This Document is the Property of His Britannic Majesty's Government
CHINA RAILWAYS.
CONFIDENTIAL.
O 202 35776
REER OCT 07
[August Bec
SECTION 2.
[28629]
No. 1.
!
Colonial Office to Foreign Office.--(Received August 26.)
(Confidential.) Sir,
Downing Street, August 24, 1907. I HAVE laid before the Earl of Elgin your letter of the 17th instant on the subject of the French claims in respect of their participation in the proposed Cunton- Hankow Railway Loan.
2. Lord Elgin regrets that he is unable fully to appreciate the view of this matter which is taken by the Secretary of State for Foreign Affairs, and from a passage in your letter, to be noticed presently, it is possible that he is still imperfectly informed as to what is proposed.
3. The original suggestion of the French Embassy, as stated in your letter of the 20th November, 1905, was that "the understanding in regard to Anglo-French financial co-operation in China should be extended to the Hankow-Canton line." Elsewhere in the letter it is stated that "the understanding referred to by the French Embassy is represented by the Agreement concluded between the British and French groups of the Chinese Central Railways (Limited)," and throughout the letter it is implied, if not expressly stated, that the Chinese Central Railways would be the Company which would undertake the business of the Canton-Hankow Railway Loan.
4. It is important to notice the manner in which effect was given to the Anglo- French understanding. The capital of the Chinese Central Railways, a British Company already in existence, was increased in such a manner as to give equal voting power to the French capital then taken in; but the Chairman remained British, he possessed a casting vote, and the British status of the Company was in no way affected by the admission of French capital. As Lord Elgin has pointed out in the course of the present correspondence, it was apparently agreed on all hands that the position with regard to the Canton-Hankow Railway was to be, in M. Franqui's words, that "the Company which will obtain the Hankow-Canton Railway will be British, with a British majority."
5. But in the French Ambassador's Memorandum all trace of this arrangement disappears. If the loan were obtained by a British Company, whether the Chinese Central Railways or another constituted ad hoc, the contract would be executed by that Company in the manner provided by statute, and neither the British nor the French Government would be concerned in the matter. But M. Cambon regards as inadmissible the suggestion "de la possibilité de faire réaliser l'emprunt de 25,000,000%. par les Anglais seuls en nom "; he speaks of "les représentants à Pékin des Syndicats Français et Anglais," and he states that "l'entente Anglo-Française pour les chemins de fer ne permet pas plus à la banque d'un des deux pays de traiter seule qu'à l'autre de se contenter d'une sous-participation." Lord Elgin cannot find a word in the Memorandum which points to a British Company as the sole agency for the loan, while its whole tenor seems to negative the idea.
6. On the other hand, in the 10th paragraph of your letter under reply, it is stated that "Sir E. Grey sees no reason why French participation should make joint management of the Hankow-Canton and Canton-Kowloon Railways impossible, as the advantage which we possess in the British Chairman having a casting vote would prevent any adverse discrimination from being put into force against us." Elgin would be glad to know in what way the advantage of the British Chairman having a casting vote is preserved in the present proposals, as without this advantage it seems difficult to accept the arrangement.
Lord
7. His Lordship trusts that he has now made it clear that, in his opinion, the position taken up in the French Memorandum is inconsistent with the proposal on which his predecessor was consulted in November 1905, and is, in fact, a new
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