PUBLIC RECORD OFFICE
Reference :-
THC.O. 882
6
PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-
COPYRIGHT PHOTOGRAPH-NOT TO
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money. This sum of £1,100,000 is really borrowed from the Government of Hong Kong, so what more need be said?
Hitherto loans through foreign banks have always carried a discount, which causes enormous loss. Moreover, after settling the loan the foreign Minister at Peking had to be notified through the Wai Wu Pu and our Minister abroad written to then the foreign Minister had to telegraph it to the foreign bank before the bonds could be made, some thousands or tens of thousands, each of which our Minister had to seal before they could be issued to the market. This multitude of details delayed actual payment at least four or five months.
In present case ready-money was essential for the redemption of the line to the great amount of Tls. 7 or 8 million. The Development Company's assent was got only seven or eight days before the date limit for payment: so the usual loan arrangements were quite impracticable.
The foreign banks could not possibly undertake, the business. It happened that the Hankow Consul-General Fraser had told memorialist that Hong Kong had money in reserve, and offered to arrange matters, the interest to be less than a bank would want. As he also said there would be no discount, agreement was made with him. The separate despatch given was to provide for the chance that our own provision of funds might not suffice or further loans be required. Having in the first instance made the redemption loan, England would then certainly compete for these, and so it was proper to lay down beforehand that whatever country's funds were borrowed there could be no rash promise of the least privilege, so as to avoid the possibility of future miscalculation. This was, in fact, a policy of nipping in the bud which it is absurd to call secret promise of privileges to foreigners.
The text of the despatch runs :-
'As regards funds for the future construction of the Canton-Hankow Rail- way in case it is necessary to borrow abroad in addition to the amount China may herself provide the first application shall be made to England and if the British tender is as regards interest and issue price equal to the tenders of other countries, British financiers shall have the first option of undertaking the business: if in the above and other respects the tenders of other countries are fairer and more favourable than England's, China will be free to choose the fairest and most favourable and make other arrangements for borrowing. "If the fund for constructing the Canton-Hankow Railway have been borrowed from England, then for the machinery and matériel required for this line apart from what China has of her own making if bought abroad British firms and works shall first be applied to and if their tenders are of similar cost to those made by other countries firms and works, the British works shall have the first option of undertaking the orders if the wares of other countries are excellent and the price moderate China will be free to contract for purchase from the most suitable.
Beyond this, if within the jurisdictions of Hupei and Hunan there are other railway construction enterprises which likewise necessitate loans from abroad, they shall all be dealt with on the system set forth above as applicable to the Canton-IIankow Railway Loans. "With regard to the engineers needed for the construction of the railways I declare that one half will be of the nation that lends the funds the other half will be Japanese. The work will be divided into sections for undertaking and each nation will attend to its own business. China will retain control as regards all employés, selection of land, management of lines and running of cars: the engineers will only attend to the affairs of the requisite works within their section and may not interfere in anything else."
Copy is now being sent to Grand Council, Wai Wu Pu and Board of Commerce for their examination, which should prove his earnestness in providing against future trouble. The critic calls the despatch a confidential compact and an indirect promise, not knowing that the language of the despatch throughout is perspicuous and straight forward. Moreover, at the time the Liang Kuang Viceroy was con- sulted by telegraph, and the despatch was duly communicated to Kuangtung and Hunan. Everyone in China knew it, so how can it be called confidential?
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The despatch referring solely to construction loans which it had been decided not to raise abroad, when the text of the agreement was sent to the Wai Wu Pu, the copy of the despatch was not sent to the Wai Wu Pu since the subject was already put aside; but what secrecy was there since Canton was previously tele- graphed to about it, and despatches sent there and to Hunan after its issue?"
As regards railway engineers, the proposal was to use only half of the lending nationality and half Japanese. There was no decision to use British subjects, and Japanese were indicated because they build cheaply and ask a comparatively lower rate of pay. In this way their employment would set a rate for the lending nation, and there was the further purpose behind of preventing the danger of engrossing a monopoly.
I have now told the English Consul-General that the Hankow-Canton line will be altogether financed by China herself, without another foreign loan, and he has raised no objection. Supposing that there had been any indirect promise of con- cessions, would their Minister have stood this in silence instead of making a fuss with the Wai Wu Pu?
This shows the extreme strictness of the terms of this despatch and the explicit- ness of its tenor. The declaration "in case it is necessary to borrow abroad in addition to the amount China may herself provide" left them no hope in case China did her own financing of the construction. Moreover, as the borrowing of English funds was only to carry the regular interest and the commission on buying materials and there were no general privileges to look for, no recrimination resulted.
The illogical censor tries to ground on this a serious imputation of guilt The censor also accuses the memorialist of trying to engross the highest powers, of stripping Hunan and Hupei of their fatness to supply his useless and reckless extravagance. He does not know that the advantage of railways does not precede their completion for traffic. Thus the Ching-Han and Tientsin-Shanhaikuan com- pleted lines, after coming through very hard times, have become worth while only now they are drawing traffic receipts. The line through Hunan Kuangtung and Hupei at soonest cannot be completed before ten years.
At present the finance question is the hindrance.
After over a year's deliberation the Hunan gentry have only arrived at an outline scheme without any tangible arrangements, while the first instalment of interest on the redemption loan is due immediately. In a succession of letters and telegrams the Hunan gentry urge action in terms showing their stress. Kuangtung, of course, is a rich country, yet of late unsatisfactory financing has caused a rupture between authorities and gentry, and a great storm. The position is still excited and the outcome uncertain. As to Hupei, we simply are in helpless embarrassment, Thus at this time the authorities and gentry of the three provinces are in a time of coil and entanglement, difficulty and distress; and yet the censor accuses their authorities of having enormous privileges.
Moreover, the public affairs of Hunan have all hitherto been managed by officials, but usually with aid from the gentry. Still more is raising funds by the gentry in the hands of their leaders, even the high authorities of Hunan simply having the decision and solely attending to supervision and urging on.
Purchase
of land and materials and starting work entirely depend on the leaders, great and small, of the gentry. Thus there is responsibility for the expenditure, whether or no it is extravagant and wasteful. From the Governor of Hunan down no money passes through official hands; much less through the Viceroy, who lives away in Wuchang. So it is hard to say how the stripping and useless waste are possible. Take Hupei's present general office for the three provinces' Canton-Hankow Railway. The patent expressly gives no salary or expenses to any of the officers. As they get no pay whence come the funds recklessly squandered?
The charge really seems too absurd.
To sum up.
Cancellation of the concession required redemption of the line, and redemption the provision of funds, of which the amount and the urgency necessitated raising a preliminary loan. Having made this loan, the lending country was sure to expect to get the privilege of future loans for construction. Knowing China's immensely difficult financial straits, the memorialist had to arrange for the contingency of raising a loan, so he took the opportunity of defining the whole question of the terms for the provision of personnel and materials so as fo stop the flow of abuses. Being still afraid that the employment of men of a single nation might possibly