[This Document is the Property of His Britannic Majesty's Government.]
[B]
AFFAIRS OF CHINA.
CONFIDENTIAL.
403
C. O.
5944
[February 1.]
RECE SECTION TEC 18 FEE 09
[4165]
No. 1.
Memorandum respecting Interviews between Mr. C. S. Addis, representing the British Group, and Representatives of the French and German Groups, at Paris and Berlin, on January 25, 27, and 28, 1909, respectively.-(Communicated by Mr. C. S. Addis, January 30, 1909.)
THE Anglo-Chinese Agreement of 1905 provides that, in the event of foreign capital or foreign material being required for the Hankow-Canton Railway, a preference shall be given on equal terms to-
(a.) British capital.
(b.) British material,
It is to be noticed that (b) is a function of (a). The preference for British material can only be obtained through a British loan on terms not worse than those offered by another Power. Conversely, if any other Power offers better loan terms than Great Britain, the British preference for material falls to the ground. The material preference would then, presumably, accrue to that Power which, by offering better financial terins, bad succeeded in wresting the loan from Great Britain.
From this form of competition France is excluded by their Agreement with the British and Chinese Corporation of the February, 1908. As regards Belgium, Russia, and Japan, from whom tenders have also been invited by the Chinese, no serious opposition is to be feared, since it is improbable that any of these countries, on account of their financial position, could float a Chinese loan of such magnitude on better terms than Great Britain, even allowing for the prospective gains they might hope to reap by the preferential supply of material which, it is held, would attach to the successful negotiation of the loan.
There
There remains Germany. That country has recently denounced the Anglo- German Protocol of the 1st (2nd) September, 1898, which limited her sphere of interest to the north of the Yang-tsze, and is apparently determined to gain a footing both in the Yang-tsze Valley and in the southern provinces of China. is, moreover, a marked change in the condition of the German money market compared with that last year, when Germany felt herself compelled, for financial reasons, to decline participation in the Anglo-French issue of the Peking-IIankow A series of internal loans Redemption loan of 5,000,000/ Money is now abundant. have recently been floated with success. Germany is now in a position to make an effective bid for the industrial advantages in China, by which she sets such store. not feared that Great Britain will fail ultimately to secure the Hankow-Canton Loan; what is to be feared is that Germany, in her anxiety to secure the coveted preference for her industries, may, and probably will, offer China such favourable financial terms as would render the subsequent acquisition of the loan by Great Britain not worth the having.
It is
Under these circumstances the British group concerned, the British and Chinese Corporation, with the concurrence of the British Foreign and Colonial Offices, resolved, so far as they were concerned, to admit German participation as regards finance, while reserving to themselves, as against both the French and German groups, the entire British rights to the appointment of engineers and the supply of material secured by the Anglo-Chinese Agreement of 1905.
To give effect to this resolution it was necessary to devise a new method of procedure. First of all it was necessary for the British to obtain the consent of the French group to the admission of a German partner in the loan. Assuming that no objection would be raised by the French, there still remained for solution the method to be adopted for separating the financial and the constructional elements of the proposed tripartite Agreement. The French acknowledgment of the British preference as regards construction of the Hankow-Canton Railway had been obtained in return for the British acknowledgment of the French preference with regard to the Peking-Hankow
[2155 a-1]
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