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Paragraph 4. Condition (A). I think this can be accepted by the Corporation ..ithout dispute.

Paragraph 4. Condition (B). This could be accepted with certain reservations which the Corporation believe His Majesty's Government would consider reasonable, e.g., the cancellation of the concession could not be agreed to unless the Corporation were at fault and the non-construction of the line were due to their dilatoriness, incapacity to accomplish the work, or intentional obstruction. To hold them responsible in case of force majeure would be unreasonable, as would also any pro- posal to cancel their concession without full repayment of all costs incurred to date for survey and all other outgoings. With such reservations as these to be liberally and fairly interpreted, the Corporation would not demur to the acceptance of the condition.

Paragraph 4. Condition (c). The Corporation recognize that it is essential that the Legislative Council of Hong Kong should approve the terms of the Agree- ment for the reasons stated in letter.

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We should point out, however, that the Chinese have a voice in the settlement of this question, in view of the fact that a section of the line, if through communication is to be maintained, will be within Chinese territory.

Paragraph 4. Condition (D). The Directors regret that they are unable to alter their views in regard to the question of leasing the line for various reasons which I need not recapitulate beyond saying that the conditions of the preliminary agree- ment do not in the first place contemplate such an arrangement, and assuming that with the aid of His Majesty's Government a new agreement were obtained, it seems to the Directors quite certain that the Chinese Government would never consent. to profits over the Chinese section being made responsible in priority for the interest and sinking fund for the moneys required in making the British section.

Having regard to the foregoing which marks a dissension in some important particulars from the views you express in your letter, I now refer to the alternatives stated in sub-paragraphs 1 and 2, and paragraph 5, and I regret that the Directors do not see their way definitely to accept the requirements enumerated or the alter- natives proposed.

It does not seem to the Directors that there should be eventually great difficulty in reconciling the divergent views of the Secretary of State and themselves, but, in order to do so, and to arrive at a clear understanding step by step as to what is practicable and what is not, I would strongly urge that qualified persons should discuss the question and endeavour to arrive at a working decision.

I am, &c.,

W. KESWICK,

Chairman.

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Lord Lansdowne understands that Mr. Secretary Lyttelton is in correspondence with the British and Chinese Corporation with regard to this line, and His Lordship would be glad to learn whether any arrangement has yet been arrived at.

(No. 200.) MY LORD,

Enclosure in No. 29.

I am, &c.,

F. H. VILLIERS.

Sir E. SATOW to the MARQUESS OF LANSDOWNE. (Received in Foreign Office July 19.)

WITH reference to my despatches, No. 132, of the 11th March, and No. 164,

Peking, May 31, 1904. of the 11th May, I have the honour to transmit to Your Lordship herewith a copy of a letter which I have received from the Hong Kong Chamber of Commerce, urging me to use my influence to secure the early construction of the Canton-Kowloon Rail- way, and, with a view to achieving this result, to make representations to Your Lordship for a grant by the Imperial Government of a guarantee on the capital required.

In my despatches above referred to I have already brought to Your Lordship's notice my conviction that the early construction of the railway in question is in the highest degree desirable, and I need only say here that I warmly advocate the view of the Hong Kong Chamber that, unless something is speedily done in that direction, we shall run grave risks of Hong Kong being left out in the cold by the establishment at some other point on the coast of the terminus of what is certainly destined to be one of the most important, if not the most important, system of railways in China. -

With regard to the question of granting a Government guarantee, I am well aware that any step in that direction would be contrary to the doctrine of "private enterprise," but I would venture to suggest to Your Lordship that the urgency of the present case affords ample excuse for breaking away from the traditional policy represented by that phrase. I would even go so far as to say that the evidence of the success which has attended the operations of concessionnaires of other countries which do not regard the principles implied in the phrase has already done much to discredit it in the Far East, and to justify the opinion that the whole doctrine which it implies is antiquated and out of date.

I do not underestimate the importance of the change of policy which is suggested in the letter of the Hong Kong Chamber of Commerce, but, in view of the greatness of the interests at stake, I trust that their proposals will receive the favourable consideration of His Majesty's Government.

I have, &c.,

26770

No. 29.

ERNEST SATOW.

SIR,

FOREIGN OFFICE to COLONIAL OFFICE.

(Received July 29, 1904.)

[Answered by No. 30.]

Foreign Office, July 26, 1904.

I AM directed by the Marquess of Lansdowne to transmit to you, to be laid before the Secretary of State for the Colonies, a copy of a despatch from His Majesty's Minister at Peking, enclosing a letter from the Hong Kong Chamber of Commerce, in which Sir E. Satow is urged to use his influence to secure the early construction of the Canton-Kowloon Railway.

You will observe that Sir E. Satow is in sympathy with the objects of the Chamber's letter.

SIR,

HONG KONG GENERAL CHAMBER OF COMMERCE to Sir E. SATOW.

Hong Kong, May 19, 1904.

In view of the progress now being made with the Hankow to Canton Railway, and other lines in South China, Your Excellency is no doubt aware that during the past few months public attention has again been directed towards the projected Canton to Kowloon Railway, a concession for which was obtained from the Imperial Chinese Government so long ago as the spring of 1899.

While it has from the first been admitted by all those concerned in the welfare of this Colony that it is imperative Hong Kong should be the sea terminus for the main trunk line which will, before many years are past, bisect China from Peking to Canton, it was not till recently felt that the need for this line to Hong Kong was so pressing that it was necessary to suggest any public influence being brought to bear upon the concessionnaires with a view to hastening the construction of the line.

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PUBLIC RECORD OFFICE

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TC.O. 882

PUBLIC RECORD OFFICE, LONDON

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The

progress which has been made with the main line has, however, changed all this, and it is now, in the opinion of this Chamber, desirable for public influence to make itself felt in the interests of the Colony.

At the annual meeting of the Hong Kong Chamber of Commerce, held on the 27th ultimo, the importance of this question was very strongly insisted upon, and the Committee of the Chamber were requested to deal with the matter as one of urgency.

For Your Excellency's information, I beg to inclose copy of the report of the proceedings of the meeting, as published in the local press.

The Committee are given to understand that Your Excellency has personally taken considerable interest in the projected railway, and in this belief are em- boldened to address you on the subject.

The reasons for the construction of this railway are so well understood that it would appear to be almost superfluous to recapitulate them, but we would especially urge upon Your Excellency the fact that, while it is clearly to the advantage of British trade generally that Hong Kong should be in direct railway connection with the main trunk lines of China, a very serious, and probably irreparable, blow will be dealt to the welfare of this Colony were Canton first connected by rail with the sea at any other point than through Hong Kong.

There are, we consider, several places outside British territory at which a terminus could be established, and we have only too good reason to fear that some of England's numerous commercial rivals may not be disinclined to use their influence in striking a blow at our prosperity.

Unfortunately the Committee have not before them the text of the Agreement made with the Imperial Chinese Government for the construction of a railway from Chinese Kowloon (as it was then) to Canton, and are in some doubt, therefore, as to the exact terms of this Agreement. We understand, however, that there are certain limitations imposed upon the concessionnaires, and that unless these are complied with the Concession can be cancelled.

The Committee give all credit to the endeavours made by the concessionnaires to raise the necessary funds required for the construction of the line, which, we understand, are estimated at £1,500,000, and are prepared to believe that the diffi- culties in the way have been of such a nature as to preclude the possibility of the necessary sum heing obtained on the home market.

Under these circumstances we would most strongly urge that representations be made to the Foreign Office with a view to securing the guarantee of the Imperial Government on the capital required, and trust that in view of the importance to British trade in China, which the construction of the railway implies, Your Excel- lency will find it possible to indorse our request and submit the matter for the con- sideration of His Majesty's Government.

I would add that, with regard to that section of the line which lies inside British territory, the Committee are addressing His Excellency the Officer Administering the Government, suggesting that a similar guarantee should be given by the Colony for the interest required on the British section of the line, or that the railway should be constructed by the Colony.

It is estimated that the line through Hong Kong territory will cost in round figures about £500,000, £1,000,000 being required to complete the line to Canton.

So far as it is possible to obtain statistics of the trade of the district through which the projected line will pass, it would appear that a large trade in produce and manufactured articles even now exists, while judging from the effects of railway enterprises already carried out in China and other parts of Eastern Asia, we believe we are justified in stating that once the line is in working order an enormous increase will take place in the trade and in the passenger traffic, with the result that the line should prove a thoroughly sound business undertaking, and the risk to the guarantors would be practically nil.

If it is possible to obtain such Government guarantee, we believe that the present concessionnaires should have no difficulty in promptly completing their negotiations and commencing the construction of the line at an early date. The Committee are of opinion that the concessionnaires should be given twelve months

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in which to actually start work on the railway; and if at the termination of this period a start has not been made, they consider that in the interest of this Colony. and of British trade generally, opportunity should then be afforded for other negotia- tions to be put in train.

In conclusion, I trust I may be permitted to express the hope that Your Excellency's influence will be employed in furthering the early construction of the Canton-Kowloon Railway, upon which enterprise the continued prosperity of this Colony and of British trade in South China so vitally depends. I have, &c.,

E. A. HEWETT,

Chairman.

MINUTES of the Yearly General Meeting of the Hong Kang General Chamber of Commerce, held on Wednesday, April 27, 1904, at 3.30 p.m., for the purpose of receiving the Report of the Committee and passing the Secretary's Accounts for the Year ending December 31, 1903.

(Extract.)

I have reserved to the last what I think you will all agree is to Hong Kong the most important question, as far as this Colony is concerned, that has arisen during the past few years, although it has not as yet been formally dealt with by this Chamber. I refer to the proposed Canton-Kowloon Railway. Throughout the whole of China we see new railways being projected, and in some (Applause.) cases actually completed, mainly, I regret to say, by the enterprise of those other than British. The race is to the swift, and we cannot grudge the well-earned success of our commercial rivals, who, under other flags, press forward where our British investor apparently fears to tread. The British investor, I am informed on high authority, does not care to put his money into railways in China, and in view of the aid that other Governments render their nationals, while our Foreign Office refuses to give us equal support, it is not, perhaps, surprising that British concessions for railways in China languish while we see foreign capital freely spent in developing foreign concessions. The Under-Secretary of State for Foreign Affairs is reported at a recent gathering in London to have made a statement to the following effect. Speaking on behalf of the Foreign Office, he says: "We are alive to the importance of railway development in civilizing a country and in promoting its commercial development

but in China we had not

ourselves administrative responsibility, and the work must be done by the foresight, motives and self-interest of private capitalists." fully explains, and in a manner justifies, the attitude of the British investor. This, I think, Whether or not the Under-Secretary of State has been correctly reported I am not in a position to say, but even though he may not have made use of the words above quoted, the policy of the Foreign Office, as understood by us, is here clearly defined. The time has now arrived, however, when an exception should be made to this policy. As I have already stated, the prosperity of this Colony depends upon its maintaining its position as a distributing centre for the trade of South China. This being the case, it is imperative that the first railway line connecting Canton with the sea should be the Canton-Kowloon Railway. If funds for this line, estimated at £1,500,000 cannot be raised by other means, then our Foreign and Colonial Offices should join hands. This Colony should be allowed to guarantee for a term of years the interest on the capital required for the section of the line across the new territory, or, if necessary, should construct and own the line, while the Home Government should for once, in the interests of British trade in China, break through its traditions, and guarantee the interest on the cost of the section outside the Colony, (Applause.)

The distance is somewhere about 120 miles, of which one-fifth would be in Hong Kong territory, and the cost of this section of the line would be about one- third of the whole. The importance of this question, both from a local and Imperial point of view, is so great that I make no apology for dealing at such length with the matter.