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the Chinese was conditioned by an understanding that the proceeda were to be invested exclusively in the purchase of British railway material and equipment, then I am bound to say that in my opinion the Groups would have good grounds for objecting that, although the letter of the Consortium Agreement had been observed there had been an evasion of the spirit of international co- operation on which it is based. The Groups, including the Japanese, would I think feel this the more, since they have made the completion of the Hankow-Canton section of the Hukuang Railways their "first aim", in terms of the Inter-Group Resèlu- tion passed at their meeting at New York on October 15, 1920.
11.
To these particular considerations I may be allowed to add one or two observations on the project in relation to the general situation in China.
12.
It has been stated by the Government in the House of Commons that the remitted British Indemnity fund is to be applied to 'purposes mutually beneficial to Great Britain and China', and it may reasonably be claimed that the completion of the Canton-Hankow railway answers to that description.
13.
That claim, however, is in my judgment ne longer tenable if any element of monopoly is introduced into the
transaction. How could it be said that a purpose was beneficial to China which proposed to confine the supply of the necessary railway material to one particular source and so to deprive her
of the advantage of obtaining it at the best market price?.
14.
Nor do I believe that a monopoly, whatever temporary advantage it might confer on individual employers, would be of
any real er permanent benefit to Great Britain. It is by the production of goods which in quality and price defy competition that British trade has been built up in the past and no immediate advantage of monopoly could compensate for the loss of that
incentive.
15.
It is doubtful, moreover, if in present conditions in
China/
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