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[This Document is the Property of His Britannic Majesty's Government.] 576
[B]
CHINA RAILWAYS.
CONFIDENTIAL.
[11480]
No. 1.
[April 11.]C. O. SECTION 12550
RECE
(NEG! 28 APR 10
Your Excellency,
Sir Edward Grey to Mr. Whitelaw Reid.
Foreign Office, April 11, 1910. I HAVE received your Excellency's note of the 2nd instant, stating that the United States Government assent to the principle of equal division in the matter of engineers on the Hukuang Railway, but that they do not consider the arrangement proposed by His Majesty's Government to be an equitable manner of settling the question.
Your Excellency adds that the effect of the British proposal would appear to leave the American group only 400 kilog.. as against the 1,500 kilog. given to the British group, and that your Government fail to see why the Hankow-Cauton section should be an integral part of the Hukuang agreement for the loan and materials, but not for engineering rights.
I would, however, point out that the United States Government themselves admit that, having arrived late in the field, they agreed to waive their rights as to chief engineers, though reserving them on further extensions, and this undertaking would therefore appear to exclude, as far as the American group is concerned, the Hankow-Canton section from the discussion.
This section does undoubtedly form an integral part of the whole loan agreement, with the important reservation, however, of the chief engineer, who by an arrangement come to between the French and British groups in February 1908, and confirmed by the British, French, and German groups on the 19th May last, was to be British.
It therefore follows that neither the American nor the French group can reasonably claim engineering rights on the Canton section of the Hukuang Railway.
As regards the Szechuan portion of the railway, His Majesty's Government have always maintained that, though they had agreed to make the necessary sacrifices in order to admit last summer the American group into the arrangement, these sacrifices should at any rate not be greater than those made by the other two groups, and it is for this reason that they have proposed a division of the line into four equal parts of 600 kilog. per group.
I am aware that the Germans have only given the American group the right to appoint a sub-engineer on 200 kilog. of their 800, which, with the 400 allotted to the American group on the extension to Chengt if and when conceded by China, will make up their 600 kilog.; but it must be borne in mind that these 200 kilog. are part of a line already conceded by China, whereas the concession of the extension is, to say the least of it, problematical. Moreover, that the division is a fair one, at any rate, in the opinion of the British group, is, I think, amply proved by the recent offer made by that group to exchange sections with the American group, an offer which your Excellency will recollect was not accepted.
It will therefore be seen that the privileged position of the British group on the Canton line has been acquiesced in by the French, and later on by the French and German groups, and last of all by the American group itself, inasmuch as it waived its rights to a chief engineer except on any extension of the present line, and that the American group have a position, on the Szechuan line at any rate, equal to that held by the British group, which it must not be forgotten has never withdrawn its offer to exchange sections with the American group, should they so desire. It is perfectly true, as stated in your note, that the arrangement proposed does not constitute an equal division of the whole of the lines now under discussion, but His Majesty's Government have always claimed, and still claim, on behalf of the British that they are entitled to a privileged position as regards the Hankow-Canton section, in virtue of their having alone advanced the funds required to enable China to repurchase the concession for this line from the original holders. Moreover, the preference thus
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