File No. 5315/564–565.
Such points of the conversation as are not covered in this memorandum are
stated in my cipher cable dispatch sent to-day.
[Inclosure.]
memorandum—hukuang loan.
Foreign Office,
London, October 20,
1909.
The United States Government may be assured that the delay in
reaching a settlement in the matter of the international railway
loan in China is not due to any action on the part of Great
Britain.
The case stands as follows:
An intergroup agreement arrived at in Berlin on May 14, 1909, placed
the British in possession, as regards engineers, of the whole of the
Hankow-Canton and of one-third of the Hankow-Szechuen Railway, as
against one-third of the latter line only to the Germans and French,
respectively.
Subsequently the American group claimed to participate in the loan
for the Hankow-Szechuen line, and negotiations were entered with a
view to meeting their wishes.
[Page 208]
Early last month negotiations appeared to have reached something like
a deadlock, in connection with the appointment of engineers to
supervise the construction of the different sections. The only
equitable solution appeared v to His Majesty’s Government to be that
each of the three groups originally concerned should make some
sacrifice in order to allow of American participation. His Majesty’s
Government accordingly suggested to the French and German
Governments that the whole of the Szechuen line from Hankow, with
any branch line constructed, should, as nearly as practicable, be
divided equally among the four powers, as regards engineers as well
as in other respects, and that the agreement with the Chinese should
be modified so as to permit of the Americans signing it. His
Majesty’s Government further proposed that, should the Chinese
Government object to making any definite arrangement at present for
the construction of the Szechuen line beyond the Hupeh section,
China should undertake, as regards such extension—i. e., beyond
Ichang—to apply to the four powers for the capital required.
Before the advent of the American group, it had been agreed that the
Hupeh section of the Szechuen line should fall to the German group,
while the extension beyond was to be shared between the British and
French groups. The foregoing proposal, while entailing a diminution
of the German section, likewise involved a decrease in the British
and French shares of the extension and provided, as far as His
Majesty’s Government could see, the only fair arrangement
possible.
The German group, however, objected on the ground that the proposal
would curtail in a one-sided manner their rights acquired by the
agreement of May 14, and that by the preliminary contract with China
of the 7th March of this year the German group were to have the
engineer for the Hankow-Canton line, and that they only gave up this
right on the condition that the engineer for the section of the 800
kilometers of the Hankow-Szechuen line, already granted by the
Chinese Government, should be their nominee. In these circumstances
the English proposal appeared to them to be unfair and incompatible
with the agreement of the 14th of May, since it obliged them to give
up acquired rights on the first 800 kilometers of the
Hankow-Szechuen line, while the English group retained without any
curtailment their rights on the Hankow-Canton Railway. According to
the views of the German financiers, it would be only fair that,
should the Hankow-Szechuen line be divided into four, the
Hankow-Canton line should also be divided.
On the other hand, it appears to His Majesty’s Government that, under
the arrangement proposed by the Germans, the British group would be
making a double sacrifice—one on the Hankow-Szechuen line and one on
the Canton-Hankow line—while the Germans would be compensated for
the sacrifice they made on the Hankow-Szechuen line and one on the
Canton-Hankow line by what they gained at the British expense on the
Canton-Hankow line, and would thus be making no sacrifice at
all.
The British group therefore consider that they are doing all that can
fairly be asked of them by offering to make the sacrifice on the
Hankow-Szechuen line and expecting the Germans to do the same, for
the sole question at issue is how to redistribute the engineering
sections on the Hankow-Szechuen line in such a way as to admit of
the American claim to appoint an engineer on one-half of the
extension without doing violence to the existing equilibrium of
parties.
By the Berlin agreement of the 14th May, one-third of the
Hankow-Szechuen line—namely, the Honkow-Ichang line, with branches
to Hsianyang and Kuang-shui—was allotted to the German group, and
the remaining two-thirds—namely, the extension from Ichang to
Hsiangyang to Ch’eng-tu—were allotted to the Chinese Central Railway
(Ltd.), an Anglo-French company constructed ad hoc and representing
the British and French groups.
In strict equity, therefore, the German group and the Chinese Central
Railways (Ltd.) should surrender 267 and 533 kilometers,
respectively, in order to satisfy the American claim to appoint an
engineer on one-half of the extension, which is assumed to be 1,600
kilometers in length.
It may be admitted, however, that the German section, as the first to
be constructed, is relatively of greater value than the deferred
section of the Chinese Central Railways (Ltd.), and in order to
promote a settlement His Majesty’s Government would be willing that
the Germans should surrender only the Hsiangyang-Kuangshui section
to the Chinese Central Railways (Ltd.), estimated at 200 kilometers,
as a contribution to the sacrifice of some 600 kilometers
[Page 209]
imposed upon the latter by
the American claim to one-half of the Tchang-Ch’eng-tu
extension.
The relative strength of the three groups over the whole line with
its extensions would then be:
|
Kilometers. |
| Germans |
600 |
| Americans |
800 |
| Chinese Central Railways (Ltd.) |
11,000 |
