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PUBLIC RECORD OFFICE

Reference :-

LICO. 882

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6 PUBLIC RECORD OFFICE, LONDON

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On account of the restriction of the English Colonial Office, I was told at the Quai d'Orsay that although they quite agreed to the plan proposed, they were equally obliged, on their side, to reserve their final assent until they were aware of the decision of the English Government. But, in the meantime, I was fully authorised to write to you in the way I am doing now.

Let me expose that in my different interviews with our Foreign Office I always mentioned that our co-operation with the British and Chinese Corporation would be on the same basis as for the Szechuen business, which was agreed.

But being under the impression that you had promised the Belgian group a retrocession of 5 per cent. on your part, I very willingly consented to retrocede them equally 5 per cent. on our part, and I mentioned this to Mr. Rouvier, who accepted the combination. I gather now, from your last letter, that the understanding between yourself and Mr. Francqui is not such as I supposed by my conversations

with him.

Let me suggest that it might not be indifferent to have the Belgians with us, and as they are seeking, as it appears, rather a part of profit for them than a share of influence or vote, I trust you will arrive at an understanding with Mr. Francqui, who told me the day before' yesterday that he was going to London to-morrow in order to discuss that question with you.

On our side we are quite prepared to do for them what we promised, and what we supposed to be as well consented by your group.

Will you kindly let me know, after Mr. Francqui's visit, how you consider the question, and accept for Mr. Townsend and yourself my best compliments of the season?

Yours, &c.,

H. SIMON.

DEAR MR. SIMON,

I AM in receipt of your letter of the 1st instant confirming the desire of the French group to co-operate with the British and Chinese Corporation in the Hankow Canton Railway negotiations.

31, Lombard Street, London, E.C., January 5, 1906.

It is unnecessary at this stage to enter upon details pending the decision of the Foreign Office, but I take note that your group are prepared to negotiate with us on the general lines laid down in our correspondence, "it being," as you say, "well understood that the British interest would be one-half, the Company a British one, and the Chairman a British subject appointed by the British group and possessing a casting vote."

As regards Belgian participation there should be no misunderstanding. I have expressly informed Monsieur Francqui that we were not disposed to entertain his proposals.

Believe me, &c.,

C. S. ADDIS.

Foreign Office, January 12, 1908.

SIR,

I AM directed by Secretary Sir Edward Grey to acknowledge the receipt of your letter of the 5th instant, relative to French and Belgian participation in the Hankow-Canton Railway enterprise.

I am to state that Sir Edward Grey entirely concurs in the terms of Mr. Addis's reply to M. Simon of January 5th.

The British and Chinese Corporation.

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SIBL

No. 198.

Iam, &c.,

F. A. CAMPBELL.

FOREIGN OFFICE to COLONIAL OFFICE. (Received January 24, 1906.)

Foreign Office, January 29, 1906. In accordance with the suggestion made in your letter of the 15th`ultimo,"

• No. 189.

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the British and Chinese Corporation were informed of the objections raised by the Governor of Hong Kong to their proposal to insert the sum of £2,000,000 in Article 1 of the Loan Agreement as the amount of the Chinese Loan in respect of the Canton-Kowloon Railway.

I am directed by Secretary Sir E. Grey to transmit to you, for the considera- tion of the Secretary of State for the Colonies, a copy of a letter which has been received from the Corporation in reply.

I am to draw your attention to the penultimate paragraph of the Corporation's letter, from which you will observe that notwithstanding certain objections which they entertain to such a course, the Corporation are willing, in order to meet Sir M. Nathan's wishes, to agree to the issue of the loan in sums not exceeding £500,000, provided that the first two instalments shall at their option be not less than £500,000 each, and that the Government of Hong Kong will not require the amount which is to be specially set aside in accordance with Article 10 of the Working Agreement, for rolling stock and working capital to come out of the first £1,000,000 of bonds.

The Corporation also suggest that, on the conclusion of the negotiations with the Chinese Government, they should give an undertaking to exercise their rights under Article 1 of the Loan Agreement in respect of the issue of bonds, only to the extent agreed upon in the negotiations and approved by the Governor of Hong Kong.

I am, &c.,

F. A. CAMPBELL.

SIR,

Enclosure in No. 198.

THE BRITISH AND CHINESE CORPORATION, LIMITED.

3, Lombard Street, London, E.C., January 11, 1906. Canton-Kowloon Railway.

WE beg leave to acknowledge the receipt of your letter of the 23rd ultimo, informing us, by direction of Sir Edward Grey, that in a despatch received at the Colonial Office, the Governor of Hong Kong expresses the opinion that very little risk would be run by inserting into Article 1 of the Loan Agreement £1,500,000 as the maximum amount of the loan, and providing for its issue in three instalments of not more than £500,000 each.

From our letter to our agents of December 15th, 1905, and the telegram which we despatched to them on the 22nd idem, copies of which letter and telegram are submitted herewith for Sir Edward Grey's information, it will be seen that the amount of the loan has, as Sir Edward Grey understands, been already the subject of conference between the Colonial Office and ourselves, and that we have responded to the Governor's views in a manner which has the approval of the Colonial Office.

There was never any intention, and it would be against our interests, to issue more bonds than would be necessary to complete the railway and enable the Chinese Government to comply with the terms of the Working Agreement to be entered into with the Colonial Government, but it was thought well to suggest a safe figure, as the Loan Agreement makes no provision for what is to be done in the event of the loan proving insufficient.

The cost of the land is at present an unknown quantity, and from our experi- ence with the Chinese in connection with Shanghai-Nanking Railway, we feared that the acquisition of land might, under Chinese methods, be a formidable item.

The contemplated agreement between the Government of Hong Kong and the Chinese Government, moreover, stipulates for the provision of working capital and for improvements from time to time, which stipulation had also to be borne in mind.

And, further, although our engineer's estimates of the cost and period of con- struction are, we believe, ample, Chinese land jobbery and obstruction to which the enterprise is so exposed might be so effective as to upset the oalculations, and involve not only additional expense in actual construction, but in additional interest during construction, in the event of the period of construction exceeding the estimated two years.

In view of these contingencies, we hope Sir Edward Grey and the Governor of Hong King will realise that our proposal that the amount of loan should be

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