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About the middle of April last, the Viceroy of Hukung, Chang Chi Tung, telegraphed to Odagiri Manjiunosuke, Manager of the Specic Bank, with whom he was on friendly terms, asking him to come to Wuchang as he wished to speak to him on urgent business. Odagiri did not know what the business was, but as he intended to go to Wuchung in any case on bank business, he went there and saw Chang Chi Tung, who told him he wished to raise a loan of 20,000,000 tacls for the carrying out of an enterprise. He explained later that the loan was for the purpose of building a railway, but at first this was not explained, and Odagiri could only presume that this was the object. As the Specie Bank could not undertake this matter single-handed, it was decided with Chang Chi Tung's consent, to raise the money in London, and the bank having received permission from the Imperial Government, at once communicated with the Hong Kong and Shanghae Bank and with Parr's Bank. These two banks replied that the guarantee of the Chinese Central Government must be a condition of the loan, and unless this "condition" were fulfilled they could not agree to the loan. Odagiri accordingly exhorted Chang Chi Tung to this effect, but the Viceroy at first refused to agree to this, and consequently the Specie Bank regarding the negotiations as quite hopeless, communicated with the British banks in this sense, and Odagiri was instructed to return to Japan. Chang Chi Tung, however, suddenly abandoned his previous statement and informed Odagiri that there would be no objection to introducing into the Agreement for the loan in question a guarantee clause similar to Article 14 of the Kiulung- Canton Railway Loan Agreement, or to Article 15 of the Shanghae-Nanking Railway Loan Agreement. Consequently, the Specie Bank, thinking that both the Hong Kong and Shanghae Bank and Parr's Bank would be satisfied with this new proposal, was on the point of telegraphing to London when Mr. Bland, of the British and Chinese Corporation, and Mr. Hillier, of the Hong Kong and Shanghae Bank, came to Haukow from Peking and commenced direct negotiations with Chang Chi Tung.
At the same time the British Minister in Peking and the British Consul-General at Hankow informed the Japanese Representatives at those places that there was an agreement that in the event of capital being required for railway construction in the two provinces of Hunan and Hupeh, negotiations should first be opened with Great Britain. It was then that both the Specie Bank and the Imperial Government heard for the first time of the existence of this Agreement, and the reason why Chang Chi Tung had in the beginning shirked mentioning to Odagiri the object of the loan, became clear. The Imperial Government accordingly at once caused the Specie Bank to decline the proposals of Chang Chi Tung'; and at the same time the Imperial Consul at Hankow informed both the Viceroy and the British Consul-General that the Specie Bank would not directly undertake the loan, but would be satisfied with being one of the issuing banks. That the Specie Bank took no initiative in this matter, and made no attempt to induce Chang Chi Tung to raise a loan, and moreover had not the smallest intention of injuring British interests, is abundantly clear from the fact that it made strong representations to the Viceroy in connection with its communications with the British banks on the subject of the proposed loan, and when his consent was obtained at once gave effect to it, and subsequently communicated the negotiations between the bank and the Viceroy without reserve to the British banks. If the British Government had any apprehensions in regard to the action of the Imperial Government and the Specie Bank these were due solely to ignorance of the existence of the above-mentioned agreement. The official intimation I have received from you has enabled the inner history of the matter to be made clear, and will be useful in preventing unexpected misunderstandings in the future.
I beg to thank you for this communication and to state that rights already acquired by Great Britain in regard to railways in China will of course be respected. At the same time in order to avoid the possibility of any misunderstanding in the future, I would like to add that according to a telegram recently received from the Imperial Consul at Hankow, the official communication addressed by the Viceroy at the time to the British Consul-General regarding the above-mentioned Agreement, contained a clause to the effect that half of the engineers employed in making the railway should be natives of the country granting the loan, and half Japanese, and that they should work in separate districts, and that the British Consul-General told the Imperial Consul that he had no objection to this. Moreover, the Imperial Govern- ment have been engaged since the beginning of 1900 in demanding the right to construct a railway from Amoy and Foochow to Hankow via Nanchang, and the Chinese Government have repeatedly said that they would on no account grant the
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Concession for this railway to any other Power. The Imperial Government expects 550 eventually to arrive at an understanding with the Chinese Government as to a suitable scheme of construction, and to carry out this project.
I beg you will also take note of this fact. The Imperial Government feel confident that in the end the best plan for our two countries will be to act together and co-operate harmoniously in China in financial as well as political matters, and thus extend our mutual interests. And they trust that this incident will have the result of assisting the realization of the wishes of the two countries in regard to financial relations in China, and that in the future they will more and more consult together without reserve, and have increasing confidence in each other.
I take, &c. (Signed) HAYASHI TADASU, Viscount,
Minister for Foreign Affairs.
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