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[This Document is the Property of His Britannic Majesty's Government.]
CHINA RAILWAYS.
CONFIDENTIAL.
[40045]
C O
35951
November 3.]
Roca
SHOTION 1.
Prof 24 NOV 10
No. 1.
(No. 365.) Sir,
Mr. Max Müller to Sir Edward Grey.—(Received November 3.)
Peking, October 17, 1910.
I REGRET to have to report that since I addressed you on the 18th June last on the subject of the Shanghai-Ningpo Railway, there appears to have been little if any real progress made towards what, to my mind, is the only possible solution of the difficulties that have arisen in connection with its construction, namely, a definite resumption of control of the line by the Board of Communications, and its completion in accordance with the terms of the loan agreement.
After sending in my note of the 14th June I lost no opportunity of urging uy point of view both on the members of the Board of Foreign Affairs and on Liang Shih-yi, the Director-General of Railways, and Mr. Mayers was in frequent communication with the latter official.
Towards the end of July the Grand Secretary Na-t'ung gave me to understand that he had hopes of effecting a satisfactory solution of this long-pending question, and the cashiering of Tang Shou-chien, President of the Chekiang Provincial Railway Company, and the leader of the local opposition, reported in my despatch No. 294 of the 30th August, appeared to be a step in the right direction, more especially as Liang Shih-yi kept on assuring Mr. Mayers that he had some proposals to lay before me, which he hoped would prove acceptable, and that he therefore asked me to have patience till he had sufficiently recovered from the illness which had kept him a prisoner to the house for many weeks to come and see me.
On the 7th September Mr. Liang came to the legation, and I asked Mr. Mayers to be present at the interview. The upshot of Mr. Liang's proposals was that he should be given time to get control of the Kiangsu line by continuing to make advances on the security of the line, and then, when the repayment fell due, the company would not be able to pay up, and he would thus acquire anyhow that portion of the line cheaply. His Excellency said that he had lately advanced a considerable sun--I think he mentioned 600,000 dollars---to the Kiangsu Company as a loan from the Board of Communications; he now proposed to make a further advance of 1,000,000 taels, and he calculated that by this means he would gain control of the company within nine months. To my enquiry as to whence he proposed to obtain this 1,000,000 taels to lend to the company, he hinted that he intended to ask for its advance from the loan funds. I replied that, as far as I could understand his proposals, they were too fantastic to be seriously considered, they involved further delay, they only referred to the Kiangsu section, leaving out of consideration the far longer Chekiang section of the line, and they did not by any means make a certainty of the purchase of the line at the end of the period for which the advance was to be inade. It appeared to me that a better way would be to use the money for buying up shares in the Kiangsu Company, and thus securing a controlling voice. Two days later Mr. Liang Shih-yi saw Mr. Mayers and repeated to him the proposals he had laid before me, but this time he made it quite clear that the advance of 1,000,000 taels to the Kiangsu Company would have to come out of loan funds. Mr. Mayers refused to entertain this proposal, but Mr. Liang had evidently been struck by the remark let fall during our interview on the 7th instant, as he now informed Mr. Mayers that he intended using the money for buying up shares in the company. He was, however, unable to supply any details as to the finances of the Kiangsu Company, and Mr. Mayers pointed out to him that before he could form any opinion as to the feasibility of his suggestions, or submit a concrete proposal to his board in London, he must be furnished with answers to certain questions in regard to the company's financial status, namely, the amount of their capital, the number of shares, the proportion of these which must be bought up in order to secure a controlling voice, &c. Mr. Mayers added that it would be necessary to ascertain whether such a transaction out of loan funds were legally possible, which is very doubtful. If that point were satisfactorily established the money could not be handed over to the railway company's directors, but would have
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