666
2
to inclose, and discussed with his Excellency the various points raised by Messrs. Pauling, Count Hayashi repeated what he had said on previous occasions; with regard to Messrs. Pauling's contention that the fact of the two lines being parallel, and therefore competitive, was discountenanced by the distance which separates them--35 miles at the nearest point--and by the presence of the Liao River-a deep and unfordable stream-his Excellency remarked that these arguments might hold in a populous country, but in the districts concerned there was not sufficient trade to maintain two lines of railway, certainly not at the present time. Japanese experts had gone carefully into the question and had come to the conclusion that a railway from Hsinmintung running northwards and parallel to the South Manchurian Railway would very seriously menace the commercial prospects of the latter railway, and for this reason the Japanese Plenipotentiaries had been instructed to insert Article 3 in the Protocol. His Excellency reminded me that in the various Railway Concessions which had been granted by China to British concessionnaires, most of which had been negotiated when I was British Representative at Peking, a similar Article had been inserted prohibiting the building of parallel lines of a competitive nature. Count Hayashi further said that he begged that I would treat this statement as confidential; that the Japanese Government were convinced that should a line be built from Hsinmintung to Fakumen and beyond, the Chinese Government and the Chinese authorities would so arrange that practically the entire trade of the district, outside the narrow strip under the administration of the South Manchurian Railway, would go to the Chinese line; about this there could be no possible doubt, and it was only natural it should be so, There might be instances where self-interest would exceed patriotism, but Chinese officials would know how to deal with such cases; indeed, the Japanese Government were in possession of certain information that the Chinese promoters of this line had stated that its main object was to damage the South Manchurian Railway. With regard to the first part of this statement, I think that it is more than probable that the Hsinmintung-Fakumen Railway, a Chinese line running through Chinese territory, would certainly tap practically all the trade on both sides of the Liao up to the borders of the South Manchurian Railway administration, and would thus undoubtedly damage very seriously the commercial prospects of the undertaking, an undertaking which, as Count Hayashi pointed out, was practically the only asset possessed by Japan as the result of a victorious war, conclusion, Count Hayashi repeated that it was a source of sincere regret to the Japanese Government that British interests had been injured in this matter, but had inquiries been made in the proper quarter before the contract and the loan had been entered into, full information would have been given, which would have saved much disappointment.
In
Judging from the comments in the press, the entire country is unanimous in supporting the position taken up by the Government in this question. In view of the arguments put forward by Count Hayashi, and more particularly with regard to an observation he made in the course of our conversation, to the effect that representations, even though made in the unofficial and friendly manner in which I had been authorized to make them, would lend considerable moral support to the Chinese in their contentions, I venture to think that any further representations on my part would be unadvisable.
I have, &c.
(Signed) CLAUDE M. MACDONALD,
Inclosure 1 in No. 1.
Lord Ffrench to Sir C. MacDonald.
Your Excellency,
Shanghae, March 10, 1908. MESSRS. PAULING AND CO., whom I have the honour to represent, have informed me by cable that His Majesty's Government has forwarded to you a Memorandum containing some of the reasons put forward by our firm why the Japanese should withdraw their objections to the building of the railway in Manchuria known as the Hsinmintung-Fakumen Railway. I understand that this Memorandum was to be shown by you unofficially to the Japanese.
My firm has cabled to me to communicate with you, because I was the person who negotiated the contract with regard to the railway, entered into between ourselves and the Chinese, and so that you might have at your disposal such a Memorandum of our reasons as my local knowledge should enable me to give. I therefore have the honour to inclose a Memorandum bearing on the subject, and I trust your Excellency's good
3
offices will induce the Japanese to withdraw their objection, and thus avoid the friction which must necessarily ensue if the policy of the open door in Manchuria is not adhered to.
Apart from the many reasons set forth in the Memorandum attached, it seems peculiarly unwise for the Japanese to exhibit unnecessarily such hostility to the interests of British firms.
The financial arrangements for the railway in question were undertaken by the British and Chinese Corporation, a firm whose supporters include groups that have no small say in the large financial transactions of the East. The firm which I have the honour to represent is of world-wide reputation and standing. It seems to me, therefore, that, considering the very shadowy nature of the contention that the railway in question will compete with the South Manchurian Railway, the Japanese would do well to reconsider their objection and not give any grounds for an agitation in the press, political and financial, such as might take place if grounds are given for the belief that the open-door policy in Manchuria is a sham, and that Japan means to occupy the same position in that country as Russia did before the war.
On the other hand, the withdrawal of the objection at the friendly instance of her ally should do much to establish a belief in Japan's good faith, while in no way preventing her legitimate aspirations.
I have, &c. (Signed)
Dear Lord Ffrench,
Inclosure 2 in No. 1.
Sir C. MacDonald to Lord Ffrench.
Tokió, April 4, 1908. I HAVE delayed replying to your communication of the 10th March on the subject of the proposed Hsinmintung-Fakumen Railway, pending the receipt of the Memorandum which, in the above communication, you said His Majesty's Government were forwarding to me, to be shown unofficially to the Japanese Government.
By the Foreign Office bag which arrived here on the 31st ultimo I received a despatch from Sir Edward Grey, forwarding copies of all recent correspondence which has passed in connection with the proposed line, including the Memorandum you mention, and also one from the British and China Association, who were prepared to advance the money for the extension. I am requested to lay the arguments put forward by Messrs. Pauling unofficially before the Japanese Government, in the hope of inducing them to withdraw their opposition to the proposed extension.
On the 2nd instant, at the Foreign Minister's reception, I spoke to his Excellency unofficially, and again when I met him at dinner last night, on this question, putting forward most of the arguments mentioned in Messrs. Pauling's Memorandum and in the one you have yourself drawn up, which forms an inclosure in your letter under reply.
I dwelt particularly on the points you raise in section 7 of your letter under the headings (a), (b), (c), &c., to (g) inclusive, in which you endeavour to show that the extension from Hsinmintung to Fakumen, so far from being a competitor of the South Manchurian Railway, must to a certain extent be a feeder of the same. In the course of our discussion Count Hayashi reminded me that the Chinese Government had made an Agreement with Japan, which was recorded in a Protocol signed by the Chinese and Japanese Plenipotentiaries, by which both these Powers were bound; that in Article 3 of this Protocol the Chinese Government engaged themselves in the interest of the South Manchurian Railway, prior to the recovery by them of the said railway, not to construct any main line in the neighbourhood of and parallel to that railway, or any branch line which might be prejudicial to the interest of the above-mentioned railway. He further stated that when the Protocol was signed the Japanese Government had particularly in view this very extension of the Imperial Railways of North China northward from Hsinmintung, which extension they thought would be prejudicial to the interests of the South Manchurian Railway. The Japanese Government, he added, are still strongly of opinion that the extension of this railway to Fakumen and beyond would be prejudicial to the interests of the South Manchurian Railway.
Extract is
In this connection I would draw your attention to the following extract of a letter from Sir Edward Grey to Messrs. Pauling, dated the 12th February, 1908. as follows
666
2
to inclose, and discussed with his Excellency the various points raised by Messrs. Pauling, Count Hayashi repeated what he had said on previous occasions; with regard to Messrs. Pauling's contention that the fact of the two lines being parallel, and therefore competitive, was discountenanced by the distance which separates them--35 miles at the nearest point--and by the presence of the Liao River-a deep and unfordable stream-his Excellency remarked that these arguments might hold in a populous country, but in the districts concerned there was not sufficient trade to maintain two lines of railway, certainly not at the present time. Japanese experts had gone carefully into the question and had come to the conclusion that a railway from Hsinmintung running northwards and parallel to the South Manchurian Railway would very seriously menace the commercial prospects of the latter railway, and for this reason the Japanese Pleni- potentiaries had been instructed to insert Article 3 in the Protocol. His Excellency reminded me that in the various Railway Concessions which had been granted by China to British concessionnaires, most of which had been negotiated when I was British Repre- sentative at Peking, a similar Article had been inserted prohibiting the building of parallel lines of a competitive nature. Count Hayashi further said that he begged that I would treat this statement as confidential; that the Japanese Government were convinced that should a line be built from Hsinmintung to Fakumen and beyond, the Chinese Government and the Chinese authorities would so arrange that practically the entire trade of the district, outside the narrow strip under the administration of the South Manchurian Railway, would go to the Chinese line; about this there could be no possible doubt, and it was only natural it should be so, There might be instances where self-interest would exceed patriotism, but Chinese officials would know how to deal with such cases; indeed, the Japanese Government were in possession of certain information that the Chinese promoters of this line had stated that its main object was to damage the South Manchurian Railway. With regard to the first part of this state- ment, I think that it is more than probable that the Hsinmintung-Fakumen Railway, a Chinese line running through Chinese territory, would certainly tap practically all the trade on both sides of the Liao up to the borders of the South Manchurian Railway administration, and would thus undoubtedly damage very seriously the commercial prospects of the undertaking, an undertaking which, as Count Hayashi pointed out, was practically the only asset possessed by Japan as the result of a victorious war, conclusion, Count Hayashi repeated that it was a source of sincere regret to the Japanese Government that British interests had been injured in this matter, but had inquiries been made in the proper quarter before the contract and the loan had been entered into, full information would have been given, which would have saved much disappointment.
In
Judging from the comments in the press, the entire country is unanimous in supporting the position taken up by the Government in this question. In view of the arguments put forward by Count Hayashi, and more particularly with regard to an observation he made in the course of our conversation, to the effect that representations, even though made in the unofficial and friendly manner in which I had been authorized to make them, would lend considerable moral support to the Chinese in their contentions, I venture to think that any further representations on my part would be unadvisable.
I have, &c.
(Signed) CLAUDE M. MACDONALD,
Inclosure 1 in No. 1.
Lord Ffrench to Sir C. MacDonald.
Your Excellency,
Shanghae, March 10, 1908. MESSRS. PAULING AND CO., whom I have the honour to represent, have informed me by cable that His Majesty's Government has forwarded to you a Memorandum containing some of the reasons put forward by our firm why the Japanese should withdraw their objections to the building of the railway in Manchuria known as the Hsinmintung-Fakuinen Railway. I understand that this Memorandum was to be shown by you unofficially to the Japanese.
My firm has cabled to me to communicate with you, because I was the person who negotiated the contract with regard to the railway, entered into between ourselves and the Chinese, and so that you might have at your disposal such a Memorandum of our reasons as my local knowledge should enable me to give. I therefore have the honour to inclose a Memorandum bearing on the subject, and I trust your Excellency's good
3
offices will induce the Japanese to withdraw their objection, and thus avoid the friction which must necessarily ensue if the policy of the open door in Manchuria is not adhered to.
Apart from the many reasons set forth in the Memorandum attached, it seems peculiarly unwise for the Japanese to exhibit unnecessarily such hostility to the interests of British firms.
The financial arrangements for the railway in question were undertaken by the British and Chinese Corporation, a firm whose supporters include groups that have no small say in the large financial transactions of the East. The firm which I have the honour to represent is of world-wide reputation and standing. It seems to me, therefore, that, considering the very shadowy nature of the contention that the railway in question will compete with the South Manchurian Railway, the Japanese would do well to reconsider their objection and not give any grounds for an agitation in the press, political and financial, such as might take place if grounds are given for the belief that the open-door policy in Manchuria is a sham, and that Japan means to occupy the same position in that country as Russia did before the war.
On the other hand, the withdrawal of the objection at the friendly instance of her ally should do much to establish a belief in Japan's good taith, while in no way preventing her legitimate aspirations.
I have, &c. (Signed)
Dear Lord Ffrench,
Inclosure 2 in No. 1.
Sir C. MacDonald to Lord Ffrench.
IFRENCH.
Tokió, April 4, 1908. I HAVE delayed replying to your communication of the 10th March on the subject of the proposed Hsinmintung-Fakumen Railway, pending the receipt of the Memoran- dum which, in the above communication, you said His Majesty's Government were forwarding to me, to be shown unofficially to the Japanese Government.
By the Foreign Office bag which arrived here on the 31st ultimo I received a despatch from Sir Edward Grey, forwarding copies of all recent correspondence which has passed in connection with the proposed line, including the Memorandum you mention, and also one from the British and China Association, who were prepared to advance the money for the extension. I am requested to lay the arguments put forward by Messrs. Pauling unofficially before the Japanese Government, in the hope of inducing them to withdraw their opposition to the proposed extension.
On the 2nd instant, at the Foreign Minister's reception, I spoke to his Excellency unofficially, and again when I met him at dinner last night, on this question, putting forward most of the arguments mentioned in Messrs. Pauling's Memorandum and in the one you have yourself drawn up, which forms an inclosure in your letter under reply.
I dwelt particularly on the points you raise in section 7 of your letter under the headings (a), (b), (c), &c., to (g) inclusive, in which you endeavour to show that the extension from Hsinmintung to Fakumen, so far from being a competitor of the South Manchurian Railway, must to a certain extent be a feeder of the same. In the course of our discussion Count Hayashi reminded me that the Chinese Government had made an Agreement with Japan, which was recorded in a Protocol signed by the Chinese and Japanese Plenipotentiaries, by which both these Powers were bound; that in Article 3 of this Protocol the Chinese Government engaged themselves in the interest of the South Manchurian Railway, prior to the recovery by them of the said railway, not to construct any main line in the neighbourhood of and parallel to that railway, or any branch line which might be prejudicial to the interest of the above-mentioned railway. He further stated that when the Protocol was signed the Japanese Government had particularly in view this very extension of the Imperial Railways of North China north- ward from Hsinmintung, which extension they thought would be prejudicial to the interests of the South Manchurian Railway. The Japanese Government, he added, are still strongly of opinion that the extension of this railway to Fakumen and beyond would be prejudicial to the interests of the South Manchurian Railway.
Extract is
In this connection I would draw your attention to the following extract of a letter from Sir Edward Grey to Messrs. Pauling, dated the 12th February, 1908. as follows
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