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long as their business is properly managed they have it entirely in their own hands, and that every shareholder is equal. No one has a right to dictate the policy of the Company; every shareholder has an equal right to speak, and the views of the majority prevail.
"I think Chinese Companies, under proper rules, with Imperial sanction, and with mixed Boards of native and foreign Directors, could be established and made to work satisfactorily. The railways would have to have foreign management at first; there are no Chinese at present who have the knowledge or experience necessary for the management of a large railway. The men who would be employed would, of course, be Chinese employés, as the Customs people are. Such men would do better work,
and be more satisfactorily controlled by a mixed than by a purely Chinese Board of Directors. Besides, a Board composed of foreigners and Chinese would likely select a better class of foreigners than would likely he got in any other way. Foreigners are the best judges of foreigners, and Chinese of Chinese.”
Noting the advice thus given, which is undoutedly based on close acquaintance with Chinese affairs, it is interesting to consider the conditions under which railways on Chinese territory have been constructed since that date, and the political and financial results of these enterprises.
In Manchuria, Shantung, and Yunnan, China has, at various times and under diplomatic pressure conceded the right of railway construction to foreign Powers under conditions which deprive China of all control and profit in these enterprises aud seriously prejudice her sovereign rights within the territory through which these railways run. The danger resulting from such concessions has now been fully recognized it is realized that the existence on Chinese soil of railways administered and controlled to the detriment of China's political authority should never have been permitted. Of this the history of the Manchurian provinces since 1896 has afforded a convincing object lesson, and a warning.
Concessions of this kind may be described as strategical and political, as distinct from commercial undertakings, their inception being undoubtedly intended rather to extend the influence or territorial advantages of the Powers concerned than to develop the resources of the Empire for the advancement of China, and the consequent benefit of nations interested in the expansion of her trade-under existing political conditions it may safely be assumed that no further concessions of this kind will be made, and that measures will eventually be agreed upon to prevent the railways thus constructed from creating results prejudicial to the Central Government's authority.
The Luban Railway, although an enterprise originally associated with political objects of certain foreign Powers (1896-98), may now be definitely regarded as a commercial undertaking for the joint benefit of the Chinese administrations and the concessionnaires, and under the authority of the Chinese Government. No officially. published information is available as to the cost of constraction of this important trunk line or the actual results of its maintenance and working; but as the concessionnaires receive 20 per cent. of the profits, figures will no doubt be published in due course. A reliable authority, however, places the total cost of construction af a little over 6,000,0001, provided partly by the Belgian loan and partly by funds paid in compensation for damage done by Boxers. The net profits (July 1906) are said to average 150,000 dollars per mensem. Had it not been for the receipt of 2,000,0001 on account of the Boxer disturbances, an additional loan would have been necessary, entailing further interest charges, which would have practically eliminated the profits now declared. By engineers the work is generally reported to be good, though the system of construction is not that adopted on British railways, and is likely to entail heavy charges for maintenance and repair. China is entitled to pay off the Belgian loan (4,500,000L) on and after the 1st September, 1907, and, should she so desire thereafter, to take over complete control of the railway.
Another Chinese Government railway which comes within the category of commercial undertakings with foreign capital is the line from Kaifeng to Honan-fu (about 210 kilom.), now in course of construction. Its conditions are practically the same as those of the Luhan, the Chinese Government guaranteeing the interest at 5 per cent, on a loan of 1,000,000l. at 90, intrusting the entire construction and administration to the Belgian concessionnaires (“la Compagnie Générale de Obemins de Fer et de Tramways en Chine"), which is also entitled to 20 per cent. of the net profits of the undertaking. Period of loan twenty years: redemption of bonds begins after the tenth year.
The Chengting-Taiyuen-fu line (about 350 kilom.), originally part of the British
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of Russian diplomacy in 1898. It is now in course of construction-the capital "Peking Syndicate" Concession, became a Franco-Russian undertaking as the result (40,000,000 fr.) is French, and the conditions of the Loan Agreement are practically the same as those of the Honan-Kaifeng contract.
There are other railway undertakings on a small scale, such as the Ping Hsiang line in Hunan and the line (under construction) from Swatow to Chaochow-fu; but they need not be referred to in detail.
In the Luhan contract no precautions were taken by the Chinese Government to prevent the Concession being transferred from Belgian to any other nationality, an oversight which before long created serious uneasiness in the minds of his Excellency Chang Chih-tung and other high officials. When, therefore, a similar commercial Railway Concession was concluded with an American Syndicate (1898) to construct the railway from Hankow (Wuchang) to Canton, a clause was included in the contract stipulating that the rights of the American concessionnaires should not be transferred to persons of any other nationality. This clause was subsequently violated. The Belgian group of politicians and financiers who (supported by French and Russian diplomacy) had endeavour to obtain the original Concession intrigued successfully at New York and obtained a controlling interest in the American Syndicate's stock, by virtue of which they speedily asserted claims to construct and administer the line. In this violation of the American Syndicate's agreement his Excellency Shêng Kung-pao was apparently willing to acquiesce, but the Viceroy Chang Chih-tung, dreading the political effect of Franco-Russian influence, insisted on cancellation of the Concession. The personnel of the American Syndicate had practically no interest in China; their objects in obtaining-and in transferring-the Concession rights were frankly pecuniary, and they readily accepted the price at which, upon his Excellency Chang Chih-tung's advice, the Chinese Minister in Washington was authorized to buy back the Concession. As the contract had admittedly been violated, and as the United States' Government was unwilling to guarantee that the railway would permanently remain a strictly American undertaking, the payment of a large indemnity to the concessionnaires was unnecessary and unwise. This unfortunate conclusion of the affair has naturally prejudiced foreign capitalists in the eyes of the Chinese Govern- ment and people, and has indefinitely postponed the construction of a most important railway. The results are as much deplored by forcigners as by Chinese, but the experience will not be lost if it teaches the Chinese Government not to intrust important national undertakings to unknown capitalists whose interests are in no manner identified with those of China,
The short line from Canton to Samshui constructed by the American Syndicate before the repurchase of the Concession is now administered by the Liang Kuang Viceroy. The passenger traffic is remunerative, showing how profitable the trunk line should be. The management of the line, however, judged by European standards, is extremely defective, the personnel inefficient, and the maintenance bad; unless these matters are reformed the railway must before long come to grief.
In Shansi a short line has been built by the Peking Syndicate to assist in the development of the Coalfield Concession, running from Tsecho to the Wei River. The future value of this railway (which has been recognized as a Chinese Government undertaking like the Chengting-Taiyuen-fa line) must depend on the facilities given for exploiting the coalfields, a matter which the gentry and students of the province appear to be opposing.
The Northern Railway--running from Peking to Tien-tsin, Shanhaikwan. Newchwang, and Sinminting--is the most profitable in China. Its first section was built by British engineers with Chinese capital under the direction of the Viceroy Li Hung-chang in 1879. Originally intended only to connect the Tongshan mines with the nearest navigable water, it was gradually extended to Tien-tsin and Shanhaikwan. In 1896 British capital was borrowed (2,300,0001.) for the completion of this railway to Newchwang, under conditions formally recognized by the Chinese and British Governments, the entire line being given as security for the loan, aud the railway being placed under the direction of a British engineer-in-chief and financial super- vision of the bondholders. The annual profits of the undertaking (which, in 1905, amounted to over 10,000,000 dollars) show how greatly the resources of the Central Government may be increased by properly administered railways, if efficiently constructed.
Recently, however, there have been indications of a tendency to minimize European control in the management--a course which, however gratifying it may be to those who profess advanced nationalist ideas, will, if definitely adopted, seriously prejudice the future prosperity and credit of the enterprise. The Chinese
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