The chief points which have given rise to discussion and debate between the negotiating parties are as follows:--
1. Doubt as to the area referred to in the above Article.
The Japanese negotiators maintain that the area is the entire basin of the Yalu, while the Chinese contention is that the chief tributary of the Yalu—known as the Hunchiang—is not included, and that only certain portions of the Yalu Valley come within the meaning of the Article.
The Japanese reply to this argument that it is illogical, for if one tributary is to be excluded, why not others? and if other tributaries are to be excluded, why not all? and if all tributaries are to be excluded, and only the country immediately bordering the actual course of the Yalu to be included, then Article 10 is a farce, since there are no forests worth mentioning within the tract of country immediately fringing the Yalu River channel.
The question of the inclusion or exclusion of the Hun River is a very crucial one, for the valley of that tributary contains half of the whole forests, and that half is the most accessible. The Company exploiting the rest of the Yalu could not, therefore, hope to compete with a Company exploiting the Hunchiang.
Minister Hayashi therefore insisted from the first that the sphere of operations of the Joint Company should include the entire area of the Yalu from Maoerhshan upwards to No. 24 district, and also all the forests of the valley of the Hunchiang from Tung-huahsien upwards, including the belt lying between the main channel of those rivers and the head-waters of their tributaries. This includes all the forests practically in the basin of the Yalu, and it is to this definition of the area that the Japanese Government persistently hold.
The Chinese Government limited the area in the first instance to only five districts, viz., Nos. 19 to 23.
Negotiations were broken off, but again renewed when Mr. Abe, Chargé d'Affaires, took the place of Mr. Hayashi, but again no understanding could be arrived at.
Again, in July 1907, negotiations were opened for the third time, and the Chinese made the concession that five more districts, namely, Nos. 14 to 18, should be included. Subsequently it was announced in the “Anto Shimpo,” the local Japanese newspaper, on the 17th October that his Excellency Natung and Mr. Abe, the Japanese Chargé d'Affaires, had further discussed the matter, with the following result:---
The Japanese still maintained their original position.
The Chinese said that the sphere of operations should include the Yalu River from Maoerhshan upwards to district No. 24, embracing a belt extending inwards 20 miles from the bank of the river. The entire Hun River, they maintained, should still be excluded.
This concession the Japanese considered of little value owing to the narrow width of the belt to which the Chinese limited the sphere of operations.
Major-General Kojima, Director of the local Japanese Timber Bureau, informed me on the 18th instant that no solution of the question had yet been arrived at, as the Chinese still insisted on the exclusion of the Hunchiang from the area of exploitation.
In the absence of a map accompanying this Report, the following explanation may serve to indicate the geography of the region referred to:--
The River Hun is the main tributary of the Yalu on the right or Chinese side, as shown on any good map of the Yalu Basin, and the district town of Tunghuahsien is situated on the Hun River at the point where the road from Mukden to Maoerhshan intersects the river.
Maoerhshan is situated south of the Chang Pai Shan (Long White Mountains) at the point where the Yalu makes its main decided bend in a southerly direction.
Both these places and the whole region referred to can be clearly seen by reference to the map to be found in the book by Mr. (now Sir Alexander) Hosie entitled "Manchuria."
The first district is immediately above Maoerhshan, and the last or 24th district is the farthest and nearest to the sources of the Yalu River.
2. Disagreement as to length of time for which the Company is to work. This question turns on the meaning to be attached to the Japanese and Chinese terms rendered in English "exploitation."
The Japanese maintain that "exploitation" means complete and permanent development of the timber resources, while the Chinese interpret the meaning as applicable only to the timber actually in existence at the time of the signing of the Agreement.
The Chinese therefore proposed that an estimate of the number of trees ready for felling at that time be made, and that a calculation then be made as to the time which it would take to fell these trees, and that the time so calculated should be the term of exploitation.
In the first instance they therefore proposed to limit the time to seventeen years, which they subsequently extended to twenty.
The Japanese insist on the principle that exploitation includes reforestation, and, while not wishing to argue about the exact length of time, feel confident that the advantages of reforestation will, as a matter of course, commend themselves to the Chinese, and so the question will settle itself automatically by the Chinese eventually withdrawing their objections. The Japanese have, I understand, actually suggested a period of ninety years.
Regarding the question of the time limit it is believed that an arrangement has been reached. What is the nature of the agreement on this point has not been made public, but it is supposed that the Japanese demand for a prolonged term has been acceded to.
3. The question of the amount of capital necessary for the organization of the Company admitted also of considerable differences of opinion.
The Japanese view of the question was that the capital should be entirely official and that no shares should be issued to individual persons, and to this the Chinese appear to have agreed.
The Japanese negotiators held that the Japanese and Chinese Governments should contribute in equal parts. The Chinese Government, however, would borrow its share from the Japanese Government at a rate of interest which would be 6 or 7 per cent. per annum.
It was anticipated by the Japanese that a capital of some 4,000,000 to 8,000,000 gold yen would be sufficient for the purpose.
As a result of subsequent negotiations it is understood that the Japanese now propose a joint capital of 2,500,000 gold yen.
4. The question of the division of the profits.
The Japanese Government proposed that the division of the profits should be equal, in proportion to the amount of capital subscribed, but the Chinese view was that the Chinese Government should be entitled to a special appointment of 15 per cent. of the net profits, after which the remainder should be divided between the two Governments according to the amount of capital contributed by each.
5. The question of the officials and employés of the Company has also raised considerable controversy.
The Japanese negotiators started from the ground that the Company would necessarily be worked by a majority of Japanese officials, as the Chinese were incapacitated by their lack of scientific knowledge and training in forestry from filling the higher positions. The only responsible positions that could be held by the Chinese would be those in the Sales Department, and even here a large proportion would be Japanese.
The employés, including the cutters and raftsmen, would consist of both Japanese and Chinese, with the former, however, in most cases as foremen.
The Chinese demanded that 70 per cent. of the officials should be Chinese, but subsequently conceded that the Company's officials should consist equally of the subjects of both countries.
The local press stated in October that the Japanese Government then proposed that the president of the Company should be a Chinese and the business manager a Japanese.
To this the Chinese objected, and held that there should be one president, who should be Chinese, and two business managers, one of whom should be Chinese and the other Japanese.
The Japanese Government objected to this on the ground that the appointment of two business managers would lead to a conflict of authority in the control of the affairs of the Company.
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