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despatch of September 1905, the duties and responsibilities attaching to the post in any properly managed railway, and though I do not think I succeeded, he promised to communicate my Memorandum to the Grand Secretary and to see what could be done to reconcile our views.
I have, &c.
(Signed)
Inclosure 1 in No. 1.
J. N. JORDAN,
Memorandum by Mr. Campbell respecting Canton-Hankow Railway Negotiations.
I CALLED with Mr. Bland on Messrs. Kao and Tseng at the Yueh-han offices at 5 P.M. yesterday (the 6th February).
Mr. Bland drew attention to the charge of delay made against him in two letters from the Delegates of the 5th and 6th February, and endeavoured to show that it was groundless. Mr. Kao was disposed to hold that it was justified. I told him that the statement in the letters was an unusual one to make, and should not have been made in the circumstances. This matter had been going on and off for three years, and it was really strange that because Mr. Bland did not prepare some long and intricate documents in forty-eight hours he was accused of delay. He resented this correction, and said that it was not the way to negotiate. I took the two letters which were on the table, and indicated to him the expressions which I held to be out of place and unnecessary, and why I thought so. He then took another tone, and went into a long and rambling explanation, the gist of which was that Mr. Bland had been asked repeatedly for his loan price, and this having been withheld on the ground that the terms of the whole contract must be settled first, they were afraid that he was trying to obtain advantages not referred to in the original despatch of the 9th September, 1905. It was to obviate this and to prevent further and unnecessary delay that they had written as they did.
I said that these letters had caused us much surprise. They seemed to us to indicate a desire to break off negotiations on this ground of delay, and therefore a desire not to conclude the business, which, taken in conjunction with the presence in Peking of persons of other nationalities, evidently at the invitation of the Grand Secretary, made us suspicions. To be quite frank with them, I said I had to remind them of the origin of the matter. We had lent the Chinese Government 1,100,0007, at 4 per cent., and without discount, three years ago-for what? Surely we were entitled to some advantage for that?
Mr. Kao repeated his previous explanation of the reasons the Delegates had for writing as they did, and reminded me that the despatch of September 1905 recorded the advantages we were to get. He proceeded to run through the text of this despatch, a copy of which I had brought with me. Was that despatch to stand ?
in
I made it clear to him that His Majesty's Minister wanted no more than was that despatch justly and properly interpreted, but it did not seem to be fair or consistent with the friendly feeling which was manifested in our original loan to begin by inviting people from Germany, Belgium, and Japau for the purpose of bringing pressure to bear on Mr. Bland.
Both the Delegates hastened to express their recognition of the friendship evidenced by the original loan, the favourable terms of which were fully admitted, and assured me more than once that the Grand Secretary's firm intention was to settle this business with us, and if, as I said, we wanted no more than was stated in the despatch there would be no difficulty whatever. They alleged that the people from other countries had not been invited, and wished us to believe that they had come of them- selves. There had been a great deal of discussion with Mr. Bland without much result, and much time had been wasted over the question of construction by contract, which the Grand Secretary had distinctly said could not be entertained.
Mr. Bland explained at length that he was not to blame for the time spent on the question of construction by contract, which the Grand Secretary had at one time taken into consideration, but had now dropped, and stated his reasons for not being able to give a loan price until the terms of the contract were definitely settled.
I supported Mr. Bland in this, and a considerable time was spent in explaining the modus operandi in obtaining terms from financial houses in Europe for railway loans. It was more and more evident that the Delegates' chief anxiety was the loan discount and interest, which they without doubt wished to place before our competitors as early as possible for their own purposes.
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During Mr. Bland's explanations the Delegates said that the Grand Secretary wanted a financial loan pure and simple, similar to the last Pei-han loan. They were given to understand that such a transaction could not be considered, and that His Majesty's Minister was opposed to it. They then suggested that, in that case, they ould be at liberty to apply elsewhere. They were reminded of the despatch of Feptember 1905, which was written at a time when a purely financial loan for railways I was not known in China, and the terms of which did not contemplate such a loan. furthermore added that His Majesty's Minister would under no circumstances submit to the Grand Secretary passing us by for that reason and applying to others for a purely financial loan, and again asked both the Delegates to remember the 1,100,0001. loan of 1905 and the despatch. Had these other people lent them any 1,100,0001. without discount at 4 per cent, in connection with this very matter?
Mr. Kao wished me not to think that there was any desire to pass us by, and assured me that it was the Grand Secretary's firm intention to act up to his obligations and conclude the business with us. He again referred to the wording of the despatch.
I said that the despatch was the basis on which to work, but that it was not the loan contract. That must refer to matters not mentioned in the despatch. The main idea of the despatch was to secure the construction of the railway as cheaply as possible, and I was there to assure him that His Majesty's Minister wanted nothing inconsistent with that object. If there was anything in Mr. Bland's proposals which was not con- sistent with fair and economical dealing, the Delegates had only to point it out to us. For instance, there must be an Engineer-in-chief-every railway had one.
Both the Delegates professed to be in full agreement with what I said, and as regards the Chief Engineer, Mr. Kao admitted that there would be one, and that he would, of course, be an Englishman.
Mr. Bland exposed the The question of the Chief Engineer's powers then arose. inadequacy of the safeguards against wasteful expenditure, or misapplication of the loan funds, contained in the Shanghae-Ningpo and Tien-tsin-Pukow Agreements, and gave instances of loan funds being tranferred to the Chiao-tung Bank (Bank of the Board of Communications) on insufficient requisitions. This state of affairs was giving rise to troublesome questions entailing the interference of the British Minister, and in the interests of economy and efficiency it was desirable that the precedent of the Canton- Kowloon Railway should be followed rather than that of the Tien-tsin-Pukow, so far as the powers of the Chief Engineer were concerned.
The Delegates knew nothing of the Chiao-tung Bank transactions, and argued that the Cantou-Hankow Railway, being directly under the Grand Secretary, would be in a different category.
I corroborated Mr. Bland's remarks about the Chiao-tung Bank, but deprecated the use of the word "powers," which I could see aroused the suspicions of the Delegates. I argued that what was wanted was that the Chief Engineer should be allowed to exercise the functions which a Chief Engineer usually fulfilled on any properly conducted railway under construction.
The Delegates seeing nothing to object to in this definition of the Chief Engineer's position, Mr. Bland stated the function of a Chief Engineer to which importance was attached to be that of certifying expenditure on works. The way this should be done, and was done on other railways, was carefully explained, and Mr. Bland insisted that the Grand Secretary, as the person most interested in an economical and sound construction of the railway, should welcome such a system. There was nothing subversive of sovereign rights in making a Chief Engineer responsible for expenditure,
A specimen of the sort of transaction which the Chief Engineer's certificate would obviate was described by Mr. Bland, and on the Delegates saying that such an occurrence was bound to produce complaints from us, I assured him that the British Minister was strongly averse from interfering in railway matters, which should, as far as possible, be settled by the Chinese authorities directly with the British and Chinese Corporation, and was for that reason in favour of arrangements which precluded complaints or interference.
Mr. Bland produced two drafts in English, one for construction by contract, and the other based on the Tien-tsin-Pukow Agreement. The first was modelled on the lines of the Fakumen Railway contract made by Viceroy Hsu Shih-ch'ang and Governor Tong Shoa-yi; the second differed in one respect only from the Tien-tsin-Pukow precedent, and in that it followed the Canton-Kowloon Agreement.
The Delegates expressed an ardent wish to come to terms quickly and settle the matter, and they were told that once the conditions were agreed upon, a price could
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