2
gentry, he added, strongly desired to do so, so as to have the handling of these millions, which they would lend out to native banks at high rates of interest.
Mr. Hillier's reply to this was to the effect that the banks would not care to constitute) themselves auditors, as it were, of the railway accounts, in the keeping of which they had no voice, though he admitted that it was encouraging to learn that they would be kept in English. As regards the earnings, if it was laid down that these had to be paid into the banks, the latter would feel responsible for seeing that they were paid in regularly and fully; and as they were to have no share in the control, this would only lead to friction. He did not therefore desire this as a condition of the Agreement. In regard to the immediate transfer of the loan funds into silver, he admitted that there was nothing to prevent this, but pointed out that the banks would not pay over any sumis except under orders countersigned by the Engineers-in-chief. That was precisely their safeguard against the danger alluded to by Mr. Liang,
Before the meeting terminated, Mr. Liang stated that both the Viceroys, Yuan Shih Kai and Chang Chih Tung, would be in Peking in the beginuing of September. His orders from the former were to settle the Agreement during the period of their stay in the capital together, which would not be long, and he was to meet Chang Chih Tung at Paoting-fu in order to inform him of what had taken place before his Excellency actually reached Peking. No further meeting with Messrs. Hillier and Cordes was expected until about the 3rd or 4th September.
On the 30th August, however, Mr. Liang came to see the former gentleman, and informed him frankly that the condition must be abandoned, whereby the Engineers-in- chief were to countersign the Chinese Managing Director's orders upon loan funds. In lieu of this, Mr. Liang proposed to insert a condition that "the railway accounts will be kept in English, and will be open at all times, during construction, to inspection by the hanks, who can satisfy themselves that funds are applied solely to the railway."
Thus, while the two Engineers-in-chief would still be British and German respectively, and persons acceptable to the banks, they would have no control over funds. On the other hand, the stipulation that the accounts are to be kept in English, and that they will be open to inspection, restores in some measure the condition respecting a Chief Accountant.
Mr. Hillier submitted this alternative to his principals by telegraph, with a recom- mendation that it should be accepted, since he felt that it was the maximum guarantee that he could get. On reconsideration of the position in which the Chief Engineers would be placed, as servants of the Chinese Government, yet responsible at the same time to the banks for countersigning orders for loan funds, he had come to the conclusion that the Chinese proposal involved no great loss, since the desired result was to be obtained in another manner by the hold which the banks will secure over the railway accounts.
I have, &c. (Signed)
J. N. JORDAN.
[This Document is the Property of His Britannic Majesty's Government.]
CHINA RAILWAYS.
CONFIDENTIAL.
(34662]
No. 1.
400
[October 21.]
SECTION 2.
Sir J. Jordan to Sir Edward Grey.--(Received October 21.) (No. 415.) Sir,
Peking, September 3, 1907. WITH reference to my despatch No. 405 of the 20th August, respecting the Soochow Hangchow-Ningpo Railway negotiations, I now have the honour to inclose copies of Mr. E. G. Hillier's Minutes of an interview which he had with Wang Ta-jên on the 22nd August, and also of a Memorandum, which is virtually a draft Agreement, and which Mr. Hillier prepared at Wang Ta-jên's request. This was sent to Wang Ta-jên on the 26th August.
Since that date no further step shave been taken, as Wang Ta-jên is apparently waiting the result of the negotiations, proceeding simultaneously, for the Tien-tsin- Yang-tsze Railway.
I have, &c.
(Signed)
Inclosure 1 in No. 1.
J. N. JORDAN.
Interview between Wang Ta-hsieh and Mr. Hillier at the Wai-wu Pu on August 22, 1907.
WANG TA-JEN had seen Mr. Liang after my interview with the latter in the morning, and Mr. Liang bad told him what had passed. Wang Ta-jên understood that I waived the condition as to the Chief Accountant. I explained that this was going rather too far, and I had no power to do so. What I had proposed to Mr. Liang was in substance that, if he could agree to the conditions as to the Chief Engineer, I was prepared to do my best to get my principals in London to modify their demands with regard to the Chief Accountant.
We then discussed the Chief Engineer question again in detail. I explained that his functions as regards the signing of certificates were only required to apply to orders upon the loan funds, and would cease, so far as we were concerned, with the exhaustion of these funds and the completion of construction. It rested with the Chinese, if he suited them, to retain his services in any capacity after construction is finished. Orders for loan funds would naturally in the first place be issued and signed by the Chinese Managing Director, the Chief Engineer's signature being added as certifying the nature and cost of the work for which the amount was to be drawn. He would be the servant of the Chinese Government in every sense of the word, and would have to obey the orders and wishes of his Chinese superiors as to the plan and construction of the line. Wang Ta-jén remarked that under this arrangement the duties of the Chief Engineer and Chief Accountant would be combined in the former, and I answered in the affirma- tive. He said he would communicate this modified proposal to his colleagues, and would let me know the decision. His powers did not permit him to give me a definite answer on the spot.
I asked Wang Ta-jên about security. He said it would probably consist of Chekiang provincial revenues, but he was not in a position to furnish me with full particulars as yet. He then went into the other terms. He thought the amount to be borrowed should be about 1,500,0001. I said that this approximated to Mr. Collinson's estimate of 1,650,0001; and Mr. Collinson had pointed out that considerable economy might be effected by asing Shanghae-Nunking Railway machine shops and staff. He asked where the Shanghae-Nanking machine shops were, I told him at Woosung, where there were facilities for landing heavy machinery, which could then be fitted together in the shops and sent up the line to Soochow. He asked if the Woosung shops could turn out loco- motives. I said that possibly they could, but I imagined the cheapest course at present would be to import locomotives in parts, and fit them at the Woosung machine shops. We discussed term of loan, amount of annual loan service, and other details. He finally said he would leave all these to me. I was to be guided by the conditions arranged with
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