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(This Document is the Property of His Britannic Majesty's Government.]
CHINA RAILWAYS.
CONFIDENTIAL.
[18400]
No. 1.
309
[June 4.]
SECTION 3.
(Confidential.)
Memorandum communicated by Baron Erlanger, June 4, 1907.
IT will be in the recollection of Sir Edward Grey that some months since Messrs. Pauling and Co., of 26, Victoria Street, Westminster, through the intermediation of their financial friends, Messrs. Emile Erlanger and Co., of 20, Bishopsgate Street Within, addressed themselves to the Foreign Office, as a firm of long standing and high repute, to receive recognition and assistance at the hands of the British Minister at Peking.
Sir Edward Grey will recall that, after consideration of the matter, he was good enough to cause a favourable communication to be sent to the British Minister at Peking.
For the last nine years, and still more at present, Messrs. Pauling and Co. are consistently continuing their endeavours to obtain railway construction work in China, and several gentlemen in relationship with them have had interviews with the British Minister at Peking on this subject. From him, however, they have recently ascertained the fact that his official instructions preclude him, in his opinion, from rendering diplomatic assistance to any British group in China save and except to the British and Chinese Corporation. Sir John Jordan was good enough, however, to stat that, in his opinion--and it was one which he bad on two occasions expressed, whether officially or unofficially was not stated, to the Foreign Office in London-the rivalry and competition actively pursued in China between the British and Chinese Corporation and Messrs. Pauling and Co. was now detrimental to British interests in China. Doubtless, when the instructions referred to on behalf of the British and Chinese Corporation were first issued, good reasons existed therefor-reasons based on the international rivalry that existed at that time for obtaining Railway Concessions with foreign loans from the Chinese Government. Messrs. Pauling and Co. believe, however, that the raison d'étre of the diplomatic monopoly thus conferred on the British and Chinese Corporation was with the view to guide the Chinese financial borrowings into British channels rather than with the object of forcing diplomatically, as far as possible, actual railway construction The British pure and simple into the hands of the British and Chinese Corporation and Chinese Corporation is in no aspect whatever an engineering or railway contracting group.
Mes-rs. Pauling and Co. and Messrs. Émile Erlanger and Co. are in China not with the object of obtaining the financing of Chinese Imperial loans, which they are quite willing to leave as the special sphere of the British and Chinese Corporation; they are in China with the object of constructing and equipping railways for the Chinese Government, and they feel strongly that the help which Sir John Jordan would willingly render them is made impossible by the continuance of official instructions issued at other times and under other circumstances than those that prevail to-day. They would respectfully beg that Sir Edward Grey would grant them relief in this matter by communicating with the British Minister at Peking in the sense desired.
There is, however, another and very important matter which Messrs. Pauling and Co. wish to bring to the attention of Sir Edward Grey in a very confidential manner. The experience gained by them during the last nine years has convinced them that the great reason underlying the problem of railway construction in China, and the real cause why the Chinese themselves display so much hesitancy on the subject, is the fact that past experience has shown the Chinese the estimates given them of cost of construction and equipment, and of the time required to complete the same, have proved so utterly unreliable on all sides that they fear to sanction an expenditure, say, for instance, of even 2,000,0007, feeling very certain that, as heretofore, further large loans will be necessary to insure the promised completion. It is this uncertainty alone which prevents the great private wealth of the Chinese from being directed into such an obviously desirable channel-from the foreigner's point of view-as the opening up and civilizing of the interior districts of China by a rapid extension of her very small railway system. close study of the question has convinced Messrs. Pauling and Co. that were this feeling
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