NO DISTRIBUTION.
Decypher.
Mr. Blunt (Canton)
30th January, 1939.
D.
(Via W/T.) 30th January, 1939.
No. 10.
R. 2.45 p.m., 30th January, 1939.
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Addr
Addressed to Embassy Shanghai No. 18 of January 30th.
Your telegram No. 9.
I saw Japanese Consul-General yesterday with Mr. Davidson
and asked the former to suggest some formula. He repeated to
me that he neither had nor could discover any formula.
Mr. Davidson then suggested that Canton Kowloon Railway differed
in two important respects from railways elsewhere in China, first, article 18 of Loan Agreement gave bondholders additional security of the working agreement with British section
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which the second point is the property of Hongkong Government,
a third party Government equally interested with bondholders in inspection and through traffic.
2. Japanese Consul-General objected that the interest of
Hongkong Government did not differentiate the railway from other
railways.
Bondholders could claim equal treatment with a
Government. He also raised usual excuses about inspection
(which in fact here still have some small but surmountable
practical foundation). Finally he said that he would see
whether he could submit Mr. Davidson's suggestions to his
Government if I would submit them to him officially.
3. I shall take no further action pending further
instructions.
Repeated to Foreign Office No. 10, Govem or Hongkong.
No. 21 and Tokyo No. 8.