CO129-383 - Public Offices - 1911 — Page 505

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Aigun Railway, and, further, if Pauling and Company were compensated in some way for the postponement of this enterprise.

Mr. Straight pointed out, and M. de Hoyer admitted, that it would be impossible for a Russian group to secure from China a right to build the Kalgan-Kiachta railroad unless the quadruple groups participated in a loan therefore,

M. de Hoyer stated that he understood, of course, that in any arrangement that might be made the groups would be on a footing of equality. In this view Mr. Straight agreed.

On the same day M. de Cartier, the Belgian Minister, approached Mr. Casenave with regard to the possibility of making some arrangement between the Russo-Belgian group and the quadruple syndicate in order that unnecessary competition might be avoided.

The explanation of this conciliatory attitude on the part of M. de Hoyer and M. de Cartier is probably to be found in the news received from London that the London, City, and Midland Bank has formally announced that it is not associated with any syndicate organised for the purpose of doing business in China, and also in the fact that the Russo-Belgian group may anticipate some difficulty in securing a quotation on the Paris market.

We are unanimously of the opinion that the competition of the Russo-Belgian group is not now seriously to be feared. We are further unanimously of the opinion that our present strong position in China is due to the fact that the Chinese feel that we represent nations friendly to China, anxious to assist in her development, and pledged to the maintenance of the "open door." We therefore believe that it would be inwise even to consider any general understanding with the Russo-Belgian group.

At the same time it must be remembered that Russia exercises considerable political power in Peking, and that Russia and Japan together could seriously hamper our activities here, while it is not at all impossible that these two Powers might attempt to interfere with the consummation of the loan for currency reform, and with the eventual inauguration of the Chinese programme.

It should further be pointed out that while a group with Russian affiliations will probably alone be unable to do business in Manchuria and Mongolia, we ourselves would be able to accomplish little in these regions against a Russian political opposition which we should certainly encounter in case we had not reached some understanding with the Russian group.

Therefore, in order to conciliate the Russians, if possible, and to prevent their opposition to the currency reform scheme, and further in order to facilitate our own entry into Manchuria and Mongolia, we believe it desirable that we express to the Russian group our willingness to consider a proposition from them regarding some understanding as to future co-operation with them in case they secure, or consider themselves in a position to secure, loan contracts for work to be done in the regions before mentioned.

[This Document is the Property of His Britannic Majesty's Governmen510 0

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med 16 JUN

AFFAIRS OF CHINA.

CONFIDENTIAL.

[May 26.]

SECTION 2.

[20277}

No. 1.

Mr. Addis to Foreign Office.—(Received May 26.)

Hong Kong and Shanghai Banking Corporation, 31, Lombard Street, London, May 25, 1911.

Dear Sir Francis,

IN reply to your letter of the 24th May, it is true that, by signing the agreement, the French have agreed to participate in the Chinese currency loan for 10,000,000%, but with this contingency, that they shall approve the statement of Manchurian expenditure, as provided for in article 8, paragraph 2.

Should the expenditure not be satisfactory to the French, they would not be compelled to go on with the loan.

I assume that, in that case, the other three banks would then be entitled to go on or not with the loan as they pleased.

Yours truly,

[2023 cc--2]

C. S. ADDIS.