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to Sir Matthew Nathan the proposed scheme, and to lay special stress during his interview with the Governor of Hong Kong on the fact that in reality the Company which will obtain the Concession of the Hankow-Canton Railway will be British, with a British majority, seeing that the Chairman will always be a British subject, and that he will have a casting vote."
"
7. As to what has taken place since this correspondence, Lord Elgin's information is very imperfect. From the inclosures to your letter of the 25th February it appears that Mr. Bland, the representative in China of the British and Chinese Corporation, in direct opposition to the advice of Sir J. Jordan, endeavoured to obtain for himself and M. Casenave, the representative of the French group, an interview with the Viceroy at Hankow for the purpose of submitting proposals for a loan. The French Consul-General further complicated matters by asking the Viceroy to receive “the Director of the 'Banque de l'Indo-Chine,' M. Casenave," who had come to Hankow accompanied by an Englishman named Bland, having some business to discuss personally with the Viceroy." The Viceroy appears to have refused to hold any communication with M. Casenave, and the only result of Mr. Bland's ill-advised action was to prejudice the whole negotiations. The British Consul-General endeavoured to remove the Viceroy's suspicions by officially communicating to him the substance of a Memorandum by Mr. Bland, the terms of which are important in view of what has since occurred. It was statod to the Viceroy that M. Casenave "is acting with Mr. Bland in representing the British and Chinese Corporation, an English Company, whereof the executive control is British, and which proposes to finance and construct Chinese railways by loans issued in London. The association of French capital in this business (for which the Corporation is, and must, remain solely responsible) is the result of internal and purely financial arrangements made by the Corporation with a certain powerful French banking house, with a view to insuring the ready provision of capital for railway and other enterprises in China.
8. It appears from the inclosures to your letters under reply that a Mr. Hillier (presumably an agent of the Hong Kong and Shanghac Bank) and His Majesty's Consul-General at Hankow have now presented to the Viceroy a draft Agreement which stipulates that equal participation should be granted to the Hong Kong and Shanghae Bank and to the French Bank; that the Viceroy has categorically refused to permit French participation; and that matters are at a deadlock. Lord Elgin is not aware of the reasons for the change of front indicated by the Consul-General's action, but in view of the terms of Mr. Fraser's letter, quoted above, he is not surprised at the Viceroy's attitude. The result of accepting French "co-operation," which was foreseen by Sir E. Satow has now come about; there is no prospect of the loan being granted to an Anglo-French group as such, and even if it is possible for the British and Chinese Corporation to free itself from its French connection, it is clear that it has not improved its chance of carrying through negotiations for a British loan.
9. The French, having brought matters to this pass by departing from the terms of the original arrangement, now propose that the British should give up part of the advantages offered to them by the Chinese undertaking of September 1905, abandoning in favour of the French all claim to make the loan required for the southern section, and contenting themselves with the indifferent prospect of obtaining the loans for the Hupei and Hunan sections.
10. Lord Elgin takes decided exception to this proposal, which, in the circum- stances, seems to him to be peculiarly unreasonable. Moreover, the suggestion that the southern section should be built by French capital is especially objectionable. For the terms of the undertaking of September 1905 are apparently well known in China ; the French could, and probably would, claim the application of its provisions to themselves, and the Hong Kong Government could not view with equanimity the prospect of the line from Canton northwards being controlled even partially by French engineers. His Lordship's objections to the proposal are shared by Sir M. Nathan, who has been consulted in the matter; and it is clear from the inclosure to your letter of the 27th ultimo that Sir J. Jordan takes a similar view.
11. Lord Elgin has not overlooked the fact that a refusal to accept the French proposal may lead to further delay in the construction of the line, but he is of opinion that this consideration is one of minor importance.
I am, &c.
(Signed) C. P. LUCAS.
21.
[This Document is the Property of His Britannic Majesty's Government.]
CHINA RAILWAYS.
CONFIDENTIAL.
[19558]
No. 1.
C.O.
31828 [June 13.]
SECTION 1.6 SEP 07
Sir J. Jordan to Sir Edward Grey.-(Received June 13.)
(No. 108.) (Telegraphic.) P.
SOUTH Manchurian Railway loan.
Peking, June 13, 1907.
I have the honour to inform you that French participation in the above loan has been suggested to M. Casenave by the Japanese Minister. The loan is to be floated by the Hong Kong and Shanghae Bank, Parr's Bank, and the Yokohama Specie Bank, and the adoption of the Japanese Minister's suggestion is being recommended by the local agent of the first-named bank to his principals.
[2525 n-1]
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