[This Document is the Property of His Britannic Majesty's Government.]
CHINA RAILWAYS.
664 REC
[September 16.E
CONFIDENTIAL.
(34726]
No. 1.
SECTION 1.
(No. 302.) Sir,
Sir J. Jordan to Sir Edward Grey.-(Received September 16.)
Peking, August 28, 1909. I AM happy to be in a position to report that the state of affairs in regard to the southern section of the Tien-fsin-Pukow railway seems to have undergone a distinct change for the better since the dates of my last despatches to you on the subject.
At the time of the visit paid to Nanking by his Excellency Sun Pao Chi, associate director-general, whose departure I reported in my despatch No. 141 of the 1st April last, the auditor, Mr. Ross, had drawn attention to certain grave irregularities which had appeared in the railway accounts for the period ended 31st December, 1908, with regard to the funds deposited in native banks. Apart from the fact that there was some doubt as to the genuineness of the bank certificates in respect of the money so deposited, Mr. Ross was told by the managing director that the item in the accounts purporting to represent the interest received on account of the deposits in native banks was made up merely of a certain proportion of such interest, the balance of the interest actually received being used for "official" purposes and omitted from the railway accounts. Further enquiry into this question on the part of Mr. Ross elicited from the managing director the statement that no interest had been credited to the railway administration during the 12th and 1st Chinese months, as it was a custom of native banks to allow no interest on funds in their hands during that period.
It is difficult to conceive how the railway could benefit, under the above conditions, from funds deposited in native banks, though the latter might nominally pay a higher rate of interest on deposits than the Hong Kong and Shanghae Bank. There is cause, therefore, for satisfaction to be found in the figures now produced by the auditor, showing the steady decrease during the first six months of this year in the amount of railway funds lying in Chinese banks. Mr. Ross shows that at the end of January, out of some 377,000 taels only 672 taels were deposited in the Hong Kong and Shanghac Bank, the remainder lying in the native banks, whereas at the end of June, the Hong Kong Bank held a deposit of over 560,000 taels as against 135,000 tacls in the native banks.
Another very welcome improvement is that which has taken place in the relations existing between Messrs. Jardine, Matheson and Co. and the managing director, Taotai Lo. The former showed great dissatisfaction at the alleged unfair treatment they had received in the matter of the purchase of foreign material for the railway observed that in January though, from the accounts now furnished by the auditor, last they received orders to the amount of over 100,000 taels. It was pointed out, however, to the firm's representatives by His Majesty's consul at Nanking that the adoption by them of a less unbending attitude in regard to some trifling points in which they found themselves at issue with Lo was absolutely necessary if they wished the latter to remember them more readily when tenders were being considered. This advice they have taken with excellent results. Not only have Jardines them- selves secured numerous orders, but their action has doubtless indirectly assisted the North British Locomotive works to obtain in July a contract for eight locomotives in spite of the lower tenders sent in by the American firms, whom Lo would naturally be inclined to favour owing to his training in the United States, while another British firm has recently received the major portion of a valuable contract in the face of an extraordinarily low Belgian offer.
I have, &c.
J. N. JORDAN.
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