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whatever the result of the present negotiations might be, His Majesty's Government would expect the strict fulfilment of the engagements of 1903 and 1905, which were amply recognized by the Wai-wu Pu as binding
From a copy of a telegram sent by the Viceroy to the Wai-wu Pu within the past few days, which has been furnished to me from confidential sources, and a translation of which I have the honour to inclose, it is evident that the Viceroy is very reluctant to tell his Government the facts of the case, and in the final interview with Mr. Hillier and His Majesty's Consul-General, which took place on the 8th July, he sought to throw on the former the onus of making the necessary explanations to the Wai-wn Pu.
At this interview the Viceroy is reported by Mr. Fraser to have stated that the Wai-wu Pu forbade him from concluding negotiations with Mr. Hillier without their approval, and that, according to the Wai-wu Pu, other Powers, especially Germany, were protesting against a British loan being granted.
His Majesty's Consul-General showed that the statements of the Wai-wu Pu to me did not bear out his Excellency's expression of their views; but the Viceroy was convinced that any loan scheme of his would be vetoed unless the French, German, and possibly the Japanese, Governments could be brought to acquiesce in the project. Finally, he suggested that German capital, as well as French, should be introduced, while the Japanese could appear as they were content to do-in the prospectus as one of the banks receiving subscriptions,
This novel proposal left Mr. Hillier no alternative but to suspend further discussion until he had returned to Peking and consulted with me, and, if necessary, with the Wai-wu Pu. As regards the latter, the Viceroy wished Mr. Hillier to explain to the Board of Foreign Affairs the absence of all clauses in the proposed Agreement derogatory to Chinese railway rights, but at the same time he did not wish Mr. Hillier to go too far into details with the Board.
It would be premature to form an opinion as to whether the Wai-wu Pu are responsible for this introduction of the Germans into the question, or whether it is, as I am inclined to believe, a ruse of the Viceroy to bring matters to a deadlock. Mr. Fraser in his telegram expresses the view that if on due consideration no objection is found to German participation, the strong combination thus formed might result in extended loan operations on sound lines, and if the loan were to be converted into an Imperial one for a trunk line from Hankow to Canton, the proposal might perhaps be worth considering. But after our experience in the present instance, I am inclined to think that, while safeguarding our existing Agreements with the Viceroy and the Central Government, we should discourage provincial loans as far as possible, and endeavour to impress upon the authorities here the wisdom of making railway construction a national enterprise. The tendency at the present moment is unfortunately in the opposite direction.
I have, &c.
(Signed) J. N. JORDAN,
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British and Chinese Corporation urging me to raise a loan. At first I vigorously opposed the idea. However, they showed great readiness to modify their terms, of which the details are complicated, and can hardly be brought within the compass of a telegram. At present I still have not agreed to them. If a loan is to be made we are under obligations to borrow from the British; but the British want to allow the French Banque de l'Indo-Chine" to participate in the loan, and I have therefore refused on the ground that there is nothing about this in our original engagement.
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The Japanese Bank also desired to make loan, but the British opposed them, and it was settled not to mention the name of the Japanese Bank in the Agreement,
As regards the Deutsch-Asiatische Bank, although they wished to thrust themselves into the business and send a representative to my yamên to speak of it, I would not discuss it with him, because, if Hupei builds lines without borrowing, it is none of their business, while if we borrow it must be from the Hong Kong and Shanghae Bank, on account of the existing engagement with the British Consul-General which cannot now be changed. As regards the request of the German Minister, I hope you will put him off with a non-committal reply.
(Translation.) (Telegraphic.)
Inclosure in No. 1.
Viceroy Chang Chih-Tung to the Wai-wu Pu.
YOUR telegrams of (dates in cypher) received.
[Undated.]
The year before last, by the good offices of the British Consul-General, a large loan was borrowed from the British to redeem the Canton-Hankow Railway; the negotiations being brought to a satisfactory conclusion between the Consul-General and myself. I then addressed an official note to Mr. Fraser, stating that whatever funds might be required in the future for building the Canton-Hankow line-beyond those raised by China herself-would, if it was found necessary to borrow abroad, be sought for from British capitalists; and, further, that whatever foreign loans might be required for other railway construction in Hupei and Hunan would be raised under similar con- ditions. I reported this to the throne in a memorial of the 6th January, 1906, and communicated a copy of my note (to Mr. Fraser) to the Board of Foreign Affairs in the 2nd month of the 32nd year March 1906).
Recently the British Consul-General, in view of the large sums necessary for constructing the Hupei sections of the Hankow-Canton and Hankow-Szechuan lines, has made repeated overtures through the Hong Kong and Shanghae Bank and the
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