38
deficit on the Luban line, and is willing that a line should be built from Yencheng to Puk'ou, the Peking Syndicate shall have the right to construct it. On this point it will be proper to wait till the Luhan line is completed, and a calculation made of the receipts, whether they are sufficient to meet the repayment of interest and capital, and then, if China wishes to construct this line, she will consult with the Peking Syndicate.
With regard to what is said on the fourth point, that the final Agreement for the Sinyang to Puk'ou line should be arranged at Shanghae by Mr. Brenan with Sheng Ta-jên, the draft Agreement in this case has already heen drawn up, and the final Agreement should naturally still be left to Sheng Ta-jen to settle with Mr. Brenan,
As to what is said on the fifth point, the Szechuen-Ilankow line, that if China desires to construct such a line and her capital is insufficient, she will obtain all the necessary foreign capital from Great Britain and the United States, and as to the proportion to be contributed by cach and the non-alienation of the same to a third Power, I find that what is said in your letter is in agreement with what was said in conversation between Mr. Townley and myself.
I have, &c.
No. 47.
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My colleague said that under the circumstances it seemed necessary for him to report to Berlin ou the subject, and in view of the probability of his doing so, I have thought it desirable to lose no time in acquainting your Lordship with the substance of my conversation with him.
I remarked that there was no reason why we should not treat this question amicably, but as your Lordship will observe I made it quite clear to him that in my opinion we were entitled to object very strongly to the terms of the Concession granted by the Chinese Government in derogation of their previous Agreement with Great Britain.
I have, &c (Signed) ERNEST SATOW.
No. 48.
The Marquess of Lansdowne to Sir E. Satow.
(No. 189.) (Telegraphic.) P.
Foreign Office, November 23, 1903. YOUR telegram of the 12th instant, No. 250. The 17th October is the date from which Brigadier-General Ventris' proinotion to rank of Major-General will date.
(No. 346.) My Lord,
Sir E. Satow to the Marquess of Lonsdowne,~(Received November 23.)
Peking, October 8, 1903. WITH reference to your Lordship's despatch No. 251 B, of the 26th August, approving the language held by Mr. Townley to Baron von Mumm, as reported in his despatch No. 258 of the 2nd July, regarding the grant by the Chinese Government to a German Company of mining rights within an area of 200 li round Chefoo, I have the honour to state that I took an opportunity of informing my German colleague to-day of the view entertained by His Majesty's Government.
I pointed out that the Concession to the German Company was dated more than a year after the Convention by which Wei-hai Wei and the surrounding territory was leased to Great Britain, and that had my predecessor been aware of the terms of the German Concession at the time it was granted he would have been justified in protesting to the Chinese Government against the grant of mining rights to German subjects, not only within the zone which may be occupied exclusively by Chinese and British troops, but also within the leased territory. Had a British subject obtained a similar Concession within the zone of influence surrounding the territory leased to Germany at Kiao-chou with the support of the British Legation, the German Government would naturally have regarded it as an unfriendly act. His Majesty's Government were entitled to acquire land for certain purposes anywhere within the territory to the east of longitude 121° 40', and obviously these rights might clash with the convenience of any one desiring to open mines.
Baron von Mumm said that he believed the German Concession specifically excepted the leased territory of Wei-hai Wei, but he would look again at the document.
*
I said that Mr. Townley had reported him to have said a clause of the Concession provided that places already conceded for the working of mines, &c., to the merchants of other nations are naturally excepted," and I asked whether he would let me see the document.
M. de Mumm replied that he would examine the Concession, and would perhaps be able to show me that part. He admitted that the German Legation had intervened to prevent mining rights being granted to the British Company outside the boundary of the leased territory and within the zone of influence, because they regarded such a protest as justified by the juridical interpretation of our lease of Wei-hai Wei. He had considered that he was precluded therefore from instructing the German Company to desist from claiming mining rights where their Concession overlapped our zone of influence, but he had advised them to come to an understanding with the British Company, which was reported to be endeavouring to obtain mining rights in some other part of Shantung, that would conflict with the interests of the German Company.
I replied that I believed the application for mining rights of which he spoke had been made by a Syndicate distinct from that interested in mining at Wei-hai Wei.
No. 49.
Memorandum by Mr. Keswick.- (Received at Foreign Office, November 25.)
THE British and Chinese Corporation are so anxious to give effect to the Shanghae-Nanking Railway Loan Agreement that, in order to secure the successful flotation of the loan, they are prepared to offer, as an inducement to investors to subscribe for the loan bonds, the 20 per cent, share in the net profits of working the railway reserved to the Corporation in the Loan Agreement.
The British and Chinese Corporation are further prepared, should it be necessary, to issue the loan at cost price, ie., the price at which they take the bonds from the Chinese Government, plus only the actual expenses of negotiation already incurred by them to date, and those expenses which must necessarily be incurred in making the public issue, in which case their remuneration for all their work in the past and for all the services and duties which will devolve upon them during the construction of the railway, and the currency of the loan will thus be confined to 5 per cent. on the actual cost of material employed in the railway.
2. The Loan Agreement, it is admitted, contemplates the issue of the loan by instalments, and the construction of the line one section at a time, but the Corporation contend that the Railway Board of Commissioners, specially appointed to control the construction, have the right to adopt that system of construction which they may be satisfied is best for the undertaking. In this respect the interests of the Chinese Railway Administration and of the British and Chinese Corporation are identical, viz., that the railway shall be well designed, constructed and equipped, as quickly as possible, and at a reasonable cost, and under arrangements which will ensure that the loan issued therefor is sufficient.
3. Construction by Contract and the emission of the whole of the bonds in one issue is, in the opinion of the directors and financial advisers of the Corporation, essential to the successful flotation of the loan, because intending subscribers will have to be satisfied that the railway will be made for the money, and that the money to make the railway is assured. If a participation in the prospective profits of the finished railway be offered with the bonds as an inducement, completion by a fixed date (which can be secured only by a Contract) is a further and very material consideration to an Unless the whole loan be issued and the proceeds absolutely intending investor. secured, a Contract for the construction of the railway could not be let on the best terms to a responsible Coutractor.
4. The successful flotation of the loan is material to Chinese credit, and the Chinese should welcome, therefore, any reasonable arrangement which is calculated to inspire confidence in their securities. The construction of the railway in the shortest possible time is an additional consideration to the Chinese, as the completion and successful operation of the line will not only obviate any necessity on their part to
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