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(This Document is the Property of His Britannic Majesty's Government.]
CHINESE LOANS AND CONCESSIONS.
CONFIDENTIAL.
[234706]
No. 1.
[December 1.]
SECTION 1.
Mr. Alston to Mr. Balfour.—(Received December 11.)
(No. 326.) Sir,
Peking, October 16, 1917, WITH reference to Mr. Alston's despatch No. 52 of the 6th February last, I have the honour to forward herewith copies of correspondence that has since passed between the groups representatives in Peking and the Chinese authorities, on the subject of the Hukuang Railway.
Upon the rupture of relations with Germany, the groups addressed an enquiry to the Minister of Communications asking what steps were contemplated with regard to the German staff of the Han-I section of the line, and it was plainly intimated to his Excellency that the matter must be dealt with in a manner satisfactory to the groups. To this enquiry the Minister replied that if the total number, thirteen in all, the eight most important were being temporarily suspended, only the chief storekeeper, chief accountant, secretary, and doctor being allowed to continue their duties as before. Hie Excellency did not, however, mention by whom the suspended German offcials were to be replaced
In the meantime, the groups' representatives had learnt from Hankow that Dr. Jeme, the Chinese director-general of the railway, had been appointed to be acting engineer-in-chief of the Han-I section. They accordingly at once lodged a protest against this contravention of article 17 of the Hukuang Railways Loan Agreement, under which the engineer-in-chief must be either a European or an American, and they went on to suggest that, on grounds of economy, the American engineer-in-chief of the I-Kwei section, Mr. Randolph, should fill the vacancy on the Han-I in addition to his own section.
Mr. Hillier having received from Dr. Jame a few days earlier a notification of the termination of Mr. Randolph's services, the groups took the opportunity to represent to the Chinese authorities the unwisdom of this action, and the undesirability of making any change at that moment.
Such was the position as between the groups and the Chinese Government at the end of March last, and so it remained until the declaration of war upon Germany on the 14th August, when it became necessary to consider how the question of the Hakuang Railway arrangements was thereby affected,
Advantage has now been taken by the groups of the impending visit to Peking of Dr. Jeme to formulate their views on the whole question in a memorandum which they presented to the Minister of Finance ou the 26th September last. This memorandum records the observations already made verbally by them to the Minister. These viewa may be summarised as follows:
Work on the Han-I section should be suspended, and any funds thus saved should be applied to the construction of the British or Hupei-Hunan section, and the precedent of the I-Kwei or American section is quoted in support of such an arrangement. The position as regards the engineer-in-chief under article 17 of the Loan Agreement is reallirmed, and the proposal is repeated that Mr. Randolph, the American engineer-in- chief of the I-Kwei section, should act concurrently as engineer-in-chief of the ex-German Han-I section, with a view to safeguarding the existing work and materials in the latter section. The chief accountant and the auditor of the Hupei-Hunan section should at the same time be appointed to act concurrently for the other two sections of the line.
The groups proceed to argue that, contrary to the view of the Chinese authorities, the German Han-I section forms part of the property mortgaged to the banks as additional security (see enclosure I in my despatch No. 112 of the 12th March, 1913), and that the elimination of the German group makes the interest of the remaining groups in that section all the greater. Consequently they claim that the purchase money for all materials belonging to the German section that have been, or may be, sold must, having been purchased out of loan funds, be recredited to the railway
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