893.77/1843: Telegram

The Minister in China ( Crane ) to the Secretary of State

285. It is understood that the Chinese Government is now seriously considering cancellation in October of Siems-Carey project33 unless business operations resumed and construction undertaken. Ministry of Communications is pressing American International Corporation for immediate reply. Confidentially, Chinese Government has submitted contract to attorneys in America who counsel cancellation of contract upon expiration ten months from last December when Ministry in verbal agreement with Carey granted ten months extension.

Present Government aggressively [asserting] Chinese rights vis à vis foreign interests. It is thought [garbled group] attitude of the Ministry [of] Communications [toward] project is being encouraged by the British and Japanese who would render aid in the elimination of American interests from railway enterprise in China. British [Page 675] interests would welcome consortium funds to complete Canton-Hankow Railway to strengthen their strategic position. Foreign interests are said to be representing to the Chinese Government that terms of Carey contract are distinctly unfavorable to China, that incidental surveys have cost one million, and that small amount accomplished on previous American record in Canton-Hankow, Chinchow-Aigun and Hukuang projects. It is of course doubtful whether another favorable contract could be secured, while failure of Carey project would damage American reputation in China and weaken American position in consortium.

I venture to suggest therefore that everything feasible be done to save this important railway project from lapsing, particularly as a friendly Cabinet is now in power.

It is very advisable for me to be authorized by the Department to urge upon the Ministry of Communications not to take any measures in this connection at this time pending the initial meetings of the consortium.

Viewing question also from humanitarian standpoint the construction of such a railway would contribute towards permanently removing cause of famine, [affording] practical non-pauperizing relief to many thousands.