File No. 5315/677.
The Secretary of State to Chargé Fletcher.
Washington, January 19, 1910.
Sir: I have to acknowledge the receipt of your No. 1309, of December 3, 1909, reporting that no progress in the Hukuang loan [Page 271] negotiations has been made at Peking since the death of His Excellency Chang Chihtung. The department has learned through the newspapers and from commercial houses that the Chinese have already begun the building of the line from Ichang to Wanhsien, which, it is understood here, anticipates in a measure the proposed extension I into Szechuen of the system covered by the loan under negotiation. The department, in its negotiations with the other powers concerned, has held it to be unwise to imperil the success of the present loan for the sake of an agreement as to engineering rights upon a line for the financing of which a concession may never be obtained.
For your information I summarize the negotiations since November 24, the date of the department’s last telegram to you upon this subject.
On November 24 the British foreign office informed the American embassy of its willingness to instruct the British group to sign, and on the following day the embassy at Berlin reported a similar willingness on the part of the German foreign office to instruct the German group to sign the agreements. This last-mentioned action was based on an understanding between the United States and Germany that the Americans should have an engineer on the Hsiangyang-Kuangshui section in compensation for the surrender of 200 kilometers on the extension, the American engineer to be subordinate to the German chief engineer, provided American broad rights should not be disturbed—i. e., that Americans should enjoy equal facilities for the receipt of tenders and equal consideration for materials on the entire system and both sections, as secured by the amendment of article 18.
On December 3, by an exchange of telegrams between the department and the embassy at Berlin, the American and the German Governments communicated each to the other its assent to the arrangement, mentioned above, whereby the Americans were to have engineering rights on the Hsiangyang-Kuangshui section of the Hankow-Szechuen line.
On December 11 the embassy at London reported that the foreign office had received demands from the French Government to which it could not agree, but had telegraphed the representative of the British group in Paris to sacrifice in favor of the French sufficient mileage to make the French and German sections equal in length, meaning apparently the sacrifice of 100 kilometers on the proposed Szechuen extension. The British group, however, refused to make this sacrifice. On December 16 the embassy at Paris reported that the French Government was ready to adhere to the agreements so soon as it obtained in the Hankow-Canton and Hankow-Ch’eng-tu lines a share equal to the share of the other powers, which could be done by assigning to the French the third section of the proposed Ch’eng-tu extension. The London embassy on December 18 reported that the French Government had suggested two compromises: First, that interchangeability of bonds be waived or, secondly, that all mileage be equal and interchangeability allowed.
The embassy at London on December 24 telegraphed that the British Government was about to suggest to France that the four groups should agree to an equal division of the Szechuen line accompanied by internationalization of the bonds. This would mean an increase of British mileage and a decrease of American. On the 27th of the same month the department telegraphed the embassy at Paris, and that at London also, that the United States was willing to share equally with Great Britain in making the sacrifice necessary [Page 272] to give the French an additional 100 kilometers on the Ch’eng-tu extension, provided the agreements should be signed without delay and subject to the conditions that our equal rights in all matters relating to the purchase of materials for the Ch’eng-tu extension and branches be guaranteed, and, secondly, that a satisfactory arrangement be made for interchangeability of bonds.
Referring to the claim of the French Government to a share equal to that of the other powers in the Canton-Hankow and Hankow-Szechuen lines, the British foreign office, on January 4, expressed to the American embassy its surprise that the Hankow-Canton line should be mentioned on an apparently equal footing with the Hankow-Szechuen line, as if the two lines formed parts of one undertaking. The British foreign office on the same date insisted that the only solution would be an equal division of the Szechuen line among the four groups, with internationalization of the bonds.
This proposal of the British Government that the Szechuen line should be apportioned equally among the four groups is not acceptable to this Government, inasmuch as it would involve the cancellation of the agreement already made between the United States and Germany and acceded to by the British Government. This has been communicated to all the powers concerned.
I am, etc.,