CO129-345 - Public Offices & Foreign Office - 1907 — Page 26

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opinion that "it would pay the Chinese much better, and suit the general feeling in the country more, if the Chinese section of the Kowloon-Canton Railway were worked as a branch of the Canton-Hankow Railway." If this arrangement is ultimately adopted, the disadvantage to the Hong Kong line (already alluded to in my former letter) of having foreign officials in positions of control at Canton might become very serious.

6. In view of these considerations, and having given his careful attention to the question, Lord Elgin regrets that he cannot intimate his concurrence in the proposed course of action, which appears to bim to involve a surrender of British interests, to prejudice the interests of Hong Kong, and to expose His Majesty's Government to an imputation of bad faith towards both the Chinese and the Japanese Governments.

I am, &c.

(Signed)

C. P. LUCAS.

[This Document is the Property of His Britannic Majesty's Po framût 10.

CHINA RAILWAYS.

CONFIDENTIAL.

[20078]

No. 1.

31828

RECO

[June 17.16 SEP 07

SECTION 9.

Sir J. Jordan to Sir Edward Grey.-(Received June 17.)

(No. 112.)

Peking, June 17, 1907. (Telegraphic.) P.

AT an interview with the Viceroy of Wuchang, His Majesty's Consul-General at Hankow and Mr. Hillier presented a draft Agreement providing for equal participation by the French bank and the Hong Kong and Shanghae Bank in the loan."

The Viceroy replied that he was only under obligation to us, and wanted to borrow from us alone. Our relations with the French financiers were not binding upon third parties, but were our own business, and he absolutely declined to allow French participation as unfair, after our objections to the Japanese. Such participation would, he alleged, insure the Throne's rejection of his request for sanction to raise a loan. This refusal on the part of the Viceroy is accepted as absolute, and as a withdrawal from the negotiations by His Majesty's Consul-General and Mr. Hillier.

The situation thus created is serious and complicated. For while the new Canton Viceroy has applied to M. Casenave for a loan of 10,000,000 taels-really for the Hankow-Canton Railway, though ostensibly for industrial purposes--the Viceroy of Wuchang, on the other hand, will probably decline, as long as we are bound to the He evidently favours French group, to entertain any railway loan proposals from us. the Japanese.

[2525 r-9]