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Nate and Date.

Sir E. Satow, No. 193, June 8, 1905

Subject.

Action re Canton-Kowloon railway should be suspended until decision of position of Sheng Kung Pao.

Enclosure in No. 120.

(No. 193. Very confidential.) MY LORD,

British Legation, Peking, June 8, 1905. REFERRING to my despatch, No. 146, of April 29th, I have the honour to state that at an interview on June 5th I reminded His Excellency Na Tung of the memo- randum relating to the Canton-Kowloon Railway which I left with him on April 25th, and of his promise to arrange a day for the discussion of the subject.

His Excellency said that the Wai-Wu-Pu had communicated this memorandum to Sheng Kung-Pao, who was the proper person to consider it, as it was with him that the preliminary agreement had been made, and he had replied that various points required careful discussion.

In explanation of the delay His Excellency told me in confidence that Sheng, who has been in Peking for the past three weeks, finds himself at the moment in a position of serious difficulty. There has been much dissatisfaction with his manage- ment of the Lu-han Railway, and on May 18th an Imperial decree ordered the Board of Commerce and the Viceroy Yuan Shih-k'ai to supervise his doings, “eradi- cating abuses and corrupt practices." At the same time the Board of Commerce was instructed to scrutinise strictly" the accounts of the Lu-han line. A decree in such terms was evidence enough that Sheng's numerous enemies were in the ascendant, but to add to his difficulties the French Minister had formally protested at the Wai-Wu-Pu against the decree as a reflection on the Belgian Company which was building the railway, and on the Engineer-in-Chief, M. Jadot. The Belgian Minister had also made observations of the same tenour, but he had taken care to make them privately to Na-Tung alone. The Grand Council suspected Sheng of prompting this official intervention of the French Minister, and their suspicions were probably increased by Sheng's careful abstention from the calls on the foreign repre- sentatives which he would have made in the ordinary course. Altogether Sheng was in great anxiety and scarcely knew what to do. For the moment it was hopeless to expect any action from him, his first and obvious care being to remove the imme- diate peril and pacify his enemies.

As your Lordship will have gathered from my despatch, No. 130, of April 18th, I am in no way anxious that the negotiations for the Canton-Kowloon Railway should be in the hands of Sheng Kung-Pao and I took the opportunity to impress upon Na- T'ung privately the importance of exercising the greatest care in the selection of a suitable person to negotiate the railway agreement, and to administer the railway during construction and after. Such a person, I pointed out, had large opportunities of manipulating transactions in land and enhancing the price of local materials, to his own profit but to the serious detriment of the railway.

Under the circumstances mentioned by His Excellency Na-T'ung, the truth of which I have no reason to doubt, it appears to me that the negotiations relating to the Canton Kowloon line would not be hastened at the moment by any action of mine at the Wai-Wu-Pu, and I do not propose to take any further step until Sheng's position is decided one way or the other. This should only be a matter of a few days. If I were to exert pressure at this juncture it is more than likely that the effect would be to assist him out of his difficulties, and this is a contingency of which, in view of his past attitude towards British interests and enterprises, I wish to run no risk.

A copy of this despatch has been sent to the Governor of Hong Kong.

The Marquess of Lansdowne, K.G.,

&c., &c.. &c.

I have, &c.,

ERNEST SATOW.

(Confidential.)

No. 121.

FOREIGN OFFICE to COLONIAL OFFICE.

(Received August 8, 1905.)

To Sir E. Satow, No. 115, July 27, 1905. Sir E. Satow, No. 146, Angust 7, 1905.

The Under-Secretary of State for Foreign Affairs presents his compliments to the Under-Secretary of State for the Colonies, and is directed by the Secretary of State To transmit, for the information of the telegrams, as marked in the margin, relating to the Hankow-Canton Railway.

Secretary of State, the accompanying copies of Foreign Office,

August 7, 1905.

Enclosure 1 in No. 121.

THE Marquess of Lansdowne to Sir E. SATOW (Peking).

(Confidential.)

(No. 115.)

(Telegraphic.)

(Foreign Office, July 27, 1905, 5.40 p.m.)

My telegram, No. 103 [of 30th June: Hankow-Canton Railway].

Daily Chronicle" reports interview between King of the Belgians and Morgan, in which King represented that it was absolutely necessary to American and Belgian expansion in China that railway should remain in the hands of capitalists of two countries, and Morgan was impressed and promised to reflect.

If money is advanced, care should be taken that Viceroy can only use it for purchase of shares.

Enclosure 2 in No. 121.

Sir E. SATOW, Peking, to the MARQUESS OF Lansdowne. (Sent 4.10 p.m.: Received 4.20 p.m., August 7, 1905.) TELEGRAM.

(No. 146.) (Decypher.)

Your telegram, No. 115 [of July 27: Hankow-Canton Railway]. Following from His Majesty's Consul-General at Hankow yesterday

"I saw Viceroy last night. He says that a preliminary contract for resumption of railway concession was signed by the attorneys of the Chinese Minister and Morgan, that the King of the Belgians has been trying to prevent completion of the final contract, that the Chinese Minister has impressed on Morgan the necessity for fulfilling his contract, and that our loan agreement will not, of course, be signed unless telegraphic news (which is expected in a few days) comes of the signature of final contract.”

United States Minister volunteered to me the information that he had strongly urged his Government to prevent the proposed unscrupulous sale of the concession by Morgan to the Chinese, and seemed sanguine of success.

I have not said anything to him about our negotiations with the Viceroy of Wuchang

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