But this admission itself involves an excision from the Agreement of those clauses which, either directly or indirectly, imply a degree of foreign interference and control which is no longer believed to be necessary.
To take them seríatim----
1. Profits.It is quite certain that to arrive at these involves a degree of foreign interference which it would be difficult to justify on other grounds. It is not easy to see how a claim to a share in the profits for which no consideration is any longer given can be maintained. An additional argument for waiving the profits will be found in relation to the basis on which the profits are to be calculated, how much is to be allowed to capital, how much to revenue, and so on. It is highly probable that in the process friction would be engendered vis-à-vis the Chinese, a friction which would almost certainly be increased when the parties to the agreement ou the foreign side were doubled.
It is recommended, therefore, that the Syndicate's claim to a share in the profits should be abandoned, and that their rights in this respect, under the Preliminary Agreement, should be waived in consideration of a monetary compensation,
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2. Commission. It is recommended also that the 5 per cent, commission on materials should be commuted for a cash payment. The arguments which have been used in connection with the proposed abandonment of the share of the profits would appear to apply equally in this case, and it is not necessary, therefore, to repeat them.
It be argued, however, that the real value of the commission lay not so much in its monetary value as in placing the purchasing control in the hands of the Syndicate, and thus enabling them to place the orders for material with their respec- tive countries. To this it may be replied that the Chinese have shown themselves in such matters to be a reasonable people, who may be relied upon to do what is required in reason, so long as they are allowed to do it in their own way. To insert a clause stipulating that a certain percentage or class of material should be purchased from foreign sources would be almost certain to provoke Chinese reprisals and to defeat the object it was designed to accomplish. It will be found in practice that no difficulty will be experienced in securing a preference for foreign material at equal rates and qualities.
3. Reserve. Admitting that the security of the loan is sufficient, it would be unreasonable to demand more from the Chinese than that there should always be retained on balance a sum sufficient to defray the amount of the ensuing six months' interest and sinking fund.
4. Board of Commissioners.-The advantage of retaining the Board of Commis- sioners on which there is no longer to be any controlling foreign influence is not apparent.
In practice it has been found that the Board of Commissioners is an ineffective instrument for the purpose for which it was designed, and that the same results can be achieved, with less heat and less friction, as in the case of the Northern and Lu Han Railways, through the intermediary of the Chief Engineer, Accountant, and Auditor. This is a change which it is believed that the Chinese would welcome, and no difficulty is likely to be experienced in securing to the Syndicate the nomination of these three officials on the precedent of the codicil to the Northern Railways Agreement, which was executed on the restoration of the line to the Chinese Railway Administration after the military occupation of 1902.
It is believed that the Chinese would offer no objection to the appointment of these three officials, with power to submit and approve all indents, to certify accounts and cheques, and to present a properly audited Statement on the model of the Chinese Customs accounts, either annually or semi-annually.
The Chief Engineer would, in point of fact, have full powers of veto, which should be ample to secure the proper construction and maintenance of the line, always provided that his character and capacity are such as to justify this heavy responsi- bility.
In recommending these proposals to the favourable consideration of the German group, the British representatives are anxious to make it plain that they involve much more than a mere modification of the existing Agreements: In effect, they constitute a fundamental change in our whole attitude towards the Chinese. It is not proposed that concessions should be offered with open hands to the Chinese negotiators; all that is recommended is that if the foregoing proposals are adopted in principle, details such as prices, amount of compensation, or commutation to be settled hereafter, then a joint form of instruction should be sent to our representatives in China in anticipation of possible Chinese demands, which would enable them, should the occasion arise, to make these concessions without reference to the Syndicates at home.
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It must often have been noticed in the course of these negotiations that a Chinese demand has been made which our representatives have found themselves unable to mect without reference. The meeting has been adjourned, and when it has been resumed, after a favourable reply from this side, it was found that the concession has been made too late; the Chinese had assumed a new attitude, or raised a fresh difficulty; and so the process is repeated.
In perusing the Minutes of the meetings of the negotiators it is difficult to resist the conclusion that while we may appear to be making progress, it is not in a straight line, but only in a circle,
It would appear that some such radical change, as indicated in the foregoing proposals, is necessary in order to bring these protracted and tedious negotiations to a speody and successful issue. It is in this belief that they are recommended for adoption by the Chinese Central Railways, Limited.
At the conclusion of this statement a few questions were addressed to the British representatives, the answers to which were considered satisfactory.
The proposals of the British representatives were then accepted by the German group en bloc, who agreed to embody them in a form of instruction to their represen tative, M. Cordes, which should be submitted to the British group for their approval before being telegraphed to Tien-tsin.
It was agreed that instructions will be sent by telegraph to the British represen- tative at Tien-tsin at the same time.
The meeting then adjourned.
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