Mr. Denby to Mr. Olney.

No. 2671.]

Sir: I have the honor to inform you that I had, day before yesterday, an important interview with the Tsung-li Yamên. It has been the practice of the Yamên to delegate one or two ministers to receive the foreign representatives and discuss with them whatever questions were raised.

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On this occasion I desired to be received by Prince Kung and Weng Tung-to, who are members of the grand council and the Yamên, as well as by the more distinguished other members of the Yamên.

On the occasion of his New Year’s visit I saw Prince Kung and asked him to be present at this interview. He said he would be unable to be there, but asked me to state what my business was. I accordingly briefly told him that I wished the Yamên to wire to Sheng Taotai, the director of railroads, that he must treat the Americans fairly and make a contract with them to build the Hankow-Pekin line of road. I do not now state the entire conversation, because it will appear in full in my report of the interview with the Yamên. The prince promised me that he would wire to Sheng that he must treat the Americans favorably.

I found at the Yamên the following ministers: Prince Ching, Weng Tung-ho, Li Hung Chang, Chang Yin-huan, Ching Hsin, and Ure Ting-fen. I stated that I came to see the Yamên to discuss with them certain I questions in which my countrymen were interested; that while I was not authorized by my Government to demand of the Chinese Government contracts to build railroads or to do any other work, yet it was, as I conceived, my duty to see that the rights of my compatriots should be protected as well in the matter of contracts as in other matters; that my Government had not demanded any compensation, direct or indirect, for its services to China, though all the gentlemen present well knew that to the Department of State belonged the honor of having made peace for China; that the services rendered by other powers were made possible only by our proposal of and conducting to a successful termination the adoption of peace negotiations; that other powers had demanded and received rewards for their action; that to one power a large strip of territory on the Mekong was ceded; that to another the right to build railroads in Manchuria was granted; that with another a contract was made to buy ships; that with all three powers advantageous loans were made; that it was conceded by all the officials who had been consulted on railroad questions that Americans could better than any other people build great railroads; that the Government had been distinctly advised on all sides to treat with Americans for building its great lines of railroads; that it had gone out all over the world that contracts would be made with Americans; that from a political point of view it was conceded on all hands that the work of developing China should be conceded to Americans, because the United States had and could have no ulterior designs on Asiatic territory; that to refuse now to grant contracts to Americans might develop a bad feeling among our people at home and make them less friendly than they always had been to China; that a few weeks ago it was understood that the contract for building the Hankow-Pekin line was actually let to Americans—a preliminary contract had been made with the American China Development Company; that this company was composed of men who were worth several hundred millions of taels; that it was beyond all peradventure able to execute any contract it might make; that at the instance of Sheng Taotai and other distinguished persons (meaning Li Hung Chang) well-known experts and financiers had come to Shanghai; that they were there in consultation with Sheng, and they had represented to me that Sheng was not disposed to treat them fairly; that it would be a breach of good faith to fail to make a contract with these representatives of American interests, and I had to demand that they wire to Sheng to contract with the American company for the building of the Hankow-Pekin line; that I did not desire to go into details of the contracts to be made, but would leave them to the parties concerned.

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The Yamên replied to me that Sheng had been appointed director-general of railroads and had the sole control of all the questions involved. I said I knew he had been so appointed, but it was idle to say that the Government of China did not control him. It controlled absolutely all its officials. Sheng had been favorable to the Americans, as everybody knew, until he was recently attacked in the English newspapers. He was afraid of their denunciation. His hands must be strengthened. He must be told to pay no attention to newspaper talk and to act in a straightforward, business way.

Li Hung Chang said the important question was the rate of interest at which money was to be furnished; that they could get money at 3 per cent. I said that nobody would loan money to China at 3 per cent, and especially to a railroad company, but that the rate of interest depended on the granting of the right of constructing the railroad; that if the contract to build the railroad and furnish the material were granted to Americans the rate of interest could be satisfactorily arranged; that certainly without these conditions nobody could loan money to a railroad company without a government indorsement.

Li then said that it must be understood that there must be no concession, meaning no ownership by a foreign company of the railroad. I said it was understood that the railroad would not become the property of any foreign company, but that, of course, proper measures would be taken to secure any loan that was made.

There were frequent interruptions of this conversation by Weng Tung-ho, Prince Ching, Chang Yin-huan, and Li Hung Chang. It was finally understood that the Yamên was to report the substance of this interview to Sheng and was to recommend that he come to terms with the American company, and I was to advise the company to be conciliatory and liberal.

As my instructions on the question of assisting my fellow-citizens in industrial enterprises are somewhat strict, I beg to say that I did not conceive that I exceeded their fair scope in taking the action above set out. I have not felt authorized to demand, as a compensation for any services rendered by the Department of State, any concessions. On the other hand, I have found myself unable to maintain absolute silence, which would be construed into indifference. I have not participated in the actual making of contracts, though, as an old lawyer, I have confidentially advised applicants as to the measures to be adopted; but when a preliminary contract is made I believe it to be my duty to insist on the rights of my fellow-citizens. The Department approved my conduct in the matter of securing to the Baldwin Locomotive Works a contract to which it was fairly entitled, and I hope it will approve my conduct as above set out.

There are at Shanghai several Americans engaged in discussing with Sheng the terms of a contract for building railroads. Among them are ex-Senator Washburn, Messrs. Whitney, Cary, Bash, Dodd, Rich, and Kennedy. Senator Washburn came to China at the instance of Li Hung Chang and so wired Li asking his assistance, and Li answered that he could do nothing, as the matter was left to Sheng. I made Li understand that I knew of this incident and he felt his responsibility and was comparatively quiet.

I believe that the interview herein reported will exercise a beneficial influence on American interests in China, and venture to hope that you will not conceive that I have exceeded my instructions.

I have, etc.,

Charles Denby.