CO129-362 - Public Offices - 1909 — Page 722

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C. O.

[This Document is the Property of His Britannic Majesty's Governine4966

CHINA RAILWAYS.

CONFIDENTIAL.

10

[35438]

No. 1.

RECE REG 25 OCT 09:

[September 22

SECTION 2.

726

Mr. Hillier to Mr. C. S. Addis.-(Communicated by Mr. C. S. Addis, September 22.)

My dear Addis,

Peking, September 3, 1909.

I HAVE your letter of the 13th August. Hukuang Railways Loan.--In spite of all our efforts to confine negotiation to the actual subject matter of the loan agreement, as the only course which appeared to promise a practical solution, the question of the Ichang-Chengtu section has again been dragged in; the result is that we are face to face with another deadlock, the issue of which depends on whether the Germans will or will not relinquish a portion of their acquired rights over the Hupei section of the Szechuan-Hankow line, so as to allow of a redistribution of engineers, and the attitude of our Government on the subject has evidently been stiffened by the anti-German campaign of the "Times." Unless the Germans yield to this demand, and there seems to me very little prospect of their doing so, the whole business must go once more into the melting pot, and we shall revert to the situation of the 7th March last. The Germans will revive their claim to the Canton-Hankow line under their preliminary agreement with the Chinese, while we shall claim our original rights in the Szechuan-Hankow line under the Ching-Townley agreement of 1904, at the same time challenging the German claims to the Hankow-Canton line on the ground that on the improved terms, which we are prepared to accept, we are entitled to the preference under the Chang-Frazer agreement. The net result will be, I take it. that the Canton-Hankow line will be indefinitely hung up pending a settlement of our difference with the Germans, while we shall be in the position to proceed with the negotiation of the Szechuan-Hankow line in conjunction with the Americans, the French coming in as junior partners. The prospect is sufficiently appalling, but the matter is out of our hands now, and is for the Governments to arrange; it is clearly beyond the powers of ordinary business men to deal with.

The wisdom of a policy which cannot but excite the resentment of the Germans at a time when the feelings of the two countries are in a state of high tension appears questionable, but that is a matter of which it lies beyond my competence to speak. Its immediate effect here will be to throw upon us the responsibility for the collapse of the present negotiations, and while weakening our own position with the Chinese, to strengthen that of the Germans. It is humiliating to the Chinese that their claims to determine their own railway policy should be ignored by the nations quarrelling over the spoil of future concessions; but that this should lead to the indefinite post- ponement of present urgent railway construction will appear to them particularly cynical, and their feelings of resentment will naturally be strongest against the nation who is principally responsible for creating the impasse. The Germans, on the contrary, can count on Chinese sympathy, since their case is one which will appeal particularly to the Chinese sense of justice. The arrangement by which the Germans exchanged their acquired rights in the Hankow-Canton line for ours in the Szechuan-Hankow line, was proposed by the Chinese, and concluded with their full approval and concurrence. That the section thus conceded to the Germans happens to form one of the three divisions of the line dealt with by the Berlin agreement of the 14th May, would appear to them, as I must confess it frankly appears to me, a mere coincidence, and our action in now calling upon the Germans to give up a portion of their section as simply an attempt to go back upon our bargain. It is true that the Germans came by their rights in the Canton-Hankow line by sharp practice, to put it mildly, but that hatchet is buried now in the initialled agreement of the 6th June, with which all parties declared themselves satisfied, and we can hardly claim to dig it up again at this stage.

The Americans have meanwhile shown an unaccountable tardiness in coming to terms on questions of detail, and Straight is still without a reply from his group to the simple points submitted in my telegram to you of the 21st August, which were simultaneously submitted to Washington. The only move from that direction has been a fresh demand that the Americans may be admitted as joint signatories to the

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