CO129-371 - Public Offices - 1910 — Page 540

C.O.

[This Document is the Property of His Britannic Majesty's Government.:

[B]

CHINA RAILWAYS.

CONFIDENTIAL.

[11480]

No. 1.

REC

Rece 21 APR 10

[April 4.]

SECTION

Sir,

Mr. Whitelaw Reid to Sir Edward Grey.-(Received April 4.)

American Embassy, London, April 2, 1910. MY Government has been awaiting with great interest the result of the agreement between the British and French financial groups on the division of interests in the Hankow-Canton and Hankow-Szechuan railways, of which you were good enough to advise me in our conversation of the 15th March. So far, we can only learn that the agreement has not received the prompt sanction of the French Government which was then expected, for the apparent reason that it is thought to violate the equality betwen the groups representing the four nations for which you and they, as well as we, have been seeking.

While this unexpected delay is thus prolonged, and the negotiations regarding this equal division, which have now been in progress for ten months since the 3rd June, 1909, still bring forth nothing, I venture, with the authority of my Government, to ask attention to what may be the cause of their sterility. Is it not possible that it results from a fundamental difference in what is really meant by the equality at which we all say we are aiming? Does not Great Britain mean equality in engineering rights merely in the Szechuan line, while reserving those rights on the Hankow-Canton line exclusively for herself? And do not the other Powers regard the Hankow-Canton line as an integral part of the Hukuang loan arrangement, and therefore to be considered in the equal division of engineering rights?

Now the original right of the United States was incontestably to one-half interest in the whole Hankow-Szechuan line, including extensions. On the suggestion of other parties interested we accepted as a virtual equivalent a quarter interest in the combined lines covered by the Hukuang agreement, the Canton-Hankow line and the Ilupeh section of the Hankow-Szechuan line. Because we were late in the field, we waived our rights as to chief engineers, but reserved them on further extensions. We thus became entitled to 800 kilom,--whether you consider our original half of the Szechuan lines, or our fourth in the combined lines. To facilitate agreement, we accepted sub- engineering rights on 200 kilom. from Germany, and made a further concession of 100 kilom. to France, leaving ourselves chief engineering rights on only 500 kilom.

Now, as my Government understands the effect of the British proposal, it would leave us still less-only 400 kilom, with chief engineering rights, as against 1,500 for Great Britain. We quite fail to see why the Canton-Hankow line should be an integral part of the Hukuang agreement for the loan and materials, but not for engineering rights. We gladly assent to the principle of equal division, but we cannot consider that division equal.

I have, &c.

WHITELAW REID,

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