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[This Document is the Property of His Britannic Majesty's Government.]
[B]
CHINA RAILWAYS.
CONFIDENTIAL.
[39464]
No. 1.
92
IREGR BEG 5 NOVO9
[October 26.]
31
SECTION 2.
(No. 282.) Sir,
Sir Edward Grey to Mr. Bryce,
Foreign Office, October 26, 1909. THE American Ambassador told me on the 20th instant that one of the reasons why his Government were so anxious to see the Hu-Kuang loan concluded was that an American and British group had negotiated with the Chinese Government for the construction of a railway of far greater importance: the Chenchow-Tsitsihar-Aigun line. This, however, could not be proceeded with until the Hu-Kuang question was settled, and the United States Government therefore wished to have our co-operation.
I told the Ambassador that we were delighted that American and British enterprise should be engaged in railway undertakings together, but I had not so far taken any action in connection with this railway, and I must explain to him what had passed between us and the Japanese Government with regard to railways in Manchuria. I had been approached originally by a British firm, with a request that I should overcome the Japanese opposition to the Fakumen Railway, which the Japanese alleged would compete with their South Manchurian Railway. This was now old history, because the last agreement between China and Japan had settled it. I had taken up the position that it would be unreasonable and contrary to the policy of the open door if the Japanese were to oppose all railway enterprise in Manchuria and to claim a monopoly for their South Manchurian Railway; but, on the other hand, there was the Japanese point of view that this railway was the only asset of any commercial value which they had secured as a result of a most costly war; that they had an agreement with the Chinese to safeguard them against new railways which would compete with it; and that they could not afford to see the value of their one commercial asset destroyed, or even impaired. I had admitted that it was reasonable that the Japanese, in their discussions with the Chinese, should stipulate for proper safeguards against undue competition by the building of new railways in Southern Manchuria. In the case of the proposed Tsitsihar line, the Japanese had informed me that in their opinion it would probably be prejudicial to the South Manchurian Railway, as it might tap the through traffic and thus starve the Japanese line. They had admitted that they could not oppose the Tsitsihar project in principle, but they would ask for participation in it-they had not said "control"-as some compensation for the harm the new railway might do to the South Manchurian Railway. I had ascertained that the Chinese objected to Japanese participation, and if this objection was maintained it would of course make the Japanese suspicious. It was quite possible that the Chinese were jealous of Japanese influence in Manchuria. But the Chinese owed to the Japanese the driving out of Russian influence, an influence which was as objectionable to the Chinese as any other foreign influence, and it was quite natural that the Japanese should resent attempts on the part of the Chinese to starve the Japanese out of Manchuria by injuring their railway. I did not know whether the Chinese, if they were pressed, would persist in their objection to participation by the Japanese in the Tsitsihar Railway, because I had not taken any part in the negotiations about it.
I would sum up my position by saying that I should resist any attempt by the Japanese to block all railway construction in Manchuria, but that it was quite reason- able for them to prove, if they could, that any particular new railway would damage the South Manchurian Railway, and to ask for proper safeguards against such damage. I was sure that when the Tsitsihar Railway concession became known to the Japanese they would make representations to the Chinese about it. The Chinese would then probably appeal to the United States Government and us. I should be glad, therefore, if the Ambassador would inform his Government, very confidentially, of what I had
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