Office of the Historian

File No. 893.77/1652

Minister Reinsch to the Secretary of State

No. 1757
American Legation,
Peking, November 26, 1917.

Sir: Supplementing my despatch No. 1736 of the 19th instant, in regard to the protest of the British Government against the proposed construction by an American corporation of certain railways in the Provinces of Hupeh and Hunan, I have the honor to enclose herewith, as a matter of record, a translation of the letter from Viceroy Chang Chih-tung to British Consul General Fraser, under date of September 9, 1905, embodying the assurance upon which the British protest is based. The correctness of this translation has been unofficially confirmed by the Chinese secretariat of the British Legation, with particular reference to the stipulation (contained in the final paragraph of the body of the text) that half of the engineers required for the construction of the railways contemplated would be Japanese.

From Mr. Mayers of the British and Chinese Corporation, it is learned that this provision in favor of the Japanese was inserted in the viceroy’s letter at the last moment, and quite unexpectedly to the British authorities concerned in the negotiations, to which this [Page 206] assurance was incidental, for the loan from the Hongkong Government for the redemption of the China-American Development Company’s concession for the Canton-Hankow Railway: the existence of this provision in their favor was for a long time suspected by the Japanese without their having any evidence thereof; subsequently, however, having learned of its existence, they based upon it a request for participation in the construction of the Pukow-Sinyang Railway (the loan contract for which, dated November 14, 1913, was forwarded to the Department in the Legation’s No. 3 of November 18, 1913); but this claim was not very strongly urged at the time, and was shortly relinquished.

In my despatch of the 19th instant, above cited, I stated that a copy of the enclosed translation of the viceroy’s assurance had been presented to the British Legation here for purposes of verification by Mr. MacMurray, “who took this copy to the British Legation purely for his own purposes * * *, and not in any sense as seeking information for the American Legation.” Lest this statement should lend itself to the misconstruction that in doing so Mr. MacMurray had acted in pursuance of his own interests as editor of a compilation of China agreements, in disregard of his responsibilities to the Legation, I feel it is only fair for me to add that the statement referred to merely dissociates Mr. MacMurray’s inquiry from any action taken by the Legation in the matter of the British protest.

I have [etc.]

Paul S. Reinsch
[Inclosure—Translation]

The Hukuang Viceroy to British Consul General Fraser

September 9, 1905.

In view of your services in obtaining for me the present loan for the redemption of the Canton-Hankow Railway and the very fair terms on which it has been arranged, I have the honor to give the following assurance which binds the viceroys and governors of the three Provinces of Hupeh, Hunan and Kuangtung and their successors in office who have power to deal with railways:

As regards funds for the future construction of the Canton-Hankow Railway, in case it is necessary to borrow abroad in addition to the amount China may herself provide, the first application shall be made to England, and if the British tender is, as regards interest and issue price, equal to the tenders of other countries, British financiers shall have the first option of undertaking the business; if in the above and other respects the tenders of other countries are fairer and more favorable than England’s, China will be free to choose the fairest and most favorable and make other arrangements for borrowing.

If funds for constructing the Canton-Hankow Railway have been borrowed from England, then for the machinery and materials required for that line, apart from what China has of her own making, if bought abroad, British firms and works shall first be applied to, and if their tenders are of similar cost to those made by other countries’ firms and works, the British works shall have the first option of undertaking the orders; if the wares of other countries are excellent and the price moderate, China shall be free to contract for purchase from the most suitable.

Beyond this, if within the jurisdiction of Hupeh and Hunan there are other railway construction enterprises which likewise necessitate loans from abroad, they shall be dealt with on the system set forth above as applicable to the Canton-Hankow Railway loans.

With regard to the engineers needed for the construction of the railways, I declare that one-half will be of the nation that lends the funds and the other half will be Japanese. The work will be divided into sections for undertaking, and each nation will attend to its own business. China will retain control as regards [Page 207] all railway companies, their employees, selection of land, management of lines, and running of cars; the engineers will only attend to the affairs of the requisite works within their sections and may not interfere in anything else.

I am communicating officially with officers concerned, and I have, etc., etc.

(Seal of Hukuang Viceroy)