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would have greater effect if communicated at a personal interview, I informed the Viceroy that I had a message from you to deliver, and his Excellency, although on the eve of handing over charge to the provincial treasurer, was good enough to give me an appointment on Saturday morning, the 10th instant,

Mr. Grove accompanied me on this occasion, and Mr. Wei Han, the managing director of the line, was present at the interview.

The Viceroy, who seemed genuinely disturbed at the news of the disorders on the line, said that immediately on receipt of my despatch he had requested Admiral Li to dispatch an adequate force of soldiers to patrol the line in the threatened sections, and that he had sent strict instructions to the local authorities to maintain order and protect the railway staff.

I gave the Viceroy your message, and he said that you might rest assured that the Canton Government would afford this enterprise efficient protection. The Viceroy added that he would the same day draw the provincial treasurer's attention to the necessity of preventing the construction of the line from being interfered with, and he promised that he would mention the matter to the Viceroy-designate Yuan when he met him in Shanghae.

I told the Viceroy that, in my opinion, these disturbances would continue to occur, and the construction of the line be seriously retarded, unless the engineers had the sympathy and support of the local magistrates, and I urged his Excellency to make an example of the Tseng Ching magistrate in particular by dismissing him from his post.

This the Viceroy would not promise to do, but I think some of the definite instances of neglect of duty on the part of this official and his colleague, the Tung Kun magistrate, which was able to give, opened the Viceroy's eyes to a state of affairs which had evidently been concealed from him, and if it does not result in the removal of these officials--one is, unfortunately, a relative of the provincial treasurer---may cause them to adopt a different attitude towards the railway in future.

As far as I can learn from the correspondence recently handed to me by Mr. Grove, and my knowledge of that gentleman and his assistant engineers, neither he nor they are in any way to blame for the difficulties that have arisen in the No. 2 district. Mr. Wei Han, too, would appear to have given Mr. Grove every assistance that lay in his power to give.

The real cause of the trouble, I venture to submit, lies in the fact that the control of the line and the responsibility for its completion rests, not with the Viceroy of this province, but with a director-general in Peking.

In order to run a line of railway through thickly populated and notoriously turbulent districts, such as Tung Kun and Tseng Ching, the co-operation and assistance of the local authorities is, as I have always pointed out, indispensable. But the director- general in Peking cannot order district magistrates to expedite the purchase of land, or to send soldiers to patrol the line. Such orders must come from the Viceroy, and he, having no control whatever over the line or financial interest in it (the director-general draws a salary from the railway funds of 2,920 dollars per mensem), is naturally disinclined to take stern measures and risk making himself unpopular for the sake of a railway from all share in the direction of which he has been expressly excluded,

These observations apply to the Viceroy, as the representative of the provincial Government. As far as his Excellency Chang Jeu Chun is personally concerned, he is, I think, too broad-minded, and has the development of his country too much at heart, to allow such considerations to influence his actions to any serious extent.

It is therefore, in my opinion, regrettable that the corporation's agents and Mr. Grove did not make a personal appeal to the Viceroy, through this consulate- general, at an earlier date, when matters had not reached the critical state they are in at present.

I have the honour to enclose, at Mr. Grove's request, copies of letters that have lately passed between the British and Chinese Corporation's agents in Hong Kong and himself. The correspondence therein referred to has, I understand, already been submitted for your inspection.

I have, &c.

HARRY H. FOX.

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Inclosure 2 in No. 1.

Mr. P. Grove to Acting Consul-General Fox.

My dear Fox,

Canton-Kowloon Railway, July 6, 1909. I SEND herewith copies of certain correspondence between myself and the British and Chinese Corporation, with copies of letters referred to, dealing with the question of land and disturbances.

Affairs have now reached a critical stage, when not only is our work stopped at Shektan and Sin Chuen Bridge (Shek Ha), and numbers of grievances are unredressed, but both Mr. Boothby and Mr. Warmington (the latter resigned some weeks ago, but, pending further endeavours to straighten things out, his resignation was not accepted) have had enough of it, and cannot be expected to stand the "pin pricks" any longer. Their going would be absolutely disastrous, and, as I told Wei Han yesterday, we should elose down No. 2 district and practically own ourselves beaten.

Following the appointment of the two deputies, the Viceroy has written a strong letter to the Tsang Shing and Tung Kun magistrates, a copy of which only came into my hands this morning. This was apparently only recently issued. Why it was not sent down at the time of the appointment of the Viceroy's deputies I do not know.

The facts are that for months past, notwithstanding repeated applications from myself to Wei Han and from him to the Viceroy, the latter has refused to take vigorous action. Both deputies have recently told Boothby that they know that the magistrates named have sided with the people and ignored entirely the interests of the railway.

Many months ago I took the matter up strongly with the British and Chinese Corporation, and I was led to suppose Sir John Jordan was appealed to--in what manner I do not know. There has been a tendency to hush things up, and, indeed, myself advocated this six or eight months ago, thinking that we might worry through.

I believe this railway has been referred to as working smoothly under a model agreement, and so forth. The time has come when you should at least be advised of the true state of affairs on No. 2 district. I shall be glad to see you in connection therewith when convenient to you.

Yours sincerely,

FRANK GROVE,

P.S.-I think, in view of our brief conversation this morning, what I take to be the position of the British and Chinese Corporation and myself should be explained further. I believe my action, taken locally in the interests of our railway as engineer-in-chiet jointly appointed by the British and Chinese Corporation and the Viceroy (who now, under the terms of the loan agreement, is represented by his Excellency Liang Shih Yi, director-general), has been approved of by the corporation, that is, that the terms of the loan agreement read particularly as regards-

1. The acquisition of land or delays connected therewith;

2. Obstructions to progress by the hostile attitude of villagers ;

3. Possible danger to the lives of European employés,

were provided for by reference—

(a.) By myself to the managing director and to the corporation;

(b) By reference to the director-general, Peking, by Mr. Bland, who holds the power of attorney of the corporation;

(c.) By reference to his Excellency Sir John Jordan, British Minister at Peking, by Mr. Bland, appealing for special diplomatic measures should the necessity arise.

My reading of the loan agreement is that it would have been unwise of me to have referred to yourself for special local diplomatic action unless matters were in extremis, or unless the lives of our foreign employés were in real danger. Up to the present I do not consider that I can charge the Chinese authorities with failure to provide fairly efficient protection for the persons of our engineers, or that their lives have been in imminent danger, beyond the usual risk that an engineer must sometimes take in China. The correspondence attached to this letter I therefore forward confidentially, though I have no hesitation in doing so now. A critical time has been reached on No. 2 district, and in view of the dissatisfaction of our engineers, some added dangers to their lives and

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