CO129-345 - Public Offices & Foreign Office - 1907 — Page 302

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(This Document is the Property of His Britannic Majesty's Government j

CHINA RAILWAYS,

CONFIDENTIAL.

37403

[October 5.]

RECE SEPTION OCT 07

[33110]

No. 1.

Sir J. Jordan to Sir Edward Grey.-(Received October 5.)

Confidential.)

(No. 402. Sir,

Peking, August 20, 1907. IN my despatch No. 306 of the 24th ultimo I had the honour to report on the progress of the negotiations between Herr Cordes and Mr. Liang Tun Yen respecting the Tien-tsin Yang-tsze Railway.

For some days subsequent to that date no further steps were taken between the two negotiators, as they had reached a point beyond which they could not usefully go pending the arrival in Europe (vià Siberia) of the draft Agreement, a copy of which was inclosed in my last despatch.

Mr. E. G. Hillier had meanwhile begun his negotiations for the Soochow- Hangchow-Ningpo Railway, and it soon became evident that he could not expect better terms than those which were offered to Herr Cordes.

Mr. Hillier had been convinced since his return to Peking on the 17th July that the terms for the Tien-tsin-Yang-tsze Railway were unsatisfactory, owing to the omission of any safeguard for the proper disposal of the loan proceeds, and he had pointed out to Herr Cordes in a friendly way that he should insist on the Engineers-in- chief of the two sections of the line being persons acceptable to the Banks, and on the appointment of a Chief Accountant, with the stipulation that all indents by the Chinese Managing Director for loan funds should bear the counter-signature of these officials.

Herr Cordes appeared singularly indifferent to these important points, and this fact, coupled with the apparent willingness of the German Minister to have the Agreement signed at all costs, led me to infer that there might be other considerations at stake.

I therefore telegraphed to you on the 6th August (No. 157), drawing attention to the possible danger of having Herr Cordes as sole representative of both groups, and pointing out that whatever was settled in these negotiations would react upon the settlement of other outstanding Concessions.

On the 9th August Mr. Hillier received instructions to act as representative of the Central Chinese Railways (Limited), and procceded forthwith to join Herr Cordes in carrying on negotiations with Mr. Liang.

At their first meeting, on the 13th August, the question of security was discussed. Mr. Liang stated that the securities which the Chinese Government proposed to offer were the general and opium li-kin of the Province of Chihli, amounting to 1,200,000 tacls per annum, and the wine, tobacco, and opium li-kin of Shantung and Kiangsu, repre- senting an annual revenue of another 800,000 taels and 600,000 taels respectively. This total of 2,600,000 taels was shown by Mr. Hillier to be insufficient to cover a loan of 6,000,000l., which, according to his calculation, would require a security of 4,000,000 taels per annum. Mr. Hillier pointed out also to his Excellency that the allocation of opium revenues by the Chinese Government as security at the present juncture, when the British public understood that the use of opium was to be totally prohibited within ten years, might arouse unfavourable comment when the loan prospectus was being examined by intending investors.

To this Mr. Liang replied that these totals represented the sums for which the three provinces undertook to hold themselves responsible, and that it was therefore immaterial from what source they came. They were general fi-kin revenues, and if, as Mr. Hillier held, they were insufficient, the Central Government would have to indicate additional sources of revenue as security.

They then passed on to the points which Mr. Hillier desired to introduce into the Agreement, namely, the appointment of Engineers-in-chief and a Chief Accountant acceptable to the Syndicate, and with a share of responsibility in the application of loan funds.

The Chinese negotiator begged that the point should not be pressed, as he foresaw endless difficulty in persuading the gentry to accept such a condition.

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