File No. 5315/417.
Chargé Fletcher to the Secretary of State.
Peking, August 10, 1909.
Mr. Fletcher reports that to-day in conference he submitted draft of agreement embodied in department’s telegram of August 6; that China declines any reference to extensions into Szechuen, and that the department’s proposal as to board of engineers unacceptable, because they are not willing to modify the provisions article 17, but the banks say they will not object to employment American engineers by the managing director as an alternative. Quotes the following, which was proposed:
- 1.
- The amount of the loan to be increased to £6,000,000, of which £3,000,000 shall be allotted to the Hupeh-Hunan section and £3,000,000 to the Szechuen-Hankow line, Hupeh section.
- 2.
- American group to be allotted one-half participation in the amount for Szechuen-Hankow line, Hupeh section, namely £1,500,000 with corresponding [Page 189] banking advantages. It is further understood that American materials shall be entitled to the same privileges and preferences reserved in the original agreement to British, French, and German materials, and that the said American bankers shall share equally in the commission on the purchase of materials.
- 3.
- The provisions of the original agreement in regard to future and supplementary loans remain unaffected by this present arrangement, except that the American rights to one-half participation in future and supplementary loans for the Szechuen-Hankow line, Hupeh section, are hereby recognized.
- 4.
- A supplementary agreement to be drawn up in the above sense by the four groups and approved by Chinese Government. The American objection to the original loan agreement will then be withdrawn stipulating original agreement ratified and signed unchanged except as to the amounts.
Explains that paragraph 3 is intended to make clear the position as to future loans, which is the great stumbling block. Says that as Americans will always encounter objections in any loan for the Hankow-Canton line, and as American rights on the Hankow-Szechuen line are safeguarded, he believes the provision is the best he can secure under the circumstances of the case. Says it would relieve Liang much embarrassment if the department will accept this arrangement, and that if accepted, financial details will be arranged accordingly. Mr. Fletcher considers practical advantage of providing for American engineers and auditors to be slight. Adds that under the circumstances United States shall have equal preference materials of both lines and commissions on purchases will be pooled, United States will receive the one-fourth.