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discussion must be confined to the actual circumstances of the case, and that the main point was to ensure that there should be no unfair discrimination; in this way both sides would obtain the advantages aimed at. If one side had reason to believe that they were being handicapped in any way, it would be impossible to force them to agree to any arrangement.
"On receipt of your communication under acknowledgment, our board wrote to the Nanking Viceroy at Nanking and the Governor of Kiangsu. In addition, we have the honour to request that you will transmit to His Majesty's chargé d'affaires the reason, as above stated, why the provincial authorities will not agree to consider the proposal previously made, that passes on goods in transit, whether by water or rail, shall be made identic and interchangeable.'
I have the honour to transmit the above reply for your information, and to request that you will inform the persons concerned accordingly.
I avail, &c.
Enclosure 2 in No. 1.
PRINCE CHING.
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or water, all form part of Chinese Imperial taxation administered by the provincial treasurer. Did no such distinct spheres of operation exist, and if in each locality there were but one li-kin office where identic passes could be obtained to cover goods in transit, either by rail or water, the provincial returns would benefit by the economy in administration. Rates by land and water would be automatically equalised, since the pass issued would cover goods in transit by either route, and the provincial treasury would gain in so far as any reduction has been made in favour of the land route.
I have the honour to again request your Highness to urge upon the Board of Communications and the provincial authorities the desirability of giving a trial without delay to Sir John Jordan's original proposal, that all passes covering goods in transit, whether by rail or water, shall be made identic and interchangeable, in the best interests not only of the Shanghai-Nanking Railway, but of the provincial I take this treasury of Kiangsu, and therefore of the Chinese Government. opportunity to remind your Highness that as regards li-kin on the Shanghai-Nanking Railway, the Chinese Government are bound by definite pledges under article 14 of the Shanghai-Nanking Railway Loan Agreement, and that the course proposed affords your Highness's Government a simple means of satisfying those pledges.
I avail, &c.
W. G. MAX MÜLLER.
Your Highness,
Mr. Max Müller to Prince Ch'ing.
Peking, September 30, 1910.
I HAVE the honour to acknowledge the receipt of your Highness's note of the 12th instant, in reply to my note of the 5th ultimo, which requested that, in view of the failure of the li-kin tariff introduced last year on the Shanghai-Nanking Railway to secure any marked increase in the goods traffic, all passes covering merchandise in transit, whether by rail or water, should be made identic and interchangeable.
In your Highness's note under reply, it is contended by the Board of Communications that "as regards the conveyance of foreign goods from one treaty port to another
an arrangement was made last year that they should be conveyed according to the regulations." I presume that "the regulations" here referred to by the Board of Communications are the rules in regard to exemption certificates, by which a clear treaty right was secured as the result of the strongest representations by His Majesty's Minister to your Highness's board at frequent intervals from March until November 1908. The rules were only eventually inaugurated on the 1st February, 1909, and even since that date more than one breach of their stipulations on the part of the li-kin officials has been brought to the notice of the Chinese authorities by His Majesty's consular officers at Shanghai and Nanking, The conduct of the provincial and li-kin authorities in this connection does not augur well for the rapid conclusion of the negotiations, which I now first learn from the Board of Communications are proceeding between the Shanghai-Nanking Railway authorities and the Customs taotais concerned in regard to native produce.
As regards the question of the reduction of li-kin on goods destined for the interior, I am at a loss to understaud the meaning of the Board of Communications. The desire of the Shanghai-Nanking Railway is by no means to secure a reduction, or favourable treatment, or to monopolise the traffic between Shanghai and Nanking, The li-kin rates themselves mainly concern the provincial authorities of Kiangsu and the Chinese Government, but in the incidence of those rates the railway is vitally interested. Where water and land routes are parallel, it is clear that competition must exist. The sole object of the railway is to ensure that the competition shall be fair, and that there shall be no discrimination in favour of the waterways. If the li-kin rates on goods, whether conveyed by the railway or by the waterways, be equal, not merely nominally according to the tariff, but actually in practice, the railway cannot fail to secure a large proportion of the goods traffic along the route which it traverses. As a matter of fact, the goods traffic receipts in a district where trade abounds are wholly disproportionate to those derived from passengers. The tariff, therefore, which was agreed to by Sir J. Jordan as an experiment only-as will be seen from his note of the 14th May, 1909--has proved a failure, and the only course to pursue is to revert to his original proposal, and to give instructions to the li-kin authorities to issue passes covering goods in transit, which shall be equally valid, whether the goods covered be conveyed by water or railway.
As an objection to this proposal, it is argued by the Board of Communications that "the li-kin barriers by land and water have distinct spheres of operation." The reason for such a distinction is not obvious, since the dues collected, whether by land
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