CO129-382 - Public Offices - 1911 — Page 398

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

AFFAIRS OF CHINA,

CONFIDENTIAL.

7234

[January 27.]

SECTION 1.

[3199]

No. 1.

Hong Kong and Shanghai Banking Corporation to Sir F. Campbell.-(Received

Dear Sir Francis,

January 27.)

31, Lombard Street, London, January 26, 1911.

I ENCLOSE copy of Hillier's private letter of the 11th January, reporting a conversation between the Russian Minister and M. Casenave. M. Korostovetz's admission that, in his opinion, the Scott-Moravieff convention of 1899 may now be considered obsolete is particularly interesting.

Hillier is mistaken in thinking that the four groups have agreed to Russian participation in the Hukuang loan, even to the extent of 5 per cent. The point is not of importance except by way of precedent, but it may well be that the report has been set in motion in order to pave the way for the concession by alleging that it has been already granted.

Yours truly,

C. S. ADDIS.

Enclosure in No. 1.

(Private.)

My dear Addis,

Mr. Hillier to Mr. C. 8. Aldis.

Peking, January 11, 1911. AT the invitation of the Russian Minister, Casenave went to call on him yesterday, and he gives me the following account of his interview. Referring to the negotiations now proceeding for the completion of the Hukuang loan, M. Korostovetz expressed the view that his Government could not fairly press for participation, after the friendly and correct attitude maintained by the British Government in respect to the Chinelion-Aigun Railway, although it was his opinion that the Scott-Moravieff convention of 1899, on which that attitude has been based, had been put out of date by the subsequent course of events, notably the change of ownership of the Chinese Eastern Railway, and our own action in admitting others to a participation of what we had previously claimed as our exclusive rights in the Yang-tsze basin. It is to be assumed that these uninvited observations of M. Korostoreiz are to be taken as official, and they are reassuring as to the attitude of Russia towards the Hukuang business; the impression was derived at one moment, from private remarks made in Paris by M. Noetzlin to M. Simon, that the Russians contemplated a demand for equal participation, which would of course have wrecked our negotiations. M. Korostovetz, however, did not refer to any such intention, so his remarks can only be taken to apply to the mere bankers' participation of 5 per cent., which I understand the other groups are quite prepared to allow.

As regards the American currency loan, under instructions from his Government, M. Korostovetz had informed the Chinese Government that, if an American adviser were appointed, Russia would demand one also. The Japanese Minister had received similar instructions, and had on two occasions informed the Chinese to the same effect. In the opinion of M. Korostovetz, China is steadily approaching the moment when her finances will have to pass under international control, and our recent quadruple agreement is a foreshadowing of this. Russia, who has substantial interests at stake in the guaranteed 4 per Cent. loan of 1894, and in her share of the indemnity, cannot afford to be left out of any such arrangement, and will, therefore, insist upon an equal voice in any operations, such as the American currency loan, which have for their object the rehabilitation of China's financial condition. The Japanese, we are left to assume, will have similar demands to formulate.

From the foregoing, it would appear that the Americans have not an easy task It would before them; their demand for an adviser has set everybody by the ears. have been far better, in my opinion, had they merely stipulated for the appointment by the Chinese Government of an adviser acceptable to the lenders, and irrespective

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