[This Document is the Property of His Britannic Majesty's Government.]
2
following effect: "The French Government while not indisposed to consider the question of Anglo-French-German entente générale, will not consent to German participation in the Hankow-Canton Railway ad hoc." The reply was clear and definite beyond all question and having informed M. Homberg that it would be duly communicated to the Germans Mr. Addis left the same day for Berlin. On the 23th instant, this reply was communicated to the Germans by Mr. Addis, word for word, accompanied by an expression of regret at its unfavourable character. It may be mentioned that Mr. Addis has informed this Department that he pointed out verbally to the French financiers that the result of this communication must be to throw the onus of the refusal of German participation upon the French.
As regards the right of the French group to a share in the preference granted in 1905 by Chang Chi Tung to the British, it is true that the arrangement concluded in October, 1906, between the two groups contemplated the formation of a British Company to deal with the loan and the advantages derivable therefrom on terms of equality; and if no modification of this Agreement had occurred the French would as shareholders in the British Company have been entitled to an equal share of the industrial, as well as of the financial, advantages arising from the flotation of the loan.
By the subsequent Agreement, however, arrived at between Messrs. Addis and Simon in February, 1908, the French group waived these rights without, it is true, the explicit sanction of the French Government, but their sanction appeared implied by the fact of their allowing the Loan Agreement of 1908 to be concluded, and it would, in these circumstances, be exceedingly difficult, if not impossible, for His Majesty's Government to get the British group to forego those rights which have thus been admitted. The maintenance of these rights in the case of this particular railway would, indeed, appear only equitable in view of the fact that it is solely owing to the action of the British Colony that the Chinese are now in a position to proceed with the construction of this line.
His Majesty's Government observe with much concern that it is now desired according to the French Memorandum to dispute the validity of this last Agreement on the grounds that the French group have not obtained any of the appointments and industrial advantages desired by them in respect of the Peking-Hankow line, and that the Agreement (the 24th February, 1908) was signed by M. Simon on behalf of the Banque de l'Indo-Chine only, and is, therefore, not binding on the other members of the French group.
On the first point it is necessary to observe that it cannot be alleged that the British Bank has not carried out its part of the engagement entered into, and that the securing of the industrial advantages desired formed no part of the Agreement; and, indeed, there is no apparent reason why any Corporation on the part of the British Sydicate should have been required for this object.
As regards the second point the Agreement expresses that it is made on behalf of the British and French groups, and its purport and scope forbid its limitation to the Hong Kong and Shanghae Bank, and the Banque de l'Indo-Chine. It was, moreover, confirmed by a Memorandum of the French group of the 25th January, 1909.
It is hardly necessary to call attention to the deplorable effect which a repudiation
of this Agreement must create in the business circles concerned.
His Majesty's Government trust that on further consideration of the facts of the case in the light of this explanation the French Government will admit the justice of the arguments advanced. It appears to them most desirable as regards the future, in order to avoid misconception and also competition, which would result in the Chinese obtaining loans on their own terms, that some definite arrangement should be come to for the future between the countries concerned as to both the financing and construction of any lines for which China may invite foreign assistance, and any suggestions which the French Government may have to offer in this respect will be welcomed by His Majesty's Government, who feel sure that the French Government will agree with them in thinking that a return to the system of active international competition for every loan which the Chinese may desire to issue would be most unfortunate.
E. GREY.
Foreign Office, February 15, 1909.
(Signed)
CHINA RAILWAYS.
JONFIDENTIAL.
[7112]
C.O.
8782
[February 22.]
SECTION 1.
REC
REGP 12 MAR OF
No. 1.
Sir J. Jordan to Sir Edward Grey.-(Received February 22.)
(No. 61.) Sir,
Peking, February 5, 1909. THE inclosed Memorandum by Mr. Bland brings up to date the story of his uegotiations with the Delegates of the Grand Secretary Chang Chih-tung in regardi to a Canton-Hankow Railway Loan, which was commenced in my despatch No. 2 of the 1st ultimo, and it will be seen that he has got the length of drafting alternative forms of Loan Agreement, one providing for construction by contract and the other for construction under a British Engineer-in-chief, which draft forms are to be sent in for the consideration of the Grand Secretary as soon as possible.
It is perhaps unnecessary for me to recapitulate the telegraphic correspondence with yourself from your telegram No. 12 of the 13th ultimo to my telegram No. 35 of the 2nd instant on this subject, but I think I should mention that my telegram No. 33 of the 23rd ultimo was evoked by a strong personal conviction that the British financial group did not fully appreciate the danger of entering into arrange- ments with third parties regardless of the Hankow Agreements of September 1905, and that our own special rights, which have been vigilantly defended during the past three years both at Hankow and here, were not receiving due recognition. It is true that the attitude of the Grand Secretary is unsatisfactory, and that he is taking, or affecting to take, a light view of his obligations to us, but I have consistently reminded Messrs. Bland and Casenave that, when all is said and done, the fact remains that we lent the Chinese Government a large sum of money on easy terms in connection with this matter. Apart from our claims under the letter of the 5th September, 1905, we have a clear right to some advantage for that financial assistance, and we can insist, if it comes to competitive tenders, to fair and reasonable dealing, and a measure of preferential treatment.
I have, &c.
J. N. JORDAN.
Inclosure in No. 1.
(Signed)
Memorandum by Mr. Bland respecting Negotiations for the Hankow-Canton Railway Loan. SINCE the date of my last Memorandum (24th December) there is little progress to be reported. The proposals which were to have been sent in by the provincial Delegates at that date were not forthcoming, and no overtures were made for further discussion of the matter until the 13th January, when I attended a second meeting. On this occasion the attitude of the Delegates was far more reasonable than before; they stated (inter alia) that there was no question of the Japanese claiming any construction rights under a British loan, and that his Excellency Chang had definitely decided, provided the terms offered were reasonable, to make a construction contract in conjunction with the Loan Agreement. Before leaving I induced Mr. Kao to write out a rough Memorandum of the general conditions agreed upon, which he promised to send me on the following day, after showing it to his Excellency Chung Chih Tung as a matter of form. This Memorandum was not sent; and on the 18th I received a letter from the Delegates stating that it was delayed owing to his Excellency's illness. It was, however, matter of common knowledge that his Excellency Chang's decision to authorize a construction contract was being strongly opposed by the Yuchuanpu and others interested in the maintenance of the financial loan policy, and that the pressure brought to bear upon the Regent was making this decision a matter of some uncertainty.
On the 25th January Messrs. Pauling's engineers, Messrs. Ormsby and Tristram, arrived in Peking, brought out, by authority of his Excellency Chang, to submit estimates for construction. Lord ffrench wrote accordingly on the 27th to the To this no direct reply was Delegates requesting an interview to arrange details, &c.
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