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be obtained for the loan by telegraph in two or three days. They said that they would have both the drafts translated and submitted to the Grand Secretary without delay.
C. W. CAMPBELL,
February 7, 1909.
(Signed)
Inclosure 2 in No. 1.
Memorandum by Mr. Bland respecting Hankow-Canton Railway Negotiations.
THE following is a résumé of these negotiations since the date of my last Memorandum (4th instant):-
•
On the evening of the 4th instant the Yuch-han Delegates wrote officially, repudiating any intention on the part of his Excellency Chang to negotiate an Agreement on the lines discussed at our last meeting (2nd instant), i.e., he would not discuss the question of construction contract, and declined to accept any arrangement which should invest the Engineer-in-chief with the desired measure of authority. Either of these alternative conditions having been formally stated to be the minimum which His Majesty's Minister would consider sufficient to give effect to the Agreement of 1905, and to recognize the obligations incurred by China in respect of the Hong Kong Government Loan, I received Sir John Jordan's authority to state, in reply to the Delegates, that Mr. Campbell would attend the next meeting to explain the views of His Majesty's Legation on the whole question.
This meeting was held on the 6th instant (Mr. Wang, the Yuchuanpu's repre- sentative, was not present.) I brought with me a rough draft of Loan Agreement (based on that of the Fakumen Railway) for the construction contract alternative; and for the other, I had made the few necessary alterations in the text of the Tien-tsin- Pukou Railway Agreement, substituting for Article 17 therein the conditions of Article 6 of the Canton-Kowloon Railway contract in regard to the duties and responsibilities of the Engineer-in-chief. Just before going to this meeting I had received the Corporation's instructions by wire stating "the control of the funds must not be less than in the case of the Canton-Kowloon Railway Loan," but as the recovery of direct control of accounts was evidently impossible (since it is known that the Deutsch-Asiatische Bank and others are prepared to accept Tien-tsin-Pukou Railway terms), and as all recent experience goes to prove that the Engineer-in-chief's certificate for requisitions on the loan funds and on statements of materials purchased is essential to secure honesty and regularity in expenditure, I followed the advice of His Majesty's Minister in limiting my conditions to those originally stated. Mr. Campbell having emphasized the obligations conferred on China under the Hong Kong Government Loan and the necessity for some adequate quid pro quo, and having explained that in the light of recent experience the better protection and control of loan funds had become necessary, the Delegates eventually modified their uncompromising refusal to discuss these conditions, and agreed to submit translations of both drafts to his Excellency Chang and inform us of the result. (Mr. Campbell also took the occasion to remonstrate with the Delegates for stating that the Corporation was responsible for delay in these negotiations, the delay being entirely of their own making.) At the conclusion of the meeting they appeared to hold a reasonable view of the proposals, and agreed, in any case, that if his Excellency Chang should refuse them and negotiate with other parties, he would conclude no Agreement without first offering the refusal to the British Minister.
On the 8th the Delegates again requested me to attend a meeting. On this occasion they stated finally that his Excellency Chang would not discuss construction contract, even for a section of the line. They continued, however, to discuss the alternative proposal in a fairly reasonable manner, and I explained in detail the changes which I proposed to make in the Tien-tsin-Pukou Railway Agreement. They under- took to prepare a draft in Chinese, and to send it in on the 11th instant, embodying the conditions acceptable to his Excellency Chang, and at the same time urging the necessity for an early conclusion of the business, and requested me to telegraph to the Corporation for a quotation of price. This, on the understanding that they would agree to the terms which I had stated in regard to the Engineer-in-chief and Agency, I undertook to do. I telegraphed accordingly on the 9th.
On the 11th the Delegates wrote, forwarding no draft, but requesting me to discuss
the matter further that afternoon. I attended and found that they were no longer prepared to give any authority to the Engineer-in-chief, or to agree to conditions calculated to make the Agency clause of any value or effect. The draft they had prepared was practically a "financial loan" with vague conditions for supply of materials dependent upon the good-will and good faith of the Railway Administration. I stated that, in my opinion, and in the light of my instructions, the draft was quite unacceptable, but undertook to examine it carefully and let them know definitely on Saturday, the 13th.
After examining the draft in detail, I informed Sir John Jordan that, from the Corporation's point of view, it provided no possible basis for a Loan Agreement, and I proposed therefore to state that if these were his Excellency Chang's final proposals the Corporation could not accept them, and would therefore be compelled to report accordingly to His Majesty's Minister, and leave the further settlement of the matter in his hands.
Upon this understanding I attended at the Yueh-han office to-day and found the Delegates (Messrs. Kao and Tseng) quite uncompromising. They would offer no modification of their conditions in regard to the essential features of the Agreement, and announced their intention of inviting offers at once from other quarters. I reminded them that his Excellency Chang's obligations to His Majesty's Government would remain unaffected by the Corperation's failure to conclude a loan on their terms; this they admitted, and undertook that his Excellency Chang would inform His Majesty's Minister before accepting proposals from any non-British source. I suggested the advisability of my seeing his Excellency and placing before him the reasons which prevent the Corporation from accepting the terms proposed. Mr. Kao replied that his Excellency Chang would certainly refuse an interview; he further stated that neither the Delegates nor his Excellency Chang were prepared to discuss the question with His Majesty's Legation, but would refer them to the Wai-wu Pu.
The sudden and complete change in the attitude of the Chinese since the 9th instant can only have been caused by outside (influences, and is no doubt due to their having been promised funds upon purely financial loan terms. (The good faith of such promises is open to doubt.) It is, in my opinion, improbable that without the co-operation of the leading British and French financial institutions, such a loan could be floated on the terms now proposed by his Excellency Chang; but, if it can, the Chinese are bound to inform His Majesty's Legation, before concluding any Agreement, of the terms offered them.
February 13, 1909.
(Signed) J. O. P. BLAND.
Inclosure 3 in No. 1.
Memorandum communicated by Sir J. Jordan to Liang Shih-yi.
IN September 1905, at the special solicitation of the Grand Secretary Chang Chih-tung, and to show the friendly desire of His Majesty's Government to assist with the development of the Hankow-Canton Railway, which is a matter of consequence to the trade of Hong Kong, a Government loan of 1,100,000, without discount, at 4 per cent. was negotiated, and the money was delivered to his Excellency for the purpose of redeeming an old Concession given to an American Syndicate. In return for this signal act of assistance, his Excellency agreed to give British financiers and British industry a preference for the provision of loans and materials for the Canton- Hankow and other railways, cost and quality being equal.
In pursuance of this Agreement, Mr. Bland has been in negotiation with the Grand Secretary's Delegates for some time past, and there is at this moment only one serious point of disagreement between them. Mr. Bland requires that the precedent of the Canton-Kowloon Railway Loan Agreement should be followed in respect of the duties of the Chief Engineer, whose certificate is attached to all requisitions for the expenditure of loan funds; and his Excellency's Delegates refuse to follow this precedent, alleging that the Chief Engineer's certificate is unnecessary.
The Chief Engineer is the only person technically qualified to certify to the cost and nature of the work done on a railway, and without his certificate it is not possible to make certain that the loan funds are properly expended. Mr. Bland's requirement is
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