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to devise some means of getting round the difficulty of the Engineer's signature in a way which would satisfy the investor and at the same time be unobjectionable to the Chinese Government, Mr. Cordes mentioned that the Chinese had made to him the suggestion with regard to protecting the loan funds against the provincial gentry, and he expressed the opinion that a clause dealing with this might furnish a useful basis for a suitable modification.
It did not appear to me, on consideration, that this "gentry" clause could be successfully used for the required purpose, and as it seemed to be impossible to obtain the Engineer's signature, attention was turned to the auditor of Article 14 of the Tien-tsin-Pukow Agreeement, the first of whose reports had just reached me. Mr. Hillier, with my concurrence, telegraphed to his principals on the 16th April, asking their opinion of the following amendment in line 20 of that Article: "accompanied by auditor's statement particularizing expenditure drawn for, copies of indents and vouchers being furnished to him for that purpose by the departments concerned”; and suggesting that before replying they should obtain counsel's opinion as to whether the banks could withhold payment of loan funds in the event of the auditor's statement not being furnished. On the same day I sent a rejoinder to the Wai-wu Pu, copy of which is inclosed. In this I reviewed the whole of the facts, once more making a liberal use of the auditor's first Report on the accounts of the Tien-tsin-Pukow Railway, repeated our protest of the 4th April, and, to show that the door was not shut on amicable discussion, took advantage of the Grand Secretary's offer to open negotiations with a British bank regarding a Jankow-Szechuan. Railway Loan to inform him officially that Mr. Hillier was seeking a solution of the difficulties which had arisen.
I have heard nothing further from the Wai-wu Pu, but to-day Mr. Hillier informs me that he has received a telegram from London, according to which it would appear that, after obtaining counsel's opinion, his principals approve his proposed amendment of the 16th April as affording the required security, and he is now arranging to see Mr. Cordes and endeavour to have this amendment favourably considered both by him and the Chinese.
The translation of Chang Chih-tung's long telegram of the 26th March, forwarded by Mr. Fraser, which is one of the inclosures in this despateh, shows very clearly the power the provinces are arrogating to themselves in railway construction, and the difficulties that are to be anticipated in carrying through the Hankow-Canton line as a Government enterprise.
I have, &c. (Signed)
J. N. JORDAN,
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that the Corporation's agent was the nominee of the British Minister at Peking, and was thus entitled to be considered the British representative in the matter of the loans, turned to the German Bank and negotiated a Preliminary Agreement, which was signed by both sides as evidence, and this was done only after the Corporation's agent had explicitly stated his rejection. His Excellency Liang Tan-yen was informed of the above facts in various letters, and requested to communicate them to Sir John Jordan for his information, and they show quite clearly that in this matter I have in no wise broken faith nor have I failed in the least to pay proper regard to my undertaking.
"As the Preliminary Loan Agreement with the German Bank has been signed by both sides, there is no possibility whatever at present of disregarding it or setting it aside without reason.
I am wholly unable to admit the contentions in Sir J. Jordan's note, for the settling of this loan with Germany instead of England was not due to my unwillingness to arrange with the British and Chinese Corporation, but was due to the Corporation themselves refusing to undertake it.
"As for the Hankow-Szechuan Railway Loan, the British and Chinese Corpora- tion having explicitly and definitely refused to undertake it, there is naturally no question of reopening negotiations with that firm, and it would be in order to apply to other countries in the same way as in the case of the Hankow-Canton Loan; however, out of my extreme desire to preserve friendly relations, and although I am, in fact, engaged in detailed negotiations with another country, I am prepared, as these latter are not yet concluded, to open negotiations with any other British bank which is willing and able to come to an arrangement quickly on the basis of the despatch of September 1905. But if demands are put forward, which are not within the terms of the despatch of September 1905, it must be understood that I shall be again unable to concede them, and that I shall again have no option but to conclude with another country."
In communicating the above for your Excellency's information, I have the honour to request the favour of an early reply.
I avail, &c.
Inclosure 2 in No. 1.
Sir J. Jordan to Prince Ching.
!
(Translation.)
Your Excellency,
Inclosure 1 in No. 1.
Prince Ching to Sir J. Jordan.
Peking, April 11, 1909. THE contents of your Excellency's two notes of the 4th April, relating to the Ilankow-Canton and Hankow-Szechuan Railway Loans, which you held should be concluded with the British and Chinese Corporation, were duly communicated to the Grand Secretary, Chang Chih-tung, from whom the following reply has now been received:---
"In the matter of the Hankow-Canton Railway Loan, it was because I was desirous of making return for the extraordinary act of friendship of the British Government that negotiations were opened with England in the first instance for the purpose of arranging a loan, and although the British and Chinese Corporation procrastinated from October of last year to February of this year-nearly half a year --I never failed to be complaisant and accommodating, and this for the very reason that I was extremely desirous of making return to the British Government in accordance with the arrangement concluded by the despatch of September 1905. Then, because the British and Chinese Corporation was unwilling to observe the terms of the despatch of September 1905, and because the Corporation's agent on two occa- sions in the 1st moon (22nd January-19th February), and again on the 5th March, announced his refusal of the business, stating in uncompromising terms that the Corporation had decided to undertake neither the Hankow-Canton nor the Hankow--- Szechuan Railway Loans, and that I might apply to other countries, T, noting
Your Highness,
Peking, April 16, 1909. I HAVE the honour to acknowledge the receipt of your Highness' note of the 11th instant, in which you embody the reply of the Grand Secretary Chang Chih-tung to the protest which I addressed to you on behalf of His Majesty's Government on the 4th instant against his Excellency's action with regard to the Canton-Hankow Railway Loan.
His Excellency complains of the procrastination of the British and Chinese Corporation, which he alleges lasted from October of last year to February of this The Grand Secretary year. I cannot admit the accuracy of this statement. telegraphed in October to Mr. Fraser at Hankow to ascertain the date of Mr. Bland's return from Europe, and was informed that he would be here early in November. Mr. Bland arrived here on the 2nd November, and wrote on the next day to Chang He wrote Chung-tang's Secretaries that he was ready to enter into negotiations. again to the Grand Secretary himself on the 10th November, but in spite of all these applications the negotiations were only opened for the first time by the Grand Secretary himself on the 24th December, and were continued without interruption until suddenly broken off by the Chinese Delegates on the 6th March.
Ever since the conclusion of the Arrangement of September 1905 the utmost anxiety has been shown by us to meet his Excellency Chang in every way, and bolh Mr. Hillier and Mr. Bland have made long visits at different times to Hankow, and spared no effort in their endeavours to coine to a settlement of the question. To accuse us, therefore, of having procrastinated seems to me to be very unjust, seeing that we started negotiations at Hankow within a month after the Agreement of September 1905 was made, and have never since ceased to urge upon the Grand Secretary the necessity of carrying out the undertaking which he then contracted with His Majesty's Government.
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