CO882-(6-8) — Page 27

PUBLIC RECORD OFFICE

Reference :-

C.O. 882

PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-

COPYRIGHT PHOTOGRAPH-NOT TO

418

general collection of the eight provinces' opium excise, but does not even slightly prejudice the shares thereof due to the three provinces. For the three provinces' need for revenue is alike very pressing, and they certainly would not refuse to provide separately special funds for the railway resumption and so passively lose the opium excise. The censor in rating me for not encouraging the provinces to provide funds shows a failure to realise how great a sum 7 or 8 million taels is, and the financial difficulties of China to-day. That he is also unaware of the difficulties of Hunan's popular resources is a puzzle indeed.

The memorialist would point out that already two years have passed since the annulling of the concession was mooted. Apart from Hupei's rice excise, ear- marked for railway work, which was initiated by him, and Hunan's similar excise, due to his telegraphic counsel to the Governor of Hunan, the thousands and tens of thousands of words of discussion in letters and telegrams between the three provinces have not produced one case of actual funds which shows how very easy the provision of funds is!

2. The original memorial also states :—

"Sheng Hsüan-huai's return of expenses at gold dollars 6,000,000 authorized an expenditure on the Kuangtung-built line ten times as great as foreign lines, and the Viceroy's loan to redeem exceeds instead of being under Sheng's estimate; how was no retrenchment possible? Yet the amount of the loan mentioned in the press is £700,000, remitted to the Minister to the United States of America and £400,000 remitted to Hupei Viceroy. Was all this £400,000 expended on behalf of the three provinces? If not the proper course was for the redemption sum and the expenses to be set forth in a return forwarded to the Board of Commerce and the Government. How can he claim that

as he was managing the redemption the Court had nothing to do with what took place?

Now the resumption for our own working of the Canton-Hankow Railway presented only two ways of dealing with the China Development Company- cancellation or redemption of the concession.

If cancellation, then the first step would have been to ask the Court to pro- mulgate a Decree announcing the reasons for cancellation. Then the Wai Wu Pu would have written to the American envoy and to our Minister in United States of America, who would have written to the American Department of State. At the same time the three provinces would have had to engage a foreign lawyer and send an officer to America to get ready for going to law with the Company. If we had won our case the agreement could have been cancelled, the expenses repayable to the Company having to be decided by the American courts. If we had lost our case the agreement would still have held good, and compensation would also have been payable to the Company, to what amount it was not possible to surmise.

Memorialist received frequent letters and telegrams from Minister Liang at Washington, stating that a rich American gentleman had at a high price recovered the 1,200 Belgian shares, and thereon the American Government held the Company had not broken the agreement in any way; if we went to law they would certainly back them up, and if we did not win not only would there be vast costs but international relations would also be impaired.

The Wai Wu Pu also frequently telegraphed that the American Minister at Peking, Rockhill, in repeated despatches declared that the American Government would not consent to the cancellation of the Company's concession.

On weighing the position, it appeared that direct cancellation would, after wasting time and costing much money, prove impracticable. So he secretly con- sulted the Minister Liang and decided to adopt the redemption plan." By a redemp- tion agreement they sell and we buy, and the price must be assented to by the seller. The Company originally did not want to sell, and only agreed to name a price under pressure of public opinion. They represented that as China was set on getting the concession back the bonds had gone up in price to over gold dollars 300 apiece. Thus the Company's 6,000 bonds made over two million gold dollars; their advances on building account were over four million, mining and other special rights of all sorts were worth several million; in addition there were over 400,000 dollars of interest due on small bonds, and the Company's expenses were a quarter of a million --making a total of well over ten millions of dollars. Minister Liang managed

419

to beat them down to seven million gold dollars as a firm offer, exclusive of small bonds, and to carry 5 per cent. until payment. This now was arranged only after repeated beating down. Afterwards, when receiving the money, Morgan pressed for interest accrued on the small bonds as well, and was only reduced to silence by being told that there could be no re-opening of points after the draft agreement had been fixed and signed.

Although the Company got a high price it was nothing like the value of the various rights recovered by China. Excessive objection would only have made firmer the Belgian shares design to keep their advantage and obstruct. In all matters of diplomacy the right thing is to grasp the main question and not grudge small expenses.

When the question of price arose the Hunan gentry, Lung Chan-lin and Wang Hsien-ch'ien, in a joint telegram told the memorialist that "if we can recognise one by one the small bonds employed by the Company, however reckless their issue and extravagant their expenditure, provided only there be accounts producible, the American Government should not have any objection." They added that "to take it over into our own management is indeed the best plan: the three provinces simply seek to recover this line, so even extra expense is not to be grudged.". Both these statements showed comprehension of the principle involved, and quite agreed with his own views. For when the opportunity came there was not a hair's- breadth of choice. If one had insisted on weighing every pound and trying to get all sorts of reductions, the probability is the matter would still have been un- settled, and with the complexity of the situation and the artfulness of foreign schemes there is no saying what new situation might not by this time have been evolved, which would have ended in this concession never being got back!

As to the total sums paid, they all passed through Minister Liang's hands. Thus, on 7th September was payable the first instalment of dollars, 2,000,000 gold, plus 29 days' interest dollars 35,342.45 gold; and the interest on loan bonds due on 1st May, gold dollars 55,550, making a total of gold dollars 2,090,892.45. Every payment made was reported by telegram by Minister Liang and communicated, as records show, by telegram to the Grand Council, Wai Wu Pu and Board of Commerce.

The censor says an account of the amount of redemption money and of expenses should have been laid before the Board of Commerce and the Government: does he mean that the telegrams of the Council and the two Boards are not enough to go on?

As to the first instalment, it was paid before the loan of English pounds bad been settled. At the time the crisis was terribly pressing, so payment was effected by means of a temporary loan, at interest, from the Hongkong and Shanghai Bank at Hankow. When the British loan was settled, as the agreement prescribed that £700,000 should be remitted to Minister to United States of America and £400,000 be allotted to Hupei to repay the Hongkong and Shanghai Bank loan, he, on 9th September, telegraphed as follows to Grand Council and the two Boards :-

"Loan for redemption of Hankow-Canton Railway of £1,100,000 settled with England; agreement in English and Chinese to-day personally exchanged with English Consul and mutually signed and scaled: the whole amount will be paid over on 6th October. On due date the second instalment of the Development Company should be fully paid off. My former telegram: first instalment remitted to Minister Liang was borrowed from Hongkong and Shanghai Bank, and will now be repaid out of the present loan."

The repayment mentioned is this £400,000 which the censor thinks was never remitted to America, and so he expresses a suspicion as to its all being expended for the three provinces, intending to convey that this whole sum was embezzled by Hupci. Does anyone suppose that sums embezzled would be specially writ large in an agreement? This sort of reckless talk is still less worthy of serious refutation.

3. The original memorial further states:-

18895

"The Viceroy's (power) was limited to cancelling the concession: he could not alone monopolise the important interests connected with the construc- tion of the line which affects the rights of the State and the three provinces. Yet he wrongfully gave Hunan gentry an official stamp. He planned to ingratiate himself without having any real control with the underlying purpose of borrowing to build the line and stopping people's mouths."

3 (2