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Hukuang Railway Loan.1

Note.—In 1903 the Chinese Government promised the British Government that if Chinese capital should prove insufficient for building a proposed railroad from Hankow to Szechuen, British capital would be invited to participate. In 1904 a promise was made that if foreign capital should be needed, Americans and British should have the preference. Reference to this promise was made by China in replying to French capitalists who requested the concession. The British and French then arranged to discuss the loan, and the British Government inquired concerning American capital. No action was taken by the Americans and a British-French syndicate was formed, provision being made for admission of Belgian and American capital. ( For. Rel. 1909, pp. 146 147, 156.)

In 1905 the British Government invited American participation but no action was taken ( id. 147 148). Subsequently the British and French admitted a group of German bankers to the negotiations, which took definite form in May, 1909, in a draft agreement with the Chinese Government. On June 2, 1909, the British Government, and on June 5 the Chinese Government, were reminded by the United States of the agreement of 1904, and notified that the United States had taken no action that could be construed as a relinquishment of the right of American capital to participate ( id. 145 and 148).

The British-French-German agreement with China was initialed on June 6, 1909, at Peking, for a loan of £5,500,000, subject to approval by Imperial edict ( id. 148 149; 152 153). In the ensuing correspondence the British Government concurred in the American view that in international law one of two joint concessionaires has no power to fix the time when the right of the other to its share in a concession shall lapse through nonuser ( id. 167), and the discussion of bases for American participation went on until May 23–24, 1910, when a supplementary agreement including American capital was drafted. ( For. Rel. 1910, pp. 280 282.) Ancillary propositions concerning engineering rights and division of mileage then occupied the correspondence, into which entered in October, 1910, certain objections of the Chinese Government to the terms of the agreement, whereupon the American Minister was instructed, October 7, 1910, not to participate in forcing the loan upon China, but to continue to use his good offices to bring about an amicable adjustment at an early date ( id. 291).

On March 11, 1911, the American Minister reported that after many conferences of the bankers with the Chinese authorities, it had been agreed that the Hu Kuang loan agreement should be amended to omit the branch line from Ching-men-chou to Han-yang. On March 15 the Department of State approved the amendment. (File Nos. 893.51/332 and 345.)

Postponement of the negotiations was caused by political agitation in China against the loan, which was allayed by conceding to [Page 88]the Chinese the right to deposit half of the proceeds of the loan during construction of the railways with the Chiaotung and Ta Ching Government Banks, sufficient amounts for one month’s estimate to be transferred to the European banks as required. (File Nos. 893.51/386 and 398.)

Further changes were agreed to in regard to the railway system: The section from Ichang to the Szechuan border was included, and the Kuangtung and Szechuan sections excluded for domestic political reasons; the bankers were given the preference on equal terms in case of further loans for those sections, and provision was made for an additional loan of £4,000,000 if necessary. (File No. 893.51/428.) Thus amended the contract was signed May 20, 1911. (File No. 893.51/438 and (text) 498), and on June 10, 1911, the foreign office authorized the Chinese minister to certify the prospectus. (File No. 893.51/477.)