$
6
created by the Edict of 1905, the financial stringency of the revenues of the province, and the failure to raise native share capital.
¡
Na-tung said there was no objection in principle to foreign borrowing. The days. of such objection were over, and China now recognized that, where domestic resources were not available, it might be necessary to borrow outside for specific objects. A week ago, his Excellency said, the Board of Finance ("Tu-chih Pu"), impressed with the dangers that beset such borrowing on irresponsible lines, memorialized "the Throne, proposing that in future Viceroys and Governors wishing to borrow for any urgent public purpose should be required as a preliminary to memorialize the Throne, stating clearly the object of the proposed loan and the sources from which it was proposed to pay the interest and refund the principal. The Throne was to refer the Memorial to the Board of Finance for report, and, if their report was favourable the provincial authorities would be authorized to proceed with the negotiations and submit the Final Agreement to the Board for their approval, after which the remaining formalities required in the case of a foreign loan could be proceeded with. His Excellency wished to point out to me as a friend that the course adopted by Chang Kung-pao could only result in waste of time and disappointment on both sides, since, unless the above procedure were complied with, any agreement we might come to would most certainly be thrown out by the Board of Finance on reference to them. I asked his Excellency if the new regulations also applied to railway loans. He replied that they applied to all foreign loans. presume from this that the new regulations may be taken as replacing and tacitly rescinding the prohibition of 1905, but I did not put this question to Na-tung. What he said left me in no doubt as to the course to be followed in the present instance, and I shall be glad if you will be so kind as to communicate the substance of it to his Excellency Chang.
I
The general impression I derived from Na-tung's remarks was, first, that the attitude of the Peking authorities towards foreign loans has undergone a fresh change-- they are prepared to recognize the necessity for these under special circumstances, but desire to retain the control of them in their own hands; and, secondly, that it is the intention in future to vest the control of such matters in the Board of Finance instead of in the Wal-wu Pu as formerly. It was quite in accordance with the enunciation of this new principle that Na-tung exhibited but little interest in the other terms of the proposed loan, and our conversation was confined almost entirely to a discussion of the general question of foreign borrowing under the new regulations. The questions of British preference and of French participation were not referred to, and I did not think it politic to raise these points.
I have not seen the Memorial of the Board of Finance. A short abstract of it appears in yesterday's "Gazette," but it merely refers to the dangers of foreign borrowing and the necessity of precautionary measures for its control in order to avoid future trouble. I am trying to obtain the full text, which Na told me is easily obtainable, and if I procure it I will send you a copy.
From our point of view I think the result of the interview is satisfactory, since it leaves the situation in a clear and intelligible light, though I am afraid the procedure imposed by the new regulations will not harmonize with Chang's feverish anxiety to raise railway funds. There seems very little doubt, in fact, that the regulations are a direct outcome of the recent negotiations at Hankow, which have been watched up here with anxiety and apparent disapproval. The door seems now closed to any resumption of these on the previous lines. If they are reopened it will have to be with the cognizance and approval of the Board, which will give them the Imperial character so strongly advocated from the first by our friends at home.
Yours, &c.
(Signed)
E. G. HILLIER.
[This Document is the Property of His Britannic Majesty's Governage]
CHINA RAILWAYS.
CONFIDENTIAL.
(28629]
(Confidential.)
Sir,
No. 1.
Foreign Office to Colonial Office.
274
35776
[September 9.1 OCT 07,
SECTION 5.
Foreign Office, September 9, 1907. I AM directed by Secretary Sir E. Grey to acknowledge the receipt of
your letter of the 24th ultimo, on the subject of the claims of the French Government in respect of French participation in the proposed Canton-Hankow Railway loan, and to state, for the information of the Secretary of State for the Colonies, that the points raised therein have been given careful consideration.
It is understood from paragraph 7 of your letter that the Earl of Elgin's objection to the terms of the proposed reply to the French Ambassador is based on the fact 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 constitutes, in fact, a new departure, and that His Majesty's Government may in future be held to have tacitly concurred therein, seeing that the proposed reply contains no refutation of the present claims of the French Government.
Sir E. Grey thinks that Lord Elgin's objection may be removed if the following alterations were made to the draft reply :-
Between the third and fourth paragraphs, between the words "held it" and "While His Majesty's Government," the following paragraph might be inserted :--
"It is not, moreover, quite clear what is the extent of the claim of the French Government in this matter. M. Cambon was informed in the Memorandum commu- nicated to him on the 24th January, 1906, that His Majesty's Government would be glad if an arrangement could be made for the co-operation of a French financial group in the Hankow-Canton Railway enterprise, but that they would prefer to leave the settlement of the details to the financiers of the two countries; that His Majesty's Government understood that the capital of the proposed British Company was to be at the disposal of the British and Chinese Corporation and of the French group in equal moieties; and that the Chairman of the Company was to be a British subject His Majesty's appointed by the British group and that he would have a casting vote. Government adhere to this attitude, which is based (as in the case of the Agreement arrived at in October 1905, as to British and French co-operation in the railway projects of the Chinese Central Railways (Limited)') on the principle of the employ- ment in equal proportion of British and French engineers and of British and French materials for railway construction."
In paragraph 4, between the words "no advantage in" and "an intimation," the following words might be inserted :-
"The scope of the engagements they took in January 1906 being extended to the fresh points raised in the two last paragraphs of the Memorandum communicated by M. Cambon, and more especially in."
These points were not touched upon in the reply as originally drafted, as Sir E. Grey was desirous of not emphasizing any points of dissent that might exist between the two Governments, but he will be glad to make the proposed alterations if Lord Elgin's objection can thereby be removed.
A draft Memorandum, revised accordingly, is inclosed for Lord Elgin's considera- tion, and I am to inquire whether his Lordship would concur in its communication to the French Ambassador.
I am, &c. (Signed)
F. A. CAMPBELL.
* Memorandum communicated to M. Geoffray, September 17, 1907.
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