I received a visit on the following day from Mr. Liang, who asked, on behalf of the Prince, for another fortnight's delay. He represented that Conferences were being held with the provincial Delegates, with a view to arranging the whole loan to be taken up by Chinese, and asked me if this could be done. I was not prepared to discuss the feasibility of this suggestion, which appeared to be merely another way of saying that the Agreement as it stood was not to be carried out, but I recommended Mr. Liang to see Mr. Bland and ascertain his opinion. In the course of the conversation Mr. Liang spoke, somewhat indefinitely, of the clauses in the Agreement relating to the Chief Engineer and Auditor, but I did not connect this with the main proposition, and confined myself to stating, for the information of Prince Ching, that I could not wait a fortnight for the desired assurance, but was willing to wait a week.
Mr. Liang must have seriously misunderstood my meaning, as he went off to Mr. Bland and told him that I saw no objection to an arrangement whereby the Agreement should be signed as it stood, with a collateral undertaking that, if the bonds were all taken up by China, the clauses relating to the Chief Engineer and Auditor would be modified.
On calling at the Wai-wu Pu on the 7th January I was received by his Excellency Yuan Shih-kai and Mr. Liang. The former stated that they were unable to give me any assurance as to the signature of the Agreement, and proceeded to unfold the same scheme as had been advanced by Mr. Liang. If this were accepted the whole matter could be disposed of in a week.
I refused to discuss it officially, as any departure from my position that the Agreement must not be touched would be construed as an indication that further compromise was possible; and before allowing myself to be led into a purely private conversation on this topic, I made it clear to Mr. Liang that he had entirely misrepresented my views to Mr. Bland. I was totally opposed to any other mode of settlement than the one which I had consistently urged, and had never for a moment contemplated the abolition of the provisions relating to the Chief Engineer and Auditor.
His Excellency Yuan said that they still could not overcome the Decree of 1905 granting these railway rights to provincial enterprise. If the Central Government did not satisfy the Delegates and signed the Loan Agreement with the British and Chinese Corporation, there was danger of serious trouble which could only be subdued by force. They could not incur this grave responsibility, and for this reason they were anxious to find some middle course. He proposed that the Agreement should be signed with the collateral undertaking above mentioned; that the provincials should be given a short limit of time within which to lodge in the Hong Kong and Shanghai Bank at Shanghai the full amount of the loan; if they succeeded in so doing, the railway shares would all be in Chinese hands, and the Corporation would be no longer obliged to insist on the employment of a Chief Engineer acceptable to themselves, or of an Auditor, since these conditions were inserted as a safeguard for foreign bondholders only. For the rest, the Agreement would be followed. The Corporation would get their "commutation" for the profits of the line and their commission on materials, while the Chinese Government would impose such conditions on the province with regard to the Engineer to be employed that no Chinese Engineer could be found to fill the post, and the result would be that a British Engineer would have to be appointed. The Government would further see to it that the line was built within the specified time.
If, on the other hand, the provincials failed to subscribe the money, the Government could then disregard them, and place the loan in the hands of the Corporation for flotation in London; and if the Corporation found it impossible, after these vicissitudes, to raise the money, the Chinese Government would take up the loan.
I could only express to his Excellency my deep disappointment at the policy which the Wai-wu Pu was adopting. As far as I could see, any such solution amounted virtually to a surrender to the provincials, and it would be followed as a precedent in other railway enterprise to the total exclusion of foreign capital. By maintaining the Agreement we were assisting the Central Government towards the State control of all railways in China, and yet they now appeared willing to give up this design. I could not hold out any hope that their scheme was either practicable or worthy of consideration, but its suggestion showed clearly that this difficulty, which was impairing our good relations, was not going to be solved for some time to come. It seemed therefore advisable to proceed with the signature of the Tien-tsin-Yang-tsze Agreement in the hope that its publication might have a good effect.
His Excellency did not think that any good effect could be expected immediately. It would take some months, but they were quite willing to sign and get the Tien-tsin-Yang-tsze Agreement off their hands.
I had the honour to report briefly the disappointing turn of affairs in my telegram No. 8 of yesterday. When I told Mr. Bland the result of my interview he expressed the opinion that, if the interests of his Corporation were alone at stake, he could accept the terms of the Wai-wu Pu without hesitation; but he fully recognized that many other considerations are involved, and has addressed to Mr. Liang a letter, copy of which I have the honour to enclose, refusing acceptance of the proposal as made to him.
I have, &c.
J. N. JORDAN.
* Not printed.
(Signed)
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