2
greater part of the Burmah-China trade depends-70 per cent. of our imports going there, whilst nearly all the exports pass through it-and I feel convinced that we are really threatened with a serious blow commercially. The three most important Tengyueh dealers have sent representatives to Hong Kong this summer to enquire into the facilities offered by the new route, the two chief banks propose to remove their head offices to Hsiakman (Talifu), and everything points to a serious set-back for us during the coming season. The Tengyuch merchants not only offer no opposition to the railway, but they perpetually remind one of the downfall which overshadows them if either the French or the Chinese should link Yünnan-fu with Talifu, and they look forward with dread to the developments of next year's trade. Things are moving quickly, and our frontier interests are threatened in every way by the rapid advance of this rival trade route. If we could once get the railway under way even as far as Tengyueh the merchants would gain confidence and it might save the stability of vested interests--things which are hard to replace. You know from Coggin-Brown's reports that the mineral wealth of the province has not been exaggerated, and it is important to remember that any line from Yünnau-fu to Talifu would cut off the only coal-field (Yünnanhsien) available for working the line. Brown has also been into the Hui-li Chon district to the south of Szechuan, the border town linking Yunnan with the Chien-Chang valley and Szechuan. He confirms Amundsen's report (sent to you by Wilkinson in 1908) of the highly mineralised nature of the country and the probability of a possible route between Talifu-Huilichon and Szechuan which would obtain the Szechuan objective independently of Yunnan-fu. This is looking far ahead, but is worth remembering. The French seem to have grasped the same idea, for a party of five have been up into the Huilichon district quite recently, and they possibly have wind of a magnificent coal-field, Ma-chang, in the neighbourhood and on the Yang-tsze.
I send you these hurried notes in the hope that they may prove useful or suggestive, for I want something to happen soon if it can possibly be managed. In 1905 I was in Shantung as the German Railway crept up from Kiaochow, gradually sapping the trade of the province and leaving Chefoo bare; that experience comes back vividly as I come in contact with this new battle of communications. The cry of "vested interests" was believed by the Chefoo people to be a talisman for every ill, but the Germans have apparently triumphed at Tsingtau and proved the victory of quick and cheap transit over the most conservative of Chinese traditions.
[This Document is the Property of His Britannic Majesty's Governinen.)
CHINA RAILWAYS.
CONFIDENTIAL.
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(Extract.)
No. 1.
252
C
48
[January 28.
BEB-10,
SACTION 1.
Papers communicated by Mr. C. §. Addis January 28.
(1.)
Mr. Hillier to Mr. C. S. Addis.
Peking, January 10, 1910.
SHANGHAE-HANGCHOW-NINGPO-RAILWAY.
TWO days ago Liang asked me to go and see him, and the result of this interview is embodied in my telegram to you of to-day's date, copy of which is enclosed.
Liang admitted to me that, of the 28 lacs of taels drawn only 8 lacs of taels had been paid over to the provincial bureaux; the balance of 20 lacs of taels was in the hands of the Chiao-tung Bank and the Board of Communications. His explanation of why, when he had no intention of handing these funds over to the bureaux, he continued to draw them under specific requisitions, and for what purported to be actual requirements, was so inadequate that I will not trouble with it. We were there to try to arrive at a friendly understanding, and I did not think it worth while to press the point. Ile explained that the board was not strong enough to assert its authority over the bureaux; and in order that he, Liang, might come to conclusions with them it was necessary that he should (to use his own words) have a "line of retreat." This he proposed to find in the scheme described in my to-day's telegram. In other words, he would be in a position to say to them:
"Well, gentlemen, since you will not listen to reason, we propose to apply the loan funds to more useful purposes, for which we have the consent of the lenders, and leave you to tinker on with your miserable railway, with your own funds, the laughing-stock of the other provinces."
It may be objected that this is a serious climb down for the Central Government. So it is, but helpless acquiescence in the present state of things is more humiliating still, and if the Central Government feels itself too weak to risk a frontal attack it is better to fall back upon the Bank movement, provided a way is clear in case it does not
come off.
From what Foord tells me (he has just arrived), the provincial shareholders are thoroughly sick of the present state of things, and do not at all relish the prospect of further calls, so that it looks as if the whole movement would break down under a little firm pressure. On the other hand, it is difficult to say exactly what Liang's real attitude is. In answer to my enquiry he told me that, if the gentry could be brought to reason, the intention was to carry out the original agreement. But he does not like the Shanghae-Hangchow-Ningpo Railway, which he maintains will never pay owing to the competition of waterways and likin complications, and the impression he left on me was that he would rather the gentry did not give way, in order that he might have a free hand to transfer the funds to the proposed new railway. This he considers would be a fairly paying line. Kai-feng-fu is of course the capital of Honan, and Hsu- chou-fu, situated in the narrow neck of Kiangsu, wedged in between Shantung, Honan, and Anhui, is an important trade centre. The whole thing turns upon the legal question, namely, whether, on a formal application from the Chinese Government, setting forth its inability to carry out the original agreement, and giving satisfactory evidence of the earning prospects of the proposed new railway, the court can give the necessary order. If it can, I see no objection to the arrangement from our point of view, and I think it would be calculated to have a salutary effect upon the provincial railway agitation generally. Above all, it will dispose once for all of a chronic source of friction between the Chinese and ourselves.
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