CO882-6 — Page 518

PUBLIC RECORD OFFICE

Reference :-

TLC.O. 882

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PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO

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3. I have already, in my despatch, No. 577, of the 17th ultimo,* expressed the opinion that the realisation of the scheme of connecting Hong Kong with Canton by a railway is of pressing importance to the interests of this Colony. I would here particularise one consideration. Last year, I regret to say, more than one rich Chinese merchant resident here removed their families to the neighbouring Colony of Macao, where sanitary measures are less irksome, and Chinese family life enjoys greater privacy than it can do here, where congested space and high rents render it difficult for all but the very wealthy to occupy an entire house to themselves. If rapid communication by railway were established with the new territories, I feel sure that the richer Chinese would gradually build houses for their families there. Even the poorer families might reside there and come in to their work in this city. A great and beneficial development in the new territories and relief of the congestion in Victoria would follow. If, therefore, a guarantee in addition to that of China is necessary to the speedy raising of capital to carry out the project, then I venture to submit the following considerations in support of Mr. Smith's proposal.

4. During the period of construction interest on the capital subscribed would be paid out of capital. Therefore the guarantee by this Government would only be called up in the event of the railway not paying, and of the Chinese Government failing to meet their guarantee.

5. Now, in my opinion, which is shared by those best able to form a judgment, the line, if judiciously constructed so as to tap the most populous centres between Hong Kong and Canton, would pay.

Those who doubt whether the line would pay appear to me to consider only the direct passenger traffic between this Colony and Canton, and to assume that the steamers which provide quick communication by water would be successful rivals of the railway.

passengers

But there are a number of large and populous towns, the traffic in and goods between which and Canton on the one side, and Hong Kong on the other, is already very large. Such traffic is at present carried on by native boats, supple- mented in some case, by launches. There are also numerous populous villages, intercommunication between which is carried on on foot, or by sedan chairs, in the case of the wealthier classes.

6. The railway would serve all this traffic; and in order to gain some autho- ritative support of my opinion that it is sufficient to make the line pay, I have consulted Mr. Wei Yuk, who was the first to conceive, many years ago, the idea of linking Canton to Hong Kong by a railway. He and some of his Chinese friends spent a considerable sum of money in obtaining information on the subject, and employed Mr. J. F. Boulton, now an Executive Engineer in the Public Works Department, to make a preliminary inspection of the route which they wished the railway to follow. He spent six weeks in doing so, and has shown me the route which he recommended, designed with a view to a large intermediate traffic, while giving a short, though not the shortest possible, connection with Canton.

The considered opinion of Mr. Wef Yuk and his friends and of Mr. Boulton---- an engineer well qualified to judge-is that a line designed on those lines would undoubtedly pay. The Chinese gentlemen referred to opened negotiations with the Viceroy at Canton with a view to obtaining permission to build the railway, but were met with the preliminary demand of such an enormous douceur as a condi- tion precedent to even considering their application, that the project fell through.

7. To give some idea of the importance of the intermediate traffic, I may mention the following facts:-.

Thousands of Chinese resident in this Colony have their homes in the villages ing between the Colony and Canton. They are continually going home for holidays, festivals, &e.. and to do so they must either travel up to Canton by steamers, and then make a journey by boat or on foot to their homes, or they must travel thither from here by boat or on foot. They will thus spend the greater part of two days in reaching their homes, and a similar period in returning, at com- paratively considerable expense and much discomfort.

These people could reach their homes by railway in two or three hours, and even at some extra expense would gladly effect the enormous saving in time.

There is also a very large traffic between the large towns of Sheklung and Tungkun, on the East River. and Canton; this is carried on by boats towed by

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steam launches. The journey occupies seven hours.

the towns mentioned there is also a large traffic in passengers and goods. The Between Hong Kong and passengers must all travel to Canton and thence to the towns mentioned, the journey occupying either a night and a day or the best part of two days, the night being spent in Canton. The goods make a slow journey in native boats. There are nearly 30,000 natives of the Tungkun district resident in the Colony, while there are another 22,000 natives of the San On district, lying between the new territories and Tungkun, living in the Colony. when visitors non-resident here are also taken into account, must therefore be The passenger traffic with these districts,

enormous.

8. There are, however, other considerations which I would the proposal for a guarantee.

urge in support of If the railway were built, the Director of Public Works, who has at my request consulted an engineer who is at present in the Colony in connection with the Naval Dockyard Extension Works, and who is apparently making some enquiries for the British and Chinese Corporation regarding the proposed line of railway to Canton, estimates that the Corporation would require an area of some 40 acres for the terminus of the railway in Kowloon. There are only two possible points where the terminus could be placed, and at either of them the premium which Government would require would be at the rate of about 30 cents a square foot, and $450 an acre Crown rent. This gives a value, capitalising the Crown rent at 20 years' purchase, of $900,000. There are also the railway stations

in Kowloon and the new territories to be considered. These would probably all be built on Crown land, which would realise a considerable sum in premium and Crown rent. In addition to that, the railway would enhance the value of all pro- perty along its route, and would lead to sales of Crown land, which at a low estimate would realise at least another $1,000,000 in premium and capitalised Crown rent within the first five years after the line was opened.

9. I venture to suggest, therefore, that it would be a financially sound specu- lation for this Colony to guarantee 3 per cent. on the capital subscribed for the construction of the line for a period of, say, five years after the line had been opened.. The estimated cost of the line is, I believe, £1,300,000, and 3 per cent. per annum on that sum at the present rate of exchange would come to $429,000. Even

If the Colony had to pay up the whole of the guarantee she would, I feel sure, recoup herself, as I have indicated by the sale of land in connection with the railway.

10. If such guarantee, were given, it would, of course, be necessary to make stipulations for the repayment of any interest paid by this Government during the limited period of the guarantee out of surplus profits in the future over and above interest, say, at 3 per cent., and also for the reversion of such portion of the line as is constructed in the Colony to the Colonial Government on payment of the difference between the amount paid under the guarantee and the cost of construc- tion of such portion of the line.

11. It is doubtful whether the guarantee for five years would be of much assist- ance to the Corporation in floating a loan for the construction of the railway. In such case I venture to suggest that it would be to the advantage of the Imperial Government to likewise guarantee the line for the further period of five years. Or, a Colonial guarantee of ten years, backed by the Imperial Government, might be given, it being understood that for the first five years the guarantee be paid by the Colony.

I have, &c.,

F. H. MAY, Officer Administering the Government.

Enclosure in No. 5.

MEMORANDUM of points for discussion between His Excellency the Officer Adminis tering the Government at Hong Kong and the Chief Manager of the Hong Kong and Shanghai Banking Corporation, in connection with the proposed Canton-Kowloon Railway.

1. The advantage the railway would be to the Colony.

2. The very serious effect it would have on the trade of the Colony, should a railway line be constructed south of Canton terminating outside this Colony.