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But in order to lessen the opposition of the local merchants the representative of the railway company promised them that he would apply to the management in Paris to be allowed to give a further preference to French and Indo-Chinese goods which would be about equal to that already in force, and would make the reduction on freight of cotton yarns from Haiphong to Mongtze 10 dollars per ton instead of 5 dollars as mentioned above, i.c., a reduction of about 20 per cent. on the full tariff instead of 10 per cent, as it stands at present. It was the actual representative here of the railway company who told me that he had made this offer, but that he did not know whether Paris would allow it. It has not been published.
As far as I can ascertain, no answer has been received from Paris yet; I presume that the suggestion was cabled. At all events, the agitation against the rebates seemed to die away instantaneously, which is not usual here when the Government adopts a measure in opposition to local opinion. It may be that local traders are satisfied with the assurance that the railway company's representative is doing his best for them. There is also the possibility that some arrangement might be come to between the Government and the railway by which more or less secret advantages would be accorded to the local cotton-spinning industry, that which is the most interested in the question. I have no reason to believe that such is contemplated, but it seems to me possible. I believe that the Indo-Chinese Government are anxious to avoid arousing foreign ill-feeling in connection with the railway, and they might consider it advisable that any further favours conferred on local industry should be as unostentatious as possible. I know that the officials who dealt with the rebates question had before them and considered the translation of a well-informed article from a Japanese native newspaper which dealt with the Yunnan Railway, the customs transit duty, and the preferential railway rates which were mentioned in my No. 2, Commercial, referred to above.
It must be remembered that, besides any advantages accorded by the railway company to goods of French or Indo-Chinese origin en route to Yünnan, these benefit also by being exempt from the transit duty which foreign goods have to pay to the Customs on passing through Tonquin. As Mr. Wilton states, in his despatch quoted above, this transit duty is 20 per cent. of the French import duty. The great bulk of this trade is and always has been with Hong Kong, and is carried on by Chinese.
The most important article of import into Yünnan by this route is cotton yarn. Of a total value of 690,0001. worth of goods passing through Tonquin from Hong Kong to Yünnan during 1907, 381,000. represented the value of 4,699 tons of cotton yarn, which was mostly of British Indian origin. During the same year the mills in Tonquin also sent into Yunnan 476 tons of yarn. Owing to the delay in publishing the trade statistics issued by the custom-house, which are the only ones available here (a delay which is of annual occurrence but more marked than over this year, those for 1908 not being yet obtainable), I am not in a position to give more recent figures, but I believe that there has been an increase in the amount of Tonquin yarn exported to Yunnan, and I understand that the local mills are devoting much attention now to this branch of the trade. The customs duty which has to be paid on yarns in transit from Hong Kong to Yunnan comes roughly to about 5 per cent. of their value.
On the whole, I think that the Government of Indo-China realises that for the present, and probably for a long time to come, the Yunnan Railway must to a very large extent depend upon the Chinese trade with Hong Kong if it is to pay its working expenses. An official of the government-general said to me recently, in effect, that Tonquin is not yet able to supply Yunnan with all she wants; if she were it might be another matter, but as she is not, we do not mean to hamper the Hong Kong trade and so cripple our railway." Still, the Government is always liable to attacks, both locally and in France, on the ground that it is neglecting national interests, and that the heavy sacrifices that the Yunnan Railway has entailed have been made for the furtherance of foreign commerce. It may therefore be tempted now and then to offer some preferential advantage to French or Indo-Chinese merchants in order to silence such criticisms.
It seems to me, therefore, that it would be an excellent check on any such tendency if there were some visible menace of an alternative route such as that sketched by Mr. Wilton. At present there seems to be a general belief here that the French railway possesses the only practicable means of access to Eastern Yünnan. The railway from Burmah, which used to be a local bugbear, is no longer feared. The Government considers that, even with the present high charges made by the railway, no other route can effectively compete with it. If the West River route is
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really feasible commercially, and if, as it seems, the Chinese authorities are disposed to actively encourage its development, this feeling of complacency would be somewhat shaken. The Government would, moreover, be given an argument-in the shape of the danger of driving foreign traffic to adopt the new route-which would strengthen their hands in resisting the demands for protection of French exporters and local merchants.
Even the mere announcement that the development of this route was in contemplation, if supported by adequate data as to its apparent feasibility, would Of course if it could be actually carried out and probably have an excellent effect. found able to compete in economy with the railway it would be better still.
I havo, &c.
T. Fr. CARLISLE.
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