File No. 893.811/210

Minister Reinsch to the Secretary of State

No. 923

Sir: I have the honor to report that in pursuance of the plan outlined in my telegram of January 4, and sanctioned by your telegraphic instructions of January 10, I have arranged with the Chinese [Page 104] Government to grant an extension of the Huai River Preliminary Arrangement for four months from January 31, for the purpose of giving Messrs. Carey and Gregory the time necessary for investigating the Canal project as a separate undertaking. It has been arranged that in case the American representatives find the Canal project feasible and undertake the execution thereof, the American International Corporation is then to be granted the extended option for financing and carrying out the larger irrigation project in the Huai River region.

I have the honor to enclose the following correspondence relating to this matter:

To the Minister of Agriculture and Commerce, January 14, 1916.

From the Minister of Agriculture and Commerce, January 25, 1916.

From the Minister of Agriculture and Commerce, January 31, 1916.

Messrs. Carey and Gregory are planning to proceed, on February 7, on a tour to inspect the canal between the Yellow and Yangtze Rivers.

I have [etc.]

Paul S. Reinsch
[Inclosure 1]

Minister Reinsch to the Minister of Agriculture and Commerce

Excellency: I have the honor to inform you that, under the terms of the Preliminary Agreement of January 30, 1914, entered into between the Chinese Government and the American Red Cross, with respect to the drainage of the Huai River and Grand Canal areas, the following proposal is submitted:

It is suggested that the restoration of the Grand Canal, from the Yangtze River to Tientsin, be first undertaken, and that the Chinese Government allow the American International Corporation, which has been nominated by the American Red Cross, a period of four months to investigate the feasibility and cost of restoration of the Grand Canal. If the representatives of the corporation approve of the plan, the corporation will raise the necessary funds under a Chinese Government loan upon such security and at such a rate as is to be agreed upon between the Government and the corporation at that time. In case this work is to be undertaken, the American International Corporation, as nominee of the American Red Cross, would be given the option of carrying out the larger plan of draining the Huai River region, when the restoration of the Grand Canal shall have been completed. It is also suggested that, during the progress of the above work, the Chinese Government, might provide funds from specified revenues sufficient to pay the necessary interest charges in order to apply the amounts borrowed, without deduction, to the accomplishment of the work.

I have the honor, in this connection, to introduce to your excellency Mr. W. F. Carey and Mr. E. T. Gregory, representatives of the Siems-Carey Company, who have been designated by the American International Corporation as its representatives in this matter. I beg also to request that your excellency will be so good as to introduce these gentlemen to his excellency Mr. Chin Pang-ping, Vice Minister of Agriculture and Commerce, and Chief of the Bureau of Conservancy.

I avail [etc.]

Paul S. Reinsch
[Page 105]
[Inclosure 2—Translation]

The Minister of Agriculture and Commerce to Minister Reinsch

Sir: I have the honor to acknowledge the receipt of your communication, in which you state that under the terms of the Preliminary Agreement of January 30, 1914, entered into between the Chinese Government and the American Red Cross with respect to the drainage of the Huai River and Grand Canal areas, there are two propositions which may be made. You introduce Messrs. W. F. Carey and E. T. Gregory, representatives of the Siems-Carey Company in China.

I have referred the matter to Mr. Chin, the Director General of the National Conservancy Bureau, for consideration, and now am in receipt of his reply, a copy of which I now enclose for your consideration.

With compliments,

Chou Tzu-Chi
[Subinclosure—Translation]

The Director General of the National Conservancy Bureau to the Minister of Agriculture and Commerce

Excellency: I have the honor to acknowledge the receipt of the communication from the American Minister which you handed to me, setting forth two proposals, under the terms of the Preliminary Agreement of January 30, 1914, entered into between the Chinese Government and the American Red Cross, with respect to the drainage of the Huai River and Grand Canal areas, and also introducing Messrs. W. F. Carey and E. T. Gregory, of the Siems-Carey Company, representatives of the American International Corporation.

A communication was also received from the American Minister in the same sense as the above.

It is noted that the first proposal in the American Minister’s communication is to restore the Grand Canal from the Yangtze River to Tientsin; also that in accordance with the conservancy area fixed upon in the Preliminary Agreement, that part relating to the Grand Canal is the Inner Grand Canal from Kwachow to Tsingkiangpu and from the point where the I and Ssu Rivers enter the Grand Canal up to Yao Wan. The preliminary agreement is still in force and it is not expedient to discuss changing it. This sincere and friendly effort on the part of the Americans is nevertheless much appreciated.

It happened that Pan Fu, Director General of the project for restoring the Southern Grand Canal and the Hu River in Shantung Province, had come to Peking to raise the funds required for this work. Messrs. Carey and Gregory having been invited to the Bureau to enter into negotiations, it was proposed that the administration of Shantung Province first enter into a foreign loan for restoring the Southern Grand Canal, the amortization, payment of interest, and security of which should all be arranged by Shantung Province. Furthermore, such matters as the employment of technical experts and the construction work to be decided by negotiation between the Province of Shantung and the parties making the loan. Before the loan agreement shall have been fixed notification thereof should be sent to the Central Government for its approval and recognition. The important points of these negotiations were explained to both parties. Messrs. Carey and Gregory stated that they would proceed at once to inspect the Southern Grand Canal. Director General Pan returned to Shantung day before yesterday to make arrangements. This Bureau will also send Fang Wei-yin, an engineer, and Yang Pao-ling, a technical expert, to make an additional inspection in order to meet its obligation to afford assistance and furnish information.

Your excellency is hereby informed of the status of the negotiations with the Americans Carey and Gregory, and the hope is expressed that you will take note thereof and inform the American Minister.

With compliments.

Chin Pang-Ping
[Page 106]
[Inclosure 3—Translation]

The Chinese Minister of Agriculture to Minister Reinsch

Sir: On the 30th of January, 1916, I received a letter from Chin Pang-ping, Director General of the National Conservancy Bureau as follows:

You have handed to me the letter of the American Minister relating to the improvement of the Grand Canal from the Yangtze River to Tientsin. The Chinese Government has agreed to grant four months’ time to the American International Corporation, recommended by the American Red Cross Society, for an investigation as to the way of carrying out the work. If this undertaking is really commenced then the American International Corporation shall be given the preference, after the improvement of the Grand Canal is completed, in the matter of the conservation work in the Huai River basin. I, the Director General of the National Conservancy Bureau, have already reported to you the results of my interview (with the representatives of the International Corporation) for transmission to the American Minister. Now the period for the consideration of the Huai River loan was extended for one year in January, 1915, so that the time expires on January 31, 1916. In order to show the friendly feeling which exists between China and America it is now proposed to give a further period of four months to the American International Corporation designated by the American Red Cross Society, in which to inspect the Grand Canal in the provinces of Shantung and Kiangsu. Within this period an estimate of the labor required for the above-mentioned Grand Canal must be presented and the terms of a loan must be settled. If the Bureau accepts the proposition made within this limit of time, preference will then be given to the Corporation in the large conservation work of the Huai River basin, after the completion of the above-mentioned work on the Grand Canal. Thus will be manifested and consolidated the friendship between the two nations. If within the above-mentioned four months matters cannot be settled, this Bureau will consider it decisive, and no extension of the time will be granted. You are asked to notify the American Minister and give me a reply.

Having received this communication I now inform your excellency and ask for a reply.

With compliments.

Chou Tzu-Chi