CO129-345 - Public Offices & Foreign Office - 1907 — Page 27

(This Document is the Property of His Britannic Majesty's Government.]}

C.O.

24

CHINA RAILWAYS.

CONFIDENTIAL.

[26893]

No. 1.

[August 11828

SECTIORE

19 6 SEP 07

Sir J. Jordan to Sir Edward Grey.—(Received August 12.)

(No. 303. Confidential.) Sir,

Peking, June 15, 1907. WITH reference to my telegram No. 112 of the 17th instant, I have the honour to transmit to you herewith copy of a despatch which I have received from Mr. Fraser,. His Majesty's Consul-General at Hankow, reporting upon the interview which Mr. Hillier and he had with Viceroy Chang Chih Tung on the 16th instant on the subject of his Excellency's proposed loan. I also inclose a copy of the draft Agreement which was submitted to the Viceroy by Mr. Hillier.

You will see that his Excellency refused to permit French participation and Mr. Fraser outlines in his despatch what he believes to be the reasons for the Viceroy's undoubted antipathy to the French. Of this antipathy M. Casenave, the Peking Agent of the Banque de l'Indo-Chine, is fully aware, and he ascribes it largely to French action in Tonkin.

After the despatch of his telegram, of which I had the honour to give you the substance in my telegram No. 112 referred to above, Mr. Fraser sent me a further telegram containing the proposals which Mr. Hillier had made to his principals in London suggesting that the negotiations be carried on in the name of the British and Chinese Corporation for a loan of 1,500,000. This sum only represented at the most half of what would be required for railway construction, and the Viceroy, alleging that he could not ask sanction for a further loan, proposed that the Hong Kong and Shanghae Bank and the Japanese Bank should make arrangements for short advances for payment of section contracts on adequate security. Mr. Hillier supported this proposal to his principals.

As I found it difficult to reconcile this with Mr. Fraser's previous statement that the Viceroy's refusal to admit French participation was absolute and must be regarded as a withdrawal from the negotiations, I telegraphed inquiries and reminded him that we were officially committed to the French Government, both in regard to the Hankow- Canton and Hankow-Szechuan lines. I added that any modification of these engage. ments, even by the partial elimination of the French element, could only, I conceived, take place by agreement between the British and French groups at home with the consent of their respective Governments. This conclusion, I may explain, was forced upon me by my knowledge of the attitude of the French Legation towards the question.

In his reply Mr. Fraser informed me that Mr. Hillier and he did not definitely accept the Viceroy's refusal to admit the French bank, but, on the other hand, they did not feel justified in jeopardizing the preference to British capital secured in 1905 by absolutely refusing to discuss the other terms of the draft Agreement which they had submitted. They had suggested the insertion of the British and Chinese Corporation as a compromise between the original draft and the Viceroy's demand for the Hong Kong and Shanghae Bank only. They were beginning to suspect that the Viceroy's attitude might be inspired by the Japanese, in the hopes that, having created an impasse, they might drive us to admit them to participation in the Agreement. If this view were correct, it might be necessary to find a solution in the admission of Japanese as well as French capital, coupled, however, with a stipulation that the participation be based upon the proportions of the loan which each nation could issue in London, Paris, and Tôkið, respectively. Contracts for the section work alluded to above would be on three-thirds

account.

In a subsequent telegram Mr. Fraser informed me that Mr. Hillier and he concurred in thinking that if the Anglo-French group consented to give the price of 94 firm, which had been proposed by the Viceroy himself, on condition that he accepted the main terms of the draft Agreement, submitted to him on the 16th June, he would place himself in an anomalous position should he refuse such a favourable offer. The Japanese could not hope unaided to offer him even as good terms, and such a refusal would amount to a public avowal of preference for the Japanese and of personal

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