CO129-351 - Public Offices - 1908 — Page 674

In the opinion of His Majesty's Government, the question whether the proposed line would or would not injuriously affect the South Manchurian Railway is one for the decision of the Japanese Government. Such a position would certainly be assumed by His Majesty's Government if the question arose of the construction of a line competing with a British Railway Concession in China.

Count Hayashi added that the Japanese Government regretted exceedingly that the interests of English contractors and financiers should have suffered by the fact that Japan upheld the terms of a solemn Agreement made between herself and China. The latter Power, when she made the loan with the British and Chinese Corporation and entered into the contract with Messrs. Pauling, must—or, at any rate, should—have known that she was breaking one Article of a solemn Agreement, which Agreement, besides this Article, contained others which it would be greatly to the disadvantage of China if Japan ignored in the same manner, and in which China would seem to have ignored Article 3.

From the above you will see that the chances of the Japanese Government departing from the position which they think they have rightly taken up are very remote.

I am to see Count Hayashi again in a few days, and will lay before him unofficially a Memorandum containing the points raised in the various documents forwarded to me by His Majesty's Government, and I will again press the matter unofficially on his Excellency's favourable consideration; but, judging from the arguments he used on the occasions I have mentioned, I do not, I regret to say, anticipate any favourable results from my further representations.

Believe me, &c. (Signed)

Inclosure 3 in No. 1.

Memorandum.

BY Article 3 of the Secret Agreement attached to the Chino-Japanese Treaty of December 1905—

"The Chinese Government engage, for the purpose of protecting the interests of the South Manchurian Railway, not to construct, prior to the recovery by them of the said railway, any main line in the neighbourhood of and parallel to that railway, or any branch line which would be prejudicial to the interest of the above-mentioned railway."

In virtue of this Article the Japanese Government have recorded their objection to the proposed construction by the Chinese Government of a line to run from Hsinmintung to Fakumen, a distance of about 50 miles, on the ground, presumably, that it would at once be parallel and prejudicial to the South Manchurian Railway.

Messrs. Pauling and Co., a British firm, have entered into a contract with the Chinese Government to construct the above-mentioned line. While admitting that, prima facie, the Japanese contention might appear to be justified, they insist that in reality it is not so. They trust, therefore, that the Japanese Government will impartially weigh the arguments adduced below, in the hope that they may reconsider their previous decision.

Messrs. Pauling and Co. allege that the fact of the two lines being parallel is discountenanced by the distance which separates them, namely, 35 miles at the nearest point, and by the presence of the Liao River, a deep and unfordable stream, which forms a natural physical barrier dividing the districts traversed.

The town of Fakumen has a population of 40,000 inhabitants. The whole district is closely cultivated, and its trade goes by road exclusively to Hsinmintung, the nearest railway terminus. The substitution of railway transport for road transport need not therefore be regarded in the light of competition.

The construction of this 50 miles extension must necessarily increase the existing trade and traffic, which at present passes by road to Hsinmintung. From there an augmented, and not a diminished, volume of freight and traffic would be forwarded to Mukden, to the benefit of the South Manchurian Railway.

So far, therefore, from being prejudicial and competitive, the proposed line may rather be expected to act as a feeder to the Japanese railway, and consequently prove beneficial.

Page 0

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

CHINA RAILWAYS.

CONFIDENTIAL.

[16370]

No. 1.

667

C.0.

20024

[May 12.]

SECTION 1. 6 JUN 08

Li Ching-fong to Sir Edward Grey.—(Received May 12.)

Your Excellency,

Chinese Legation, May 11, 1908. WITH reference to the interview I had with your Excellency on the 8th instant, at which I brought up the question between China and Japan of the construction of the Hsin-Min-Tun-Fakumen Railway, I have the honour to transmit herewith a copy of the translation of a telegram which I have received from the Wai-wu Pu, and which I have been instructed to communicate to your Excellency for information.

I have, &c. (Signed)

(Translation.) (Telegraphic.)

Inclosure in No. 1.

The Wai-wu Pu to Li Ching-fong.

May 7, 1908.

IN last year the Viceroy and the Governor of the Fengtien Province proposed to extend the section of the Imperial North Railway outside the Great Wall from Hsin-Min-Tun to Fakumen, and had already instructed Messrs. Pauling and Co., a British firm, to undertake the survey and construction of the proposed line. To this the Japanese Minister protested on the grounds that the line would be in the neighbourhood of and parallel to the South Manchurian Railway, that its construction would therefore be detrimental to the prosperity of the latter, and that it was in contravention of what was recorded in the Minutes of the China-Japan Treaty negotiations.

Although this Department has repeatedly refused to entertain the views of the Japanese Minister on the question, yet he still maintains his opposition.

It has also been heard that the Japanese Government have forwarded the Minutes of the said negotiations to His Britannic Majesty's Government for their information.

Now it is recorded in the said Minutes that, with the view of conserving the interests of the Manchurian Railway, the Chinese Government agree not to construct any railway in the neighbourhood of and parallel to the said railway until they have recovered its possession.

When the Plenipotentiaries of the two Powers came to negotiate for a Treaty on the subject China raised the question that the interpretation of the word "parallel" was too vague and too unlimited, and it was necessary that there should be clearly stated the limit of miles within which other lines could not be built. To this Japan replied that if that were done other Powers would say that Japan had placed restrictions on the rights of China in the construction of her railways. Later on, China again suggested that, in accordance with the usual practice which obtains in Europe and America regarding railway inter-communication, it was necessary that the distance within which two lines parallel to each other should not be built should be clearly defined, but Japan said that the practice in this regard varied in different countries, and that it was not necessary. Japan further declared that she would not place any obstacles in the way of any steps which China might take to develop Manchuria.

Now the extension of the line from Hsin-Min-Tun to Fakumen is the principal step towards the development of the country, and the line is not in the neighbourhood of and parallel to the South Manchurian Railway; it cannot, therefore, be detrimental to it in any way, but, on the contrary, it would increase facilities of communication and develop trade. The proposed line is therefore not in contravention of what was recorded in the said Minutes.

Besides making a reply to the Japanese Government in this sense, the Department telegraphs this to you. Please communicate it to the British Foreign Office.

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