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10
Inclosure 2 in No. 1.
Tang, Vice-President of the Board of Communications, to the Viceroy at Canton.
(Translation.) (Telegraphic.)
[Undated.]
WITH reference to your Excellency's telegram No. 10 to the Wai-wu Pu which I saw yesterday, and to the many telegrams which I have received from Kuangtung in criticism of the Canton-Kowloon Railway Agreement, I beg to make the following observations :-
In 1898 Sir C. MacDonald, then British Minister, demanded of the Tsung-li Yamên five Chinese Railway Concessions on behalf of British capitalists, and the Yamên, on giving its consent, directed Shêng Ta Chrên to negotiate with the British concessionnaires.
The negotiations for the Canton-Kowloon line resulted in a preliminary Agree- ment in five Articles being signed between Sheng Ta Chên and the British and Chinese Corporation in March of 1899. Article 1 stipulated for the construction of a railway from Kuangchou-fu (the city of Canton) to Kowloon, under terms similar to those adopted in the preliminary Agreement already signed for the Shanghae-Nanking Railway.
By Article 2 it was agreed that the foregoing stipulation as far as practicable should be subject to the conditions of the Shanghae-Nanking Railway final Agree- ment, when signed, and under Article 3 both parties agreed to make working arrangements in conjunction with the line from Canton to Hankow for mutual
rates.
Under Article 4 provision was made for a survey of the route, upon signature of the preliminary Agreement, by engineers engaged by Messrs. Jardine, Matheson, and Co., and under arrangements to be made by the Director-General of Railways, who would notify the local authorities in order that the engineers should be duly protected.
Article 5 reads as follows:---
"This preliminary Agreement is signed by the Director-General of the Imperial Chinese Railway Administration, who will, in case there should arise local difficulties, consult with the Viceroy of Canton to make the necessary arrangements, the said Viceroy will, in conjunction with the Director-General, memorialize the Throne before the final Agreement is signed."
In the course of last year (1905) the British Minister adverted to this prelimi- nary Agreement, and asked that negotiations should be taken up for the final Agreement. The Corporation also presented a proposed draft of a final Agreement.
The Viceroy Ts'ên held, however, that local conditions had changed, and desired to change the modus operandi to that adopted in the case of the Northern Railway Loan.
The Corporation argued that the existing understanding must be anhered to, and, as neither side would give way, it was not until half a-year had elapsed in fruitless discussions that an Edict was issued in the fifth month of this year (June-July, 1906), commanding that negotiations with the Corporation should be taken up by the Wai-wu Pu.
When these negotiations began, the Corporation's representative, Mr. Bland, maintained that the preliminary Agreement having been approved by the Goveru- ment, the present negotiations must follow the lines of the Shanghae-Nanking Agreement. After repeated discussions he eventually agreed to consider arrange- ments based on those of the Northern Railway Loan, and to discuss other clauses than those in bis proposed draft.
Now, in our several Railway Agreements the provision most damaging to our interests is that which admits of profit certificates; therefore, my first step was to get this clause struck out.
As regards what your Excellency says in your telegram to the effect that, we have let the British capitalists construct this line, and have agreed that no other line can be built to compete with it and damage its interests, all the future railway development of the whole province is placed under their control, and there is no line which we can undertake ourselves, while other provinces will also suffer from the
11
effects of this provision, which is more far-reaching even than the previous demand respecting a parallel line," I beg to observe that the present Agreement arranges for a loan of money to be made by the British capitalists, but the State constructs the line itself. It is not the British capitalists who are going to construct it. Therefore, as it is a State line, there is naturally no possible justification for proceeding to build another line in the same direction, and to thus enter into competition with oneself. Further, the question of "competition" applies only to this particular Canton-Kowloon line, and in no way affects the railway development of the whole province; still less can other provinces suffer from this understanding.
Again, with reference to your Excellency's remark that "the loan is for railway construction, and the line can only be used as a security, it cannot be given over to their control," I would point out that the present Agreement distinctly provides for the appointment by the Chinese Government of a Managing Director to superintend all matters connected with the construction of the line, and it is stipulated that the power of engaging and employing engineers and personnel is vested in the Chinese Government, so there is no question of parting with the control.
Your Excellency further observes that, as the loan is to be issued at 94, there seems to be no reason for giving the Corporation 35,0001. remuneration. With respect to this point, your Excellency is aware that the practice of discounting loans is universal. The Northern Railways and the Shanghae-Nanking Railway Loans were both issued at 90, so that the present price of 04 seems to me exceptionally favourable. Under the Shanghae-Nanking Railway Agreement, the Corporation gets a commission of 5 per cent. on the purchase of materials, and it was out of apprehension that this arrangement is too far-reaching that we changed the payment to a fixed remuneration calculated on an expenditure for materials of 700,000, and giving the total of 35,000!. Beyond this the Corporation only gets a further annual remuneration of 1,0001. This arises from the fact that in the Shanghae-Nanking Railway the foreigners representing the Corporation's Agency on the Directorate draw in pay monthly several thousand taels, and after construction is completed the Corporation still gets a corumission on materials. So, by giving them this sum of 1,000, we have merely guarded against possible irregularities, and there has been no cession of other profits.
Your Excellency then asks: "Since the Agreement mortgages the railway as security, why should there be any bonds issued to the public?" But your Excellency must know that the issue of such bonds is also the universal practice. If bonds were not issued, how could the money be raised? The raison d'être of the line is precisely to beget confidence in the bonds, the one being dependent on the other.
As regards redemption, the term has now been fixed at thirty years; and as regards the payment of 24 per cent. premium on bonds redeemed before the expiry of twenty-five years, I would point out to your Excellency that the Northern Railway bonds, which may be redeemed before the term of the loan, are subject to a premium of 20 per cent. The Shanghae-Nanking Railway bonds, redeemed after twelve years and within twenty-five, are subject to 24 per cent. premium. In now stipulating that bonds redeemed in excess of the amount specified in the amortization table, before the expiry of the twenty-five years, shall be subject to 2 per cent. premium, we have better terms than either the Northern Railway or the Shanghae-Nanking Railway.
In conclusion, this is a matter in which we were bound by the original consent of the Tsung-li Yamên, followed by the preliminary Agreement entered into by Shêng Ta Ch'ên, which stipulated that the modus operandi of the Shanghae-Nanking Railway Agreement should be followed. There was nothing to be done in face of these under- standings but to assure the protection of our sovereign rights. The Agreement has now been settled, and is being laid before the Throne in a joint Memorial of the Wai-wu Pu and the Board of Communications.
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