Regarding the question, however, in the light of the results hitherto shown by construction under native official direction, and bearing in mind the financial obligations which the Chinese Government incurs in these undertakings, it appears to us—and we submit this opinion for your careful consideration—that the successful development of foreign railway enterprises in China lies in the direction of loans to be concluded in combination with contracts for construction work, a system which, while leaving to the Chinese the control upon which they insist, would facilitate the loans and insure the rapid, efficient, and economical construction of the railways.
We are of opinion that, with the sympathetic and united support of the British and French Legations, this system could readily be made to appeal to the Central Government, and, although it might at first be opposed by the provincial officials, experience would demonstrate to them also its obvious advantages. Finally, we are of opinion that an Anglo-French combination to finance and construct railways on these lines would practically control the situation, provided that it could command a reasonable prospect of equal opportunities. It is already evident that the Japanese Government intends to use its powerful influence with the Chinese, and to make every effort in European financial circles, to obtain a preponderating position in Chinese railway construction, and a definite policy of consistently united action, backed by diplomatic support, is therefore, in our opinion, essentially necessary.
The interests of the Chinese Central Railways, as well as those of the British and Chinese Corporation, are definitely associated with those of the French banks interested in Chinese railways. To make this combination effective, under existing conditions, it would be necessary to combine construction interests, affiliated to the two groups, under a system similar to that of the financial interests, whereby competition would be eliminated and profits shared. The undertakings already given in regard to Belgian and Japanese participation would remain undisturbed, but it should be clearly understood that they involve no further benefits than those prescribed in those arrangements.
In conclusion, we are of opinion that the Syndicate should realize that in certain cases it would be of immediate advantage if either the French or British group were in a position to negotiate separately for any business in which Chinese susceptibilities might take exception to joint negotiations, it being always understood that in such cases the resultant profits would be shared. The recent Wuchang negotiations, wherein the Viceroy Chang took exception to the introduction of French capital, indicate the advisability of providing for such emergencies, and an arrangement allowing of independent action by either group would greatly simplify the situation while leaving the ultimate ends of the partnership unimpaired.
We have, &c.
(Signed)
J. O. P. BLAND.
CASENAVE.
(3.)
Memorandum from French Group.
In order to thoroughly understand the proposal made to-day it is important for Mr. Addis to remember the terms of the Agreement concerning the Hankow-Canton line, which Agreement has been signed by him, acting on behalf of the British and Chinese Corporation, and M. Simon, acting on behalf of a French group. The principal conditions of this Agreement are:—
1. Eventually, the constitution of an Anglo-French Company on the basis of the Chinese Central Railways.
2. The sharing between the English and the French groups of the whole of the financial and industrial advantages, each group being entitled to one-half of them.
3. The sharing between the two groups of the recruiting of the staff, each group doing one-half.
4. Organization of an office in London and an office in Paris.
The proposal now made is the following:—
The British and Chinese Corporation should negotiate directly with the Chinese Government the granting of the Peking-Canton Railway, reserving, however, in the new British Company, to be formed according to the arrangements agreed upon by the French and English groups, the principal conditions of which are mentioned above. If this proposal were accepted it should be understood that the London office of the new Company to be formed would have the exclusive management of the Hankow-Canton line, which it would manage on behalf of the new Company, and that the Paris office would have the exclusive management, under the same conditions, of the Hankow-Peking line, each of them consequently having to appoint for their respective line the staff necessary in China, the orders for material and the financial advantages being, however, shared between the two groups.
The Hankow-Peking line being now under the control of a Company partly managed by the French group, it is clear that the proposal hereinbefore stated implies serious advantages to the English group, since the French group only asks for the maintenance of the present situation re the staff in the Hankow-Peking concern, and since it yields also to the English group half of its rights re material and financial advantages in the Hankow-Peking line. Moreover, in the Hankow-Canton concern the French group waives the right of appointing the staff, although half of this staff, according to the arrangements between Messrs. Addis and Simon, ought to be appointed by the Paris office.
Such being the case, and in compensation for these very material advantages granted by the French group to the English group, the former merely requests that the English group bind themselves to support the negotiations which the French group may enter upon with the Chinese Government in order to obtain contracts for two railways which are entirely outside the scope of the English group, namely:
(a.) The extension of the Yunnan Railway as far as the Szechuan.
(b.) Another line to join Canton to the Indo-Chinese frontiers.
Moreover, it would be understood that these two concerns would be eventually transferred to a Franco-British Company formed under the French law, the British group subscribing one-half of the capital, as in the Chinese Central Railways, but with the only difference that the British group should have in this new Company the situation now occupied in the Chinese Central Railways by the French group.
If special arrangement should exist for the Hankow-Peking line between the British and Chinese Corporation and the Peking Syndicate, or any other British group, by virtue of which the Hankow-Peking line, being situated north of the Yang-tsze, must be controlled by the Chinese Central Railways, the above proposal could still be realized; but in that case the Paris office of the Chinese Central Railways would manage the Hankow-Peking concern, the London office of the new Company to be formed having the management of the Hankow-Canton line. All profits accruing from the Hankow-Peking line would in that case belong to the Chinese Central Railways, whereas the profits of the Hankow-Canton line would go to the new Company to be formed.
In any case a French Company would be formed which would take up, amongst other aims in China, the rights granted to the French group by the Hankow-Canton Agreement.
The said French Company would at the proper time discuss with the British and Chinese Corporation the allotment, either re the Hankow-Canton Railway or re the whole of the Peking-Hankow-Canton line, of the rights to be respectively exercised by the English group and by the French group according to the above-mentioned basis.
If Mr. Addis' group agrees to these proposals it would be useful that he should let it be known to M. Simon without delay, in order that the latter may settle the matter and take the necessary steps with the French Foreign Office, so that the latter may instruct the French Minister in Peking to support the negotiations of the British and Chinese Corporation's representative, especially as regards the Hankow-Peking concern.
February 19, 1908.
[2856 bb--2]
2
Regarding the question, however, in the light of the results hitherto shown by construction under native official direction, and bearing in mind the financial obligations which the Chinese Government incurs in these undertakings, it appears to us-and
3
we submit this opinion for your careful consideration-that the successful development Agreement which would be eventually signed the right of transferring this contract to a
of foreign railway enterprises in China lies in the direction of loans to be concluded in combination with contracts for construction work, a system which, while leaving to the Chinese the control upon which they insist, would facilitate the loans and insure the rapid, efficient, and economical construction of the railways.
We are of opinion that, with the sympathetic and united support of the British and French Legations, this system could readily be made to appeal to the Central Government, and, although it might at first be opposed by the provincial officials, experience would demonstrate to them also its obvious advantages. Finally, we are of opinion that an Anglo-French combination to finance and construct railways on these lines would practically control the situation, provided that it could command a reasonable prospect of equal opportunities. It is already evident that the Japanese Government intends to use its powerful influence with the Chinese, and to make every effort in Europeau financial circles, to obtain a preponderating position in Chinese railway con- struction, and a definite policy of consistently united action, backed by diplomatic support, is therefore, in our opinion, essentially necessary.
The interests of the Chinese Central Railways, as well as those of the British and Chinese Corporation, are definitely associated with those of the French banks interested in Chinese railways. To make this combination effective, under existing conditions, it would be necessary to combine construction interests, affiliated to the two groups, under a system similar to that of the financial interests, whereby competition would be eliminated and profits shared. The undertakings already given in regard to Belgian and Japanese participation would remain undisturbed, but it should be clearly under- stood that they involve no further benefits than those prescribed in those arrange.
ments.
In conclusion, we are of opinion that the Syndicate should realize that in certain cases it would be of immediate advantage if either the French or British group were in a position to negotiate separately for any business in which Chinese susceptibilities might take exception to joint negotiations, it being always understood that in such cases the resultant profits would be shared. The recent Wuchang negotiations, wherein the Viceroy Chaug took exception to the introduction of French capital, indicate the advisability of providing for such emergencies, and an arrangement allowing of indepen- dent action by either group would greatly simplify the situation while leaving the ultimate ends of the partnership unimpaired.
We have, &c. (Signed)
(3.)
Memorandum from French Group.
J. O. P. BLAND. CASENAVE.
In order to thoroughly understand the proposal made to-day it is important for Mr. Addis to remember the terms of the Agreement concerning the Hankow-Canton line, which Agreement has been signed by him, acting on behalf of the British and Chinese Corporation, and M. Simon, acting on behalf of a French group. The principal conditions of this Agreement are :-
1. Eventually, the constitution of an Anglo-French Company on the basis of the Chinese Central Railways.
2. The sharing between the English and the French groups of the whole of the financial and industrial advantages, each group being entitled to one-half of them.
3. The sharing between the two groups of the recruiting of the staff, each group doing one-half,
4. Organization of an office in London and an office in Paris.
The proposal now made is the following:-
The British and Chinese Corporation should negotiate directly with the Chinese Government the granting of the Peking-Canton Railway, reserving, however, in the
new British Company, to be formed according to the arrangements agreed upon by the French and English groups, the principal conditions of which are mentioned above. If this proposal were accepted it should be understood that the London office of the new Company to be formed would have the exclusive management of the Hankow-Canton line, which it would manage on behalf of the new Company, and that the Paris office would have the exclusive management, under the same conditions, of the Flankow- Peking liue, each of them consequently having to appoint for their respective line the staff necessary in China, the orders for material and the financial advantages being, however, shared between the two groups.
The Hankow-Peking line being now under the control of a Company partly managed by the French group, it is clear that the proposal hereinbefore stated implies serious advantages to the English group, since the French group only asks for the main- tenance of the present situation re the staff in the Hankow-Peking concern, and since it yields also to the English group half of its rights re material and financial advantages in the Hankow-Peking line. Moreover, in the Hankow-Canton concern the French group waives the right of appointing the staff, although half of this staff, according to the arrangements between Messrs. Addis and Simon, ought to be appointed by the Paris office.
Such being the case, and in compensation for these very material advantages granted by the French group to the English group, the former merely requests that the English group bind themselves to support the negotiations which the French group may enter upon with the Chinese Government in order to obtain contracts for two railways which are entirely outside the scope of the English group, namely:
(a.) The extension of the Yunnan Railway as far as the Szechuan. (b.) Another line to join Canton to the Indo-Chinese frontiers.
Moreover, it would be understood that these two concerns would be eventually trausferred to a Franco-British Company formed under the French law, the British group subscribing one-half of the capital, as in the Chinese Central Railways, but with the only difference that the British group should have in this new Company the situation now occupied in the Chinese Central Railways by the French group.
If special arrangement should exist for the Hankow-Peking line between the British and Chinese Corporation and the Peking Syndicate, or any other British group, by virtue of which the Hankow-Peking line, being situated north of the Yang-tsze, must be controlled by the Chinese Central Railways, the above proposal could still be realized; but in that case the Paris office of the Chinese Central Railways would manage the Hankow-Peking concern, the London office of the new Company to be All profits accruing from formed having the management of the Hankow-Canton line. the Hankow-Peking line would in that case belong to the Chinese Central Railways, whereas the profits of the Hankow--Canton line would go to the new Company to be formed.
In any case a French Company would be formed which would take up, amongst other aims in China, the rights granted to the French group by the Hankow-Canton Agreement.
The said French Company would at the proper time discuss with the British and Chinese Corporation the allotment, either re the Hankow-Canton Railway or re the whole of the Peking-Hankow-Canton line, of the rights to be respectively exercised by the English group and by the French group according to the above-mentioned basis.
If Mr. Addis' group agrees to these proposals it would be useful that he should let it be known to M. Simon without delay, in order that the latter may settle the matter and take the necessary steps with the French Foreign Office, so that the latter may instruct the French Minister in Peking to support the negotiations of the British and Chinese Corporation's representative, especially as regards the Hankow-Peking
concern,
February 19, 1908.
[2856 bb--2]
B 2
252
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