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construction account at one of the banks.
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As regards the balance of loan funds in the hands of the German bank at the declaration of war on Germany, this should be recovered and be placed in one of the group banks.
The memorandum ends with a recommendation that, with a view to further economy, the Ministry would be well advised to abolish the department of the director- general, thereby saving 15,000 dollars a month, at present rate approximately 26,0001, a year.
So far no reply has been received from the Minister of Communications, but I will forward to you a copy as soon as it reaches me.
Having now laid before you the gist of the correspondence that has been carried on with the Chinese authorities by the groups during the past few months, I may conveniently supplement it with additional information that I have since obtained.
The question of the dismissal of Mr. Randolph has already been referred to in an earlier paragraph. I now understand that, as the result of action by the American Legation, the dismissal did not materialise, Mr. Randolph's agreement having been extended to the 31st December next. On the other hand, his position is not secure after that date. Whether the American Minister will insist on his retention or not I am not in a position to state; but it may be taken for granted that his Excellency will insist upon the continued employment of an American engineer-in-chief, whether Mr. Randolph or not it remains to be seen. It appears that the gentleman in question is not persona grata with the Chinese, and that they would gladly see him replaced by someone else more welcome to them.
As regards the sale of materials from the Han-I section, the proceeds of which would, according to the groups, be recredited to loan funds, I am informed that the material so sold up to date consists of sleepers which have been bought by the Peking Hankow Railway, and have not yet been paid for. The purchase money may therefore still revert to the groups in response to their arguments. It may, I think, be admitted that it was wise to sell these sleepers rather than to keep them indefinately to deteriorate from rot and rust, And I may mention that a similar course of action was recently adopted on the American Kwei-I section, a large number of sleepers from which were acquired by the Indian Government last spring.
As regards the balance of loan funds in German banks at the outbreak of war, I am told by Mr. Mayers that the sum of 230,0007. still remains at Berlin. The groups are at present engaged in urging the Chinese Government to debit this amount from the funds accumulating in China for the service of the various German loans that are now suspended; the idea being that, if this course is followed, the Germans will be excluded from all further participation in the Hukuang Railways, the Han-I section being allotted to one of the three remaining groups. Mr. Mayers indeed informs me that the French are displaying great interest in this project, and wish the groups to take up the question of redistributing the sections of the Hankow-Szechuan line as soon as the Germans have been eliminated.
The actual balance of loan funds held by the Deutsch-Asiatische Bank in China was, at the outbreak of war, believed to be about 400,000 taels, but this sum, even if seized in time by the Chinese authorities, will not be available until the bank has been liquidated.
Mr. Mayers tells me that work in the Hupei-Hunan section continnes, funds not yet being exhausted. The line will be open to Changsha in December next, a distance of 226 miles from Wuchang, with another 41 miles on from Changsha to Lokou, making a total of 267 miles.
There still remain 200 miles to cover to bring the line to the Hunan border, and thence a gap of 63 miles to the railhead of the Yuat Han line at Shuichow.
From the above it will be seen that in present circumstances the prospect of completing the through connection between Canton and Hankow is still somewhat remote. Nevertheless, if the residne of the German portion of the loan funds, both in Berlin and China, becomes available in the manner suggested in an earlier passage of this despatch, pro tanto work will be possible for so much longer. And the definite elimination of the German group would in such case be an additional ground for satisfaction.
I have, &c.
J. N. JORDAN.
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Enclosure 1 in No. I.
Groups' Representatives to Chinese Minister of Communications.
) Sir,
Peking, March 15, 1917. WE understand that the steps to be taken in regard to the question of the German staff of the lan-I section of the Hukuang Railways were discussed by your Ministry and the Director General on the occasion of his recent visit to Peking.
We should be glad if you will be good enough to inform us of the measures which you have in contemplation, in order that the question may be dealt with, in consultation with us, in a manner satisfactory to our groups. Awaiting the favour of your reply, &c.
Gentlemen,
Enclosure 2 in No. 1.
E. G. HILLIER.
R. SAINT-PIERRE. E. T. GREGORY,
Ministry of Communications to Groups' Representatives.
Peking, March 16, 1917. WE have the honour to acknowledge the receipt of your letter-contents of which we have duly noted-on the subject of the German employees in the Han-I section of the Hukuang Railway.
We beg to inform you that these number thirteen in all, and that telegraphic instructions have been sent to suspend temporarily from duty the eight engineers and the mechanical engineer, whose positions are relatively more important. The chief storekeeper, chief accountant, secretary, and doctor-four in all are, however, still permitted to carry on their duties as before.
Dear Sir,
We are, &c.
(Seal of Ministry of Communications.)
Enclosure 3 in No. 1.
Director-General Hukuang Railways to Mr. Gardner (Hong Kong and Shanghai Bank, Bankowo).
Hankow, March 17, 1917. IN reply to your letter of yesterday's date enquiring what steps are contemplated with regard to the suspension of and replacement of the German staff of the Han-1 section, I beg to inform you that telegraphic order has been received from the Ministry suspending temporarily the services of all the German employees on half-pay, with the exception of the foreign accountant, the chief storekeeper, and the secretary of the engineer-in-chief's office, who are still retained by the railway, and at the same time appointing me concurrently as acting engineer-in-chief. This arrangement has already been effected, and the positions thus left vacant by the German staff shall, if necessary, be replaced by Chinese.
Sir,
Yours faithfully,
JEME TIEN YOW, Director-General.
Enclosure 4 in No. 1.
Groups' Representatives to Chinese Minister of Communications.
Peking, March 24, 1917. WE have the honour to acknowledge the receipt of your letter of the 16th instant, informing us of the temporary suspension from duty of the German engineers on the Han-I section of the Hukuang Railways.
son Your letter does not mention by whom they are to be replaced, but we have since
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