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PUBLIC RECORD OFFICE

Reference :-

C.O. 882

6

PUBLIC RECORD OFFICE, LONDON

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

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The experiment is being watched with the keenest interest by the Chinese, and it appears probable that, in the event of success, there will be a powerful demand from the more enlightened and wealthier classes all over the Empire to be allowed to build, under like conditions, their own railways wherever required. On the success or failure of this little enterprise would seem to depend the future course of the development of railway building in China. In the event of success, we may expect to see increased opposition offered both by officials and people to any future schemes for building railways with foreign capital.

In view of this, the importance of pressing ahead with whatever preliminaries are still necessary to prepare the way for the loan required to build the Kowloon- Canton line, in order to have it ready for flotation at a favourable moment, has become increasingly apparent. Hence our constant representations on this subject. Our idea was, and is, that if the British and Chinese Corporation could get in first with their line to Canton, the idea of starting an opposition port would receive con- siderable discouragement, and the movement on foot, as described, would suffer a severe check.

On the head of this came posititve information that the Americans were attempting to obtain a concession for an open port to serve as a sea terminus to their Hankow to Canton line. From the foregoing it might appear that they would be likely to encounter Chinese opposition, and possibly they may. At the same time it is equally open to any one to surmise that they may find it convenient to join forces with the Chinese on some mutually advantageous business basis. Our infor- mation from one source colours this theory. From another we hear that the American-China Development Company are trying to get the concession clear for themselves under a clause in their original agreement providing for access to the There would seem to be two groups of Americans at work, but there is some doubt about this. There is, however, no doubt at all about the truth of the statement made in our telegram of the 31st, "Americans_endeavouring to arrange for deep water port near Whampoa as terminus Canton-Hankow line."

sea.

If there had been any doubt about the matter, our message would have been couched in different terms. Often it is not possible to obtain precise information when it may, nevertheless, be advisable to utter a warning note, and in cases of this kind we shall always take the precaution of using guarded language calculated to make clear to you the uncertain nature of our information. In this case there was no doubt, and we therefore telegraph a plain statement of fact. When we adopt this course, we trust that you will give us credit for having something more to go upon than mere rumour.

As regards the railway negotiations in progress at Peking, we trust that the British and Chinese Corporation will not fail to take into consideration the danger to this Colony arising out of delay.

19701

No. 93.

I am,

&c.,

M. STEWART,

Hon. Secretary.

FOREIGN OFFICE to COLONIAL OFFICE.

(Received June 8, 1905.)

[Answered by No. 98.]

1.

The Under-Secretary of State for Foreign Affairs presents his compliments to the Under-Secretary of State for the Colonies, and, by direction of the Secretary of State, transmits herewith copy of the under-mentioned paper relative to the Canton-Kowloon Railway,

Foreign Office,

June 7, 1905.

Name and Date.

121

DESCRIPTION OF ENCLOSURE.

Sir E. Satow, No. 130, April 18, 1905

Subject.

Conversation with Mr. ('. H. Ross on the subject

of the proposed railway from Canton to Kowloon.

Enclosure in No. 93.

Sir E. SATOW to the MARQUESS OF LANSDOWNE

(No. 130.) MY LORD,

Peking, April 18, 1905. I HAVE the honour to acknowledge receipt of your Lordship's despatch, No. 42, of February 24th, enclosing copy of a letter from the Colonial Office with enclosures, relating to the proposed railway from Canton to Kowloon.

Mr. Ross, who is mentioned in the second paragraph of your Lordship's despatch, called on me by appointment on the 15th instant, and we discussed the question of the appointment of a negotiator on the Chinese side. I said that our experience of Sheng Kung-pao in connection with the negotiations for the Shanghai-Nanking Railway, and for the conversion of the Peking Syndicate's rail- way into a Chinese Government line, had not been satisfactory. Mr. Ross observed that the preliminary contract was signed by Sheng, and informed me that when passing through Shanghai on his way to Peking, he had endeavoured to ascertain confidentially whether Sheng desired to undertake the negotiations for a final agreement, but the latter let it be known that he would say nothing on the subject until he was approached officially, and the question had, therefore, been left in abeyance.

As the draft loan agreement together with the draft proposed agreement between the Government of Hong Kong and the Chinese Government for the joint working of the line between Canton and Port Kowloon are long legal documents, the import of which is not to be gathered from a hasty perusal, I requested Mr. Ross to furnish me with an outline of the proposals of which he is the bearer; this I could have put into Chinese, and I would then discuss with the Foreign Board the choice of a negotiator. I think it might possibly be found easier to come to an agreement with the Viceroy of Canton than with Sheng Kung-pao, but the question must largely depend on the view taken by the Foreign Board."

There are two points in the proposed agreement for joint working which call for remark.

Paragraph 3 (page 38) provides that the construction of the two sections shall proceed simultaneously and at such a rate of progress as to be completed and ready to be open at the same time. Mr. Ross informs me, however, that the 101 miles or thereabouts from Canton to the frontier of the leased territory would take about two years to build, while the British portion from Port Kowloon, measuring 24 miles, could not be constructed in much under four years, owing to the difficult nature of the ground, which will require a good deal of tunnelling. Possibly the Chinese portion might take a little longer and the British portion a little less than was at present estimated, but there would certainly be a considerable difference in the time required for the two.

This statement has an important bearing on paragraph 16, which provides for the division of the net profits in proportion to the actual cost incurred by the two Governments, in which outlay the cost of land and any commissions are not to be reckoned. In Mr. Ross's opinion the traffic on the Chinese section would not suffice to pay interest on the loan besides working expenses, and consequently provision must be made in fixing the amount of the loan for at least one year's interest, if not for two. As the Hong Kong Government will no doubt be able to raise the capital required for the British section much more cheaply than the Chinese Govern- ment for theirs, while the land will no doubt he acquired more cheaply, and there will be no commissions to pay, the Chinese Government will, it appears, be at a disadvantage if interest is to be allowed only on the amount actually expended on construction and equipment. The enclosed copy of a rough pro-forma estimate shows that under this clause, while the amount of the loan is estimated at

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