This Document is the Property of His Britannic Majesty's Government.
288
C.O.
Inclosure 3 in No. 1.
Acting Consul-General For to Sir J. Jordan.
(No. 40. Confidential.) Sir,
Canton, September 9, 1908.
IN continuation of my despatch No. 31, Confidential, of the 25th July last, on the affairs of the Chinese section of the Canton-Kowloon Railway, I have the honour to report that Mr. Grove, the Engineer-in-chief, has now completed his estimate of the total cost of the line from Canton to the British frontier.
Mr. Grove is unable to furnish me with a copy of this estimate for your perusal, but suggests that the British and Chinese Corporation, to whom the statement has been forwarded, will doubtless send you a copy if requested to do so.
Mr. Grove has with much difficulty, and at a sacrifice of efficiency to economy in certain matters, succeeded in keeping his estimate within the allotted sum (£1,500,000.), leaving, however, no margin for unforeseen expenditure. As stated in my previous Report, the unexpectedly heavy expenditure which is being incurred in the purchase of land is chiefly responsible. Mr. Grove informs me that the purchase of land is now proceeding more satisfactorily, and he hopes by next spring to have secured all the land he requires. Considerable opposition to the railway is being shown in the Samchun district, adjoining the British frontier, where the inhabitants of one village have, after an acrimonious dispute with the railway's land officers, succeeded in inducing the Director-General in Peking to sanction a serious deviation in the line.
Mr. Grove estimates that the section between Canton and Hsintang (near Shelkung), some 30 miles long, will be open to traffic in December 1909, and the whole line in July 1911.
The line is divided, for construction purposes, into three sections, each under a District Engineer.
The first and third sections present few difficulties; the second section, which is considerably shorter than the others, will require a large amount of bridge work.
Work is now proceeding on all three sections.
Mr. Grove does not consider that any good purpose will be served by commencing negotiations for a Working Agreement between the Chinese and British sections until portions of the line on both sides have been opened to traffic, and traffic departments have been organized. However, this is only his personal opinion, and he has asked me to assure the Governor of Hong Kong that, should his Excellency deem it advisable to start preliminary negotiations at this stage, he will co-operate in whatever way he can. He does not wish to take any active part in the negotiations himself, as he is afraid that, by so doing, he might compromise his position as Engineer-in-chief vis-à-vis the Chinese authorities.
I am forwarding a copy of this despatch to the Governor of Hong Kong.
I have, &c. (Signed) H. H. FOX.
CHINA RAILWAYS.
CONFIDENTIAL.
[38032]
No. 1.
[November 2.]
SECTION 1.
42997
24 NOV OC
Sir J. Jordan to Sir Edward Grey.-(Received November 2.)
(No. 420. Confidential.) Sir,
Peking, September 16, 1908.
WHEN Mr. Hillier saw Mr. Liang Shih-yi, of the Board of Communications, on the 1st September, to discuss the draft Final Agreement mentioned at the close of my despatch No. 385 of the 1st September, he was requested to inform his principals that the Grand Council preferred the first of the two alternatives offered on the 29th August, that is, a loan at 95 and 5 per cent., and would probably refuse to conclude the transaction on the 93 basis. Mr. Liang gave expression to some personal disgust at being forced to break his word, but Mr. Hillier naturally insisted that he had been given the option "firm," a fact which was in no way denied, and declined to acquiesce in its withdrawal in this manner. The matter was referred by him to London by telegraph.
It appears that, in the meantime, the French group had expressed to the Hong Kong and Shanghae Banking Corporation in London their readiness to take half of the whole seven millions at 93 if it were issued at once, but they were unable to co-operate in a loan at 95 for a reason peculiar to the French market. There is a French stamp duty of 2 per cent., as opposed to 10s. per cent. in England, and the difference of 1¼ per cent. left insufficient margin to the French on the 95 offer. As a matter of fact, Mr. Liang in discussion had admitted that the 93 scheme was more advantageous for China, and he could give no better reason for the withdrawal of the option than the wish of his superiors, whose names were not disclosed.
While this difficulty was created on the Chinese side, Mr. Hillier's principals showed signs that they were not satisfied to issue a loan without stating the purposes for which the money was required, and especially that four millions of it were to go to the redemption of the existing Belgian indebtedness. Mr. Liang had shown himself stubborn on this point, alleging that the stipulation required might furnish a handle for future interference, and that the Chinese Government were resolved not to furnish the slightest pretext to foreign bondholders to meddle in the administration of the Pei-Han Railway.
I saw my French colleague on the 6th September, gave him a Memorandum by Mr. Hillier to read, and explained the situation fully. He had himself seen Mr. Hillier the same morning, and had learnt from him how matters stood. I should mention that a pledge had been given by Mr. Hillier at the outset that there should be no official intervention of Legations in this matter, but Mr. Hillier did not think that this pledge could be construed to cover a "breach of faith" on Mr. Liang's part. On the other hand, it was possible that any attempt by the Legations to hold the Chinese Government to the 93 option might wreck the whole negotiations, and bring the Belgians again on the scene. M. Bapst was willing to let Messrs. Hillier and Casenave decide jointly whether or not they desired intervention, and, if they did, he thought a private representation to Yuan Shih-k'ai would be the best method of procedure. I gathered from him the impression that, in his view, the 95 proposal, which he characterized as a "bold one," had been made and accepted by the British group without consulting the French.
On the 8th September M. Casenave received a telegram from the Banque de l'Indo-Chine at Paris stating that the price of 95 shut them out entirely from participation in the operation, and making a counter-suggestion of a loan repayable in thirty years at 5 per cent. for fifteen years and 4½ per cent. for the second fifteen years at the price of 94; but soon afterwards this was followed by another telegram instructing him to keep this suggestion in reserve, and to hold the Chinese Government to the 93 option. A telegram to the latter effect was also received by Mr. Hillier from London on the 9th September.
I took advantage of a private visit from Mr. Tong Shao-yi on the 9th September to put the circumstances before him. I did not conceal my suspicions that the surprising withdrawal of the 93 option sprang from some doubtful manoeuvre of Chen Pi, the President of the Board of Communications, who is commonly reported to be in Belgian ...