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tions.
CHINA REPORT
At first sight all the essentials of the latter appear to be adequately safeguarded or preserved intact. We find references to the creation of an endowment fund, to the choice of railways as the best field for investment, and to the establishment of a Board of Trustees which is to handle the income of the endowment in accordance with the general views set forth in the Willingdon Report. The definite allocation of £265,000 to the University of Hong Kong and of £200,000 to the Universities' China Committee in London is some- thing new, but by no means out of harmony with the principles of the Report, which indeed specifically included the University of Hong Kong and also the promotion of Chinese studies in Great Britain among those institutions and activities which deserved recognition and support.
But a more careful scrutiny of the agreement reveals departures of a very serious kind from the principles accepted by the Advisory Committee and its delegation and by His Majesty's Government in 1926. There is to be a Board of Trustees, but its powers and functions are not clearly defined, and in any case it is relegated to a position altogether inferior to that of an entirely new body called the Purchasing Commission. The exact relationship between the Board and the Commission is left very much in doubt. It would almost appear that the Board was not taken seriously by those who were engaged in drawing up the agreement embodied in the Exchange of Notes. We have indeed strong reasons for believing that the British Government were indifferent as to whether a Board of Trustees were created or not, and that it came into existence at the instance of Dr. C. T. Wang.
There is no mention of any part of the accumulated funds being made immediately available for educational purposes, far less the £350,000 per annum (irrespective of the expected income from endow- ments) which forms the subject of a special recommendation in the Report. On the contrary, the whole of the existing accumulations, and half of all future instalments of the indemnity, are to be handed over to the Purchasing Commission for the purchase of railway material in the United Kingdom. The remaining half of all future payments is to be handed over to the Board of Trustees, but even this amount is not to be at the Board's unfettered disposal for the purpose of financing educational and cultural activities, for it is expressly provided that the accumulated funds now on deposit and all future instalments" are to be invested in " rehabilitating and building railways and in other productive enterprises in China". It is true that the funds spent in the United Kingdom are to be "regarded as loans,
SITUATION CREATED BY EXCHANGE OF NOTES
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bearing interest and providing for eventual amortisation, from the Board of Trustees to the Chinese Government railways or other pro- ductive enterprises concerned", and that "the amounts attributable to the service of such loans will be paid to the said Trustees and by them applied to educational purposes at the earliest opportunity "; but no provision is made for ensuring that interest will actually be paid or amortisation provided for, and no mention whatever is made of the express stipulation in the Willingdon Report that no railway project in which it was proposed to invest indemnity funds should be definitely adopted until it had been favourably reported upon by impartial experts, as being feasible, as a reasonably safe investment for trust funds, and as likely to produce a steady and adequate return on the capital invested ".
CC
The fact is that the particular railway projects which the Willing- don delegation had in view for endowment-fund purposes are by no means the same as those contemplated in the Exchange of Notes. What that delegation proposed was to apply the money to the con- struction of a new railway or new section of a railway. Hence their alternative suggestions of the completion of the missing middle section (445 kilm. in length) of the Hankow-Canton railway, or the construction of a new line across the provinces of Hunan, The Kwangsi and Kwangtung, or through the province of Shansi. advantages of these various proposals were discussed in turn, and with the reiterated observation that the delegates concluded "with regard to all the schemes described above it is, of course, essential that there should be a close scrutiny of the pro- posals by financial authorities and a full examination by technical experts
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The enterprises referred to in the Exchange of Notes are of a totally different character. No one definite railway project is men- tioned or recommended. We are merely told that the money is to be devoted to "rehabilitating and building railways and other productive enterprises". Now the most serious objection to the rehabilitation scheme is that the Chinese railways are deeply in debt to British and other bondholders, whose claims seem likely to be a first charge on any future earnings of the rehabilitated railways. from There is no certainty whatever that interest on the "loans
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the indemnity funds will be forthcoming in the near or even in the distant future, and meanwhile the Board of Trustees is left with no funds for any of the cultural purposes mentioned in the Willingdon Report except such monies as may possibly be forthcoming from some of the other productive enterprises in which the Chinese
C
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