69
[This Document is the Property of His Britannic Majesty's Government d
[B]
CHINA RAILWAYS.
CONFIDENTIAL.
[38933]
No. 1.
36988
RECO REG I NOV 09
[November 1.]
SECTION 2.
Note communicated to Count Metternich, November 1, 1909.
THE question now at issue in the matter of the Hukuang loan is the redistribution of the engineering sections on the Hankow-Szechuan line in such a way as to admit of the American claim to appoint an engineer on one-half of the extension without doing violence to the existing equilibrium of parties.
On the 27th September Sir E. Grey had the honour to inform Herr von Kühlmann that it appeared to His Majesty's Government that, under the arrangement proposed by the German financiers, i.e., that should the Hankow-Szechuan line be divided into four, the Hankow-Canton line should also be divided, the British group would be making a double sacrifice, one on the Hankow-Szechuan line and one on the Canton- Hankow line, while the German group would be compensated for the sacrifice they made on the Hankow-Szechuan line by what they gained at the British expense on the Canton-Hankow line, and would thus be making no sacrifice at all.
The British group therefore consider that they are doing all that can fairly be asked of them by offering to make the sacrifice on the Hankow-Szechuan line and expecting the Germans to do the same.
By the Berlin Agreement of the 14th May one-third of the Hankow-Szechuan line, namely, the Hankow-Ichang line with branches to Hsiangyang and Kuangchui, was allotted to the German group, and the remaining two-thirds, namely, the extension from Ichang or Hsiangyang to Chengtu, were allotted to the Chinese Central Railways (Limited), an Anglo-French company constructed ad hoc and representing the British and French groups.
In order to satisfy the American claim to appoint an engineer on one-half of the extension, which is assumed to be 1,600 kilom. in length, it would seem that the German group and the Chinese Central Railways (Limited) should in strict equity therefore surrender 267 and 533 kilom. respectively.
It may be admitted, however, that the German section, as the first to be constructed, relatively of greater value than the deferred section of the Chinese Central Railways (Limited), and in order to promote a settlement His Majesty's Government would be willing that the Germans should surrender only the Hsiangyang- Kuangehui section to the Chinese Central Railways (Limited), estimated at 200 kilom., as a contribution to the sacrifice of some 600 kilom., imposed upon the latter by the American claim, to one-half of the Ichang-Chengtu extension.
The relative strength of the three groups over the whole line with its extensions would then be----
Germans
Kilom.
600
Americans..
800
Chinese Central Railways (Limited) (this includes the British and French
shares, which thus amount to 500 kilom. each)
1,000
This proposal has been submitted to the French and United States Governments, and His Majesty's Government would be glad to learn that it would be favourably entertained by the Imperial German Government.
Foreign Office, November 1, 1909.
[2486 a-2]