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purpose by the interested Powers willing to participate (a plan the execution of which the United States Government freely admitted would require the co-operation of Russia and Japan as well as of the United States and Great Britain), commended itself to His Majesty's Government so far as the preservation of the open door policy and equal commercial opportunity were concerned, and would, in their opinion, be well adapted to securing to China full control in Manchuria. I added that I was, however, of opinion that until the pending negotiations for the Hukuan loan were completed it seemed undesirable to consider the question of another international loan for China's railway undertakings, and I therefore suggested that for the present at any rate it would be wiser to postpone consideration of the first scheme.
As regards the alternative scheme, i.e., diplomatic support by Great Britain and the United States of the Chenchow-Aigun Railway, and the issuing of an invitation to the interested Powers, friendly to the complete commercial neutrality of Manchuria, to participate in the financing and construction of that line and of such additional lines as future commercial development might demand, and to supply funds for the purchase by China of such of the existing lines as might be offered for inclusion in this system- I said that I had observed with satisfaction that the co-operation of interested Powers formed part of the scheme, and had suggested, as a preliminary step towards attaining this end, that the two Governments should unite in endeavouring to persuade the Chinese Government to admit the Japanese to participation. It is Chinese unwilling- ness to admit the latter which has hitherto prevented His Majesty's Government from giving any diplomatic support to the scheme, even before they were aware that Russia was likely to take an active interest in the undertaking.
On the 17th ultimo the United States Ambassador addressed a further note to me, stating that in the opinion of the United States Government no time should be lost in placing their proposals relating to the commercial neutralisation of the Manchurian railways before the Governments of the other interested Powers with a view to obtaining their support to the principle involved, and adding that the United States representatives at Peking, Tokyo, St. Petersburgh, Paris, and Berlin would be instructed forthwith in this sense, and that the United States Government were prepared as a preliminary step to join with His Majesty's Government in urging China to consent to participation in the Chenchow--Aigun Railway by Japan and the other Powers interested. I replied that I should be glad to learn what views the Govern- ments of the other Powers concerned, and more especially of Russia and of Japan, took in regard to these proposals. I added that instructions had been given to His Majesty's Minister at Peking authorising him to join with his United States colleague in endeavouring to persuade the Chinese Government to agree to Japanese participation in the Chenchow-Aigun Railway, and that I had approached the Japanese Ambassador in London with a view to ascertaining what measure of participation would satisfy his Government in regard to the undertaking.
This is still the situation, and your Excellency will observe that no agreement has been arrived at between the three Governments mentioned, and the concession has not, so far as His Majesty's Government are aware, been actually granted. I need scarcely say that I should be very pleased to see provision made for Russian and Japanese participation in the undertaking.
In regard to M. Isvolsky's contention that the notes exchanged in April 1899 between the British and Russian Governments exclude the former from seeking railway concessions north of the Great Wall, the matter under discussion being merely a provision by private firms of funds to China for railway purposes, scarcely seems to His Majesty's Government to fall within the scope of the 1899 Agreement.
I have also the honour to observe that when in July last your Excellency raised objections to an agreement arrived at between the Hong Kong and Shanghae Bank, the German Asiatic Bank, and the Banque de l'Indo-Chine for railway loans in China, I pointed out that the arrangement was a purely private one, that any participation in it on the part of other financial bodies was a matter for arrangement between the latter and the three banks, and that if arrangements were made whereby the Russo-Chinese Bank shared in those and future financial undertakings there would certainly be no objection on the part of His Majesty's Government.
Your Excellency will recollect that the loan which was at that moment in question was for the construction of two specific railways, ie,, the Canton-Hankow and the Hankow-Szechuan, both in the Yang-tsze Valley. These railways were subject to special obligations into which the Chinese Government had entered with the British in the case of one line, and with the British and Americans in
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the case of the other. Beyond this no claim was, however, put forward that Great Britain had exclusive rights to railway enterprise in the Yang-tsze Valley, or that Russian firms were debarred by the Agreement of 1899 from taking part in the enterprise.
I shall be obliged if your Excellency will bring the above explanation and considerations to the knowledge of the Russian Government.
I have, &c.
E. GREY.
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