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foreign, other than a British, engineer to supervise the construction of the line would be an unfriendly and ungrateful act towards this Colony. I also transmitted copies of the correspondence to His Majesty's Consul-General at Hankow for him to show to Viceroy Chang Chih Tung if he thought fit to do so.

3. On the 14th Mr. Mansfield wrote to me that the engagement of a Belgian engineer had been definitely abandoned, Viceroy Yuan Shih Kai having protested against it. According to the Hong Kong newspapers Viceroy Chang Chih Tung had also telegraphed that the employment of any foreign engineers was to be avoided as likely to give rise to foreign protests.

4. It seems to me probable that the attempt to construct the Canton-Hankow Railway entirely under Chinese direction and with Chinese engineers will ultimately result in such waste and confusion in the carrying out of the project and dissatis- faction among the persons that have contributed towards it that the advantages promised to Great Britain in Viceroy Chang Chih Tung's letter to Mr. Fraser of the 9th September, 1905, may eventually be realised.

I have, &c.,

M. NATHAN,

Governor.

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1st, 2nd, 3rd (XXXIX. to XLIII.), which were communicated to your Lordship in my despatch* referred to above.

2. I also enclose a copy of a letter, dated the 10th instant, from the Agent of the British and Chinese Corporation at Peking.

3. Both Mr. Carnegie and Mr. Bland are desirous that the negotiations for the working agreement should take place here or at Canton simultaneously to those for the loan agreement at Peking. As your Lordship is aware from paragraph 3 of my despatch of the 18th May† I have long been desirous of commencing negotia- tions for the former agreement. Yesterday I took advantage of Mr. Mansfield staying with me to discuss with him how another attempt could best be made to do this and, at my suggestion, he sent to the Viceroy the telegram of which a trans- lation together with translations of a reply and of a further telegram sent to-day are annexed.

4. I take this opportunity of acknowledging, with reference to the Canton- Kowloon Railway, your Lordship's secret despatch of July 23rd and confidential despatch of July 27th, which enclosed papers§ dealing with this railway as well as with the project for the Canton-Whampoa líne.

I have, &c.,

}

M. NATHAN,

Governor.

PUBLIC RECORD OFFICE

Reference :-

EPIC.O. 882

Enclosure in No. 292.

TRANSLATION.

Shum, Acting Viceroy of the Feoo Kioongs, and by Imperial Appointment, a Junior Guardian of the Heir Apparent to the Throne, makes the following communi- cation in reply:-

The Viceroy is in receipt of a despatch from the Consul-General stating that he has received a despatch from the Governor of Hong Kong which is to the effect that the Governor has learned from Chinese newspapers that it was proposed to employ Belgian engineers to construct the Canton-Hankow Railway, and, as the said Railway was redeemed by China, with the help of the Hong Kong Government; from the hands of the Americans and Belgians, His Excellency the Governor thinks that if engineers of any country other than British are to be engaged to construct the Railway, the friendly relations between the two Governments is not considered, and the Canton Government is ungrateful for the assistance rendered to it. The Consul-General thinks it his duty to request the Viceroy to consider His Excellency's despatch.

The Viceroy has acquainted himself with the contents of the Consul's letter, and has to state in reply that the Viceroy has memorialised the Throne that the Railway should be constructed by the merchants, who are to decide as to the appoint- ment of employees, and as to financial and other questions regarding the Railway, and that the Viceroy cannot interfere with the power of the Railway Company to appoint chief engineers. While replying for the information of the Consul-General the Viceroy takes the opportunity to wish him the blessings of the season. Dated the 19th of the 6th moon of the 32nd year of Kioong Sui.

August 8, 1906.

35268

(Secret.) MY LORD,

No. 293.

GOVERNOR SIR M. NATHAN to THE EARL OF ELGIN. (Received September 24, 1906.)

Government House, Hong Kong, August 24, 1908. IN continuation of my secret despatch of the 10th August on the subject of negotiations for the completion of a loan agreement and of a joint working agree- ment in connection with the proposed Canton-Kowloon Railway, I have the honour to enclose, for your Lordship's information, a copy of the concluding part of a letter, dated the 4th instant, from His Majesty's Chargé d'Affaires at Peking. The first part of the letter paraphrased the telegrams of July 30th, 31st, and of August.

7

• No. 282.

(Confidential.)

SIR,

Enclosure 1 in No. 293.

Peking, August 4, 1906.

*

It may yet be some days before the negotiations commence, and, in any case, does not seem to be necessary that I should make the communication to the Wai Wu Pu as desired by Your Excellency at the outset. I think it may be useful, there- fore, to place before you by letter some of the considerations that were in my mind during the exchange of telegrams above recorded. The first and dominating one is that the Chinese authorities, both at Canton and here, do not wish to conclude any agreement in regard to the Canton-Kowloon Railway. They look upon the preliminary agreement as a concession extorted years ago by force and for that reason to be resisted by every trick and pretence open to them. That being so, it is clear that a negotiation in Peking, which is made dependent on the successful completion of another negotiation at the other end of the Empire, would labour under difficulties, which those who have had experience of the ingenuity of the Chinese in these matters will recognise to be out of the ordinary. The Chinese negotiators, not wishing to conclude either agreement, are not likely to be swayed in a direction favourable to our purpose by any threat to refuse to conclude one if difficulties are raised in regard to the other; they are more likely to take adroit advantage of such a threat and procrastinate indefinitely. It will, I think, require all Mr. Bland's single-minded endeavours and the strenuous support of this Legation to enable him to come to terms in any case, and if he did succeed in coming to an arrangement, I should be very averse from delaying final acceptance and signature on the ground that His Majesty's Government required the working agreement to be settled beforehand as a return for consenting to the relaxation by the Corporation of the terms of the preliminary agreement.

It seems to me that, if possible, the two agreements should be negotiated as nearly simultaneously as possible, that is to say, the negotiation of the working agreement should begin at Canton or Hong Kong as soon as the bases of the loan agreement are settled; that every effort should be made to have them signed simul- taneously, but that no hard and fast condition should be laid down with the Chinese or the Corporation about it. If the Viceroy refuses to discuss the details of the working agreement with Your Excellency until the loan agreement is concluded here, then I think the course suggested by Mr. Bland, or something similar, is

• No. 282.

† No. 261.

་

L.F.F.

f Nos. 265 and 268.

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6 PUBLIC RECORD OFFICE, LONDON