unable to get funds, and had been obliged to appeal to Kuantung to pay
its instalment of the resumption loan.
In November 1906 Yuan, the ex-Taotai of Shia, who gained notoriety in connec- tion with the riot of December 1905, was appointed as General Director of the Hunan Railway, but this appointment did not meet with the approval of the local gentry and merchants, who insisted that the construction and the management of the line should be entirely under their control, and indicated that no funds would be forthcoming except on these terms. Matters have consequently been since at a deadlock. It is now rumoured that, in view of the universal opposition in Hunan, the question of the possi bility of obtaining capital may be discussed. The security to be offered would be certain mining or other Concessions in Hunan. It is quite certain that the gentry would bitterly oppose any such scheme.
Another report says that there is an attempt to raise money from native capitalists in Shanghae, but it is unlikely that any funds will be forthcoming except on substantial security, which would doubtless include a voice in the control and management of the railway, which the gentry would strenuously oppose.
Inclosure 4 in No. 1.
(Initialled)
Memorandum respecting the Kiukiang-Nanchang Railway.
W. J. G.
THE capital necessary for the construction of the line, which is to be about 130 miles in length, and will connect Kiukiang with Nanchang, the provincial capital, was, as reported early in 1906, to be subscribed entirely, if possible, by natives of Kiangsi; 1,000,000 taels, a third of the amount required, having been promised by two rich Chinese salt merchants.
In January 1907 a native paper at Hankow announced that there were not enough funds to start work on the railway as desired, the Director had asked the Director of the Shanghae ironworks to get a loan of 1,000,000 taels in Shanghae. The paper added that the parties had come to an agreement, and the Director of the Railway was to proceed to Shanghae to sign the Agreement and bring back the money.
His Majesty's Consul reported at the end of January that a loan of 1,000,000 dollars, raised at Shanghac for the purpose of covering initial expenses, had enabled the local Railway Bureau to begin work on the line. This, he added, was said to be the first instalment of a loan of 4,000,000 taels made by a Belgian Syndicate; but a Hankow native newspaper published an article on the 4th February to the effect that the General Manager of the Railway had telegraphed to the Board of Communications suggesting
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