CO129-360 - Public Offices - 1909 — Page 592

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made, but on the 31st I received a letter stating that his Excellency had now decided to abandon the idea of a construction contract as "contrary to precedent, and likely to impair Chinese control." At the same time the Delegates stated that, if no mention were made of contract, the engineers might proceed to make a rapid survey of the line, their expenses being paid by the Railway Administration as agreed, and they requested me to attend at their office to discuss the matter. I went on the 2nd instant, after having discussed the situation with His Majesty's Minister and obtained his authority to inform the Delegates (and, if necessary, his Excellency Chang) that the position now assumed towards the Corporation and the interpretation placed on the "Fraser Agreement " of 1905, afford no adequate recognition of the obligations incurred by the Chinese Government under the Hong Kong Government's Loan Agreement. I was instructed, therefore, to state that no "financial loan" would meet the requirements of the case, and that His Majesty's Government would expect his Excellency Chang to agree either to a British "construction contract' to construction by an Engineer-in-chief, appointed by the Corporation, with authority sufficient to safeguard the British preferential right in regard to purchase of materials. I placed these conditions clearly before the Delegates, whose attitude was not unfavourable to negotiations on these lines.

or

They promised that his Excellency Chang would telegraph instructions to the Wuchang Viceroy to afford all possible assistance to Messrs. Ormsby and Tristram in framing an estimate for the Hupeh section of the railway; they said that his Excellency, while unwilling to give any formal undertaking in re construction contract, and anxious to proceed at once with the Loan Agreement as a question entirely distinct therefrom, would nevertheless consider Messrs. Pauling's proposals when submitted, and they thought it not improbable that he would eventually accept them. In the meanwhile it was agreed that I should draft alternative forms of Loan Agreement, one providing for construction contract and the other for construction under a British Engineer-in-chief, these drafts to be sent in for the consideration of his Excellency at the earliest possible date.

There is no doubt that his Excellency Chang is in constant communication with the Belgians, Germans, and Japanese with a view to competitive offers; but if it is clearly understood that competition on "financial loan" "conditions is incompatible with his obligations to His Majesty's Government there would appear to be every reason to hope for a satisfactory conclusion of an Agreement by the Corporation.

February 4, 1909.

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1909

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HONG KONG

STRAITS

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28000--11-08

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