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PUBLIC RECORD OFFICE

Reference :-

TLC.O. 882

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President Roosevelt took a personal interest in the situation and requested a detailed memo- randum from the Chinese Minister, giving all the facts connected with the American company's interests. He laid this before his Cabinet advisers. Secretary Hay freely acknowledged that there was no precedent in the State Department for taking the action proposed. It was, therefore, referred to Attorney-General Knox for a legal opinion as to the status of the American company. The questions submitted by the Chinese Minister were as follows:-

First--If the American-China Development Company is considered by the United States Government to be a bona-fide American company.

Second-If the United States Government will maintain the sole right to deal with all diplomatic matters affecting the interests of this company.

Third-If the United States Government will take steps to make public its position concerning the Canton-Hankow Railway and its intention to protect the railway's interests. To these questions Secretary Hay replied :-

First-The United States Government considers the American-China Company to be in good faith an American company.

Second-The United States considers that as the company is at present organized and conducted, this Government alone has the right to deal with all diplomatic questions affecting the interests of the company.

Third The United States will make public its position concerning the Canton-Hankow railway and its intention to interpose its good offices on all proper occasions in the interests of that railway.

The company which became the subject of such an important step on the part of this Government is the old Calvin Brice Syndicate, which obtained from the Chinese Goverument a concession for the construction of a railway from Canton to Hankow, a distance of about 900 miles north in the direction of Pekin. After the death of Senator Brice, and before a supplementary contract had been signed, the affairs of the Syndicate became somewhat disorganized and much of the stork changed hande, and when the American company was organized to begin the work of construction it was found that a large part of the stock was in the hands of Belgians.

The company was organized and chartered under the laws of New Jersey, and its first president was William Barclay Parsons, now a member of the Isthmian Canal Commission, who had first surveyed the line from Canton to Hankow for the original syndicate. Already nearly fifty miles of the railway have been constructed, and it is thought that it will be completed" within three or four

years.

It was explained to-night by persons connected with the recent movement by China that all foreign companies operating in China are not subject to Chinese law, but to the law of their own countries, and as the present condition of affairs in China is more or less affected by the general situation in the East, the Chinese Government has been desirous of finding out the exact standing of the American company, and which Government would be its protector in case trouble should arise.

The cause of China's fear lest Russian interests should obtain a footing in the Canton-Hankow Railway Company was shown by reference to the map of China. At the present time no less than four great Powers are interested in Chinese railways. The railroad from Yingkow to Pekin is owned by a British Company, but Russia has been negotiating for some time to secure a concession that would permit her to enter Pekin. Already Belgian and French interests own a concession from Pekin south to Hankow, and should Russia get to Pekin she would then be certain of a line as far south as Hankow.

From Hankow south to Canton and the sea the proposed line is that of the American company, and the failure of the United States to at once declare its sole right to deal with all matters affecting the railway, or, in other words, to give warning to the Powers that this Government intended to insist upon the rights of the company as an American concern, would have left the way open for the further advance of Russia into China. The action of the United States is considered by China, therefore, as another barrier in the way of Russian influence over Chinese territory. It is admitted by Government officers that they cannot foretell what attitude the United States would assume in case the Belgian stockholders should dispose of their holdings to Russian or French interests, and it is pointed out that Becretary Hay has been careful to provide that the action of this Government is based on the present organization of the company.

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(Confidential.)

No. 23.

FOREIGN OFFICE to COLONIAL OFFICE.

(Received June 14, 1904.)

The Under-Secretary of State for Foreign Affairs presents his compliments to Sir E. Satow, No. 134, Jun» the Under-Secretary of State for the Colonies, and is directed by the Secretary of State to transmit, for the information of the Secretary of State, the accompanying copy of a telegram, as marked in the margin, relating to the Hankow-Canton Railway.

13.

Foreign Office,

June 13, 1904.

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Enclosure in No. 23.

Sir E. SATOW (Peking) to the Marquess of LANSDOWNE.

TELEGRAM.

(Despatched 3.35 p.m., received 11.45 a.m., June 13, 1904.)

(Paraphrase.) (No. 134.)

Consul-General at Shanghai reports as follows:-

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SIR,

"A British subject, Mr. Kingsford, who is acting Agent for the American- China Development Company, informs me that Sheng is referring to the Throne the question of cancelling the Agreeinent for construction of Canton-Hankow Railway, and is asking that in the event of decision being left to him Chang-Chih-Tung may be joined with him to settle question. The point is that Article XVII. of the Agreement has been broken by allowing control to be obtained by the Belgians."

(Confidential.)

No. 24.

ACTING GOVERNOR MAY to MR. LYTTELTON. (Received June 20, 1904.)

Government House, Hong Kong, May 20, 1904. WITH reference to my previous despatches on the subject of the construction of a railway between Hong Kong and Canton, I have the honour to transmit, for your consideration, the enclosed report of an interview which I recently had with the Committee of the China Association, who waited upon me with the object of pressing their views on this subject upon the Government.

2. The gentlemen who compose the Committee comprise many of the leading European business men in the Colony, and their opinion, therefore, carries great weight.

3. As indicated in my remarks to the Committee, I am of opinion that if the concessionaires will not undertake to proceed with the immediate construction of the line, either unsupported by any assistance, or with the help of a guarantee, such as I have previously suggested, then His Majesty's Government should induce the Chinese Government to cancel the concession, and to make a new one in favour of the Colonial or Imperial Government, or of a company nominated by either of them. The nature of the concession might be the same as that under which the French Government is extending their railway from Laokay to Yunnan.

4. If such fresh concession were made then I consider the Colonial Government might with safety guarantee interest at 4 per cent, on the cost of construction of the line for such term of years as may be found necessary to attract capital for the under- taking.

5. It would be only fair, if such guarantee were given, that in view of the Imperial interests involved, the Imperial Government should back the Colony's guarantee. The financial condition of the Colony is at present more satisfactory than when I wrote my despatch of the 15th of January. There has sprung up a large demand for land for various commercial enterprises, and there is other evidence of increased and increasing prosperity. The position of the Colony, with its small debt and low taxation, is so strong that I am of opinion she might well, with Imperial support in case of temporary and unforeseen financial difficulty, undertake the guarantee suggested.

6. The suggestion made by Mr. Gershom Stewart to the effect that the Colonial Government should have control of the whole line throughout its entire length, lest branch lines should multiply its value, is deserving of consideration at the proper time.

7. I enclose copy of the report referred to regarding the line from Macao to Canton.

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PUBLIC RECORD OFFICE, LONDON

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