line north of Shanhaikuan was to be considered a Russian railway, there was no justification for Russian objections to the Chinese employment of an engineer of any nationality they pleased, much less of an engineer who had so fully earned their confidence. They authorised me to report to your Lordship that they would not consent to dismiss Mr. Kinder." Strong representations were also made by Sir Claude to M. Pavloff, who said that he "had no wish to get rid of Mr. Kinder because he was an Englishman, but because he was not a Russian." He told Sir Claude " frankly that the Russian Government intended that the provinces of China bordering on the Russian frontier must not come under the influence of any nation except Russia." Throughout the negotiations relative to Port Arthur and Talienwan, the matter was argued between Russia and England at St. Petersburg as well as at Pekin. Russia continued, meanwhile, to urge China to remove Mr. Kinder. Eventually (March 20th, 1898) Sir N. O'Conor was informed by Count Lamsdorff, that Russia would raise no further objection to the employment of Mr. Kinder on the railways in China, and that instructions in that sense had been sent to M. Pavloff.

Manchurian Railway (Agreement for Construction of, between Chinese Government and Russo-Chinese Bank). Presented March, 1898.-The Statutes of the Chinese Eastern Railway Company as published in the Official Gazette of St. Petersburg, contain, among others, the following provisions:-1. On the strength of the Agreement concluded on the 27th August (8th September), 1896, by the Imperial Chinese Government with the RussoChinese Bank, a Company is formed, under the name of the "Eastern Chinese Railway Company," for the construction and working of a railway within the confines of China, from one of the points on the western borders of the Province of WeiLun-Tsian to one of the points on the eastern borders of the Province of Ghirin, and for the connection of this railway with those branches which the Imperial Russian Government will construct to the Chinese frontier from Trans-Baikalia and the Southern Ussuri lines. The Company is empowered, subject to the sanction of the Chinese Government, to exploit, in connection with the railway, or independently of it, coal mines, as also to exploit in China other enterprises-mining, industrial, and commercial. For the working of these enterprises, which may be independent of the railway, the Company shall keep accounts separate from those of the railway. The formation of the Company shall be undertaken by the Russo-Chinese Bank. With the formation of the Company all rights and obligations are transferred to it in regard to the construction and working of the line ceded in virtue of the abovenamed Agreement of the 27th August (8th

September), 1896. Owners of shares of the Company may only be Russian or Chinese subjects. 2. In virtue of the Agreement with the Chinese Government, the Company shall retain possession of the Chinese Eastern Railway during the course of eighty years from the day of the opening of traffic along the whole line. 3. In recognition that the enterprise of the Chinese Eastern Railway will be realized only owing to the guarantee given by the Russian Government in regard to the revenue of the line for covering working expenses, as well as for effecting the obligatory payments on the bonds (Sections 11, 16), the Company on its part binds itself to the Russian Government, during the whole term of the Concession, under various obligations; these provide for the provision of rolling-stock, etc., due maintenance of the line of traffic, and the establishment and maintenance of a telegraph line along the entire course of the railway, the free transmission of messages from Russia to China and conversely, and free carriage of postal matter and postal officials. The privileges granted to the railway by the Chinese Government are the exemption of passenger luggage and goods in transit from one Russian station to another, of all Chinese Customs, goods, and internal dues, and taxes. Goods imported from Russia into China by rail and exported from China to Russia in the same manner shall pay respectively an import or export Chinese duty to the extent of one-third less as compared with the duty imported at Chinese seaport custom-houses. If goods imported by the railway are destined for conveyance inland they shall in such case be subject to payment of transit duty to the extent of one-half of the import duty levied on them, and they shall then be exempted from any additional imposts. Goods which shall not have paid transit duty shall be liable to payment of all established internal carrier and lits-zin dues. 4. In regard to the place of acquisition of materials for the requirements of the railway, the Company shall not be liable to any limitations. If materials be obtained beyond the confines of Russia they shall, on importation through Russian territory, be freed from payment of Russian customs duties. 5. The breadth of the railway track must be the same as that of the Russian lines (5 feet). 6. Tariffs are to be determined by the Company itself subject to par. 3. 7. Crimes, litigations, etc., on the territory of the railway are to be dealt with by the local authorities, Chinese and Russian, on the basis of existing treaties. 8. Chinese Government has undertaken to adopt measures for securing the safety of railway and employés against extraneous attack. 9. Cost to be determined by estimates. 10. Share capital fixed at 5,000,000 nominal credit roubles, and divided into 1,000 shares at 5,000 roubles. Guarantee of Russian Government does not extend to shares. 11. The remaining portion of the capital of the Company will be formed by the issue of bonds. The

bonds will be issued in measure of requirement, and each time with the special sanction of the Minister of Finances. The nominal amount and value of each separate issue of bonds, the time and condition of the issue, as also the form of these bonds, shall be subject to the sanction of the Minister of Finances. The Russian Government will guarantee the interest on and amortization of the bonds. For the realization of these bonds the Company must have recourse to the Russo-Chinese Bank, but the Russian Government reserves to itself the right of appropriating the bond loan at a price which shall be determined between the Company and the bank, and to pay to the Company the agreed amount in ready money. Subsequent clauses are of a detailed financial character; and it is necessary only to quote Clauses 29 and 30:-"29. In accordance with the Agreement concluded with the Chinese Government, the latter, after the expiration of eighty years of possession of the railway by the Company, enters into possession of it and its appurtenances. The reserve and other funds belonging to the Company shall be employed in paying the money due to the Russian Government under the guarantee (Section 16), and in satisfaction of other debts of the Company, and the remainder shall be distributed among the shareholders. Any money that may remain owing by the Company to the Russian Government at the expiration of eighty years in respect of the guarantee shall be written off. The Russo-Chinese Bank will incur no responsibility in respect of the same. 30. In accordance with the Agreement concluded with the Chinese Government, on the expiration of thirty-six years from the time of completion of the whole line and its opening for traffic, the Chinese Government has the right of acquiring the line, on refunding to the Company in full all the outlays made on it, and on payment for everything done for the requirements of the railway, such payments to be made with accrued interest. It follows. as a matter of course that the portion of the share capital which has been amortized by drawing, and the part of the debt owing to the Russian Government under the guarantee, and repaid out of the net profits (Section 17) will not constitute part of the purchase-money. In no case can the Chinese Government enter into possession of the railway before it has lodged in the Russian State Bank the necessary purchasemoney. The purchase-money lodged by the Chinese Government shall be employed in paying the debt of the Company under its bonds, and all sums, with interest, owing to the Russian Government, the remainder of the money being then at the disposal of the shareholders."

Port Arthur and Talienwan: The Question of Loan. Correspondence. No. I. Presented April, 1898.-On December 17th, 1897, Sir Claude Macdonald telegraphed to Lord Salisbury that

the Chinese contractor at Port Arthur had been instructed by the Chinese general there to get ready the necessary provisions for five Russian men-of-war, which were going, by the permission of the Russian Government, to winter at Port Arthur. On December 20th, he reported that H.M.S. Daphne had visited Port Arthur on the 18th inst., and had returned to Chefoo. She reported four Chinese men-of-war anchored inside Port Arthur, and three Russian menof-war outside. The captain of the Daphne was informed that three Russian men-ofwar were expected at Talienwan, and three more at Port Arthur. On December 22nd, Sir Claude was informed by the Yamên that the Chinese Government had given permission for the Russian fleet to winter at Port Arthur. On the 23rd Count Mouravieff spoke to our representative at St. Petersburg about Port Arthur, to the effect that the Russian ships had gone there "only owing to the existence of a certain difficulty in keeping more than a certain number of ships of war in Japanese ports at one time." "The Chinese Government," added the Count, "had expressed their willingness to give the ships hospitality there, and the convenience of Port Arthur lay in the fact that it was not so far distant from Vladivostock, and that for repairs to ships, &c., it was more suitable than any other place." Russia assured the Japanese Government that "Port Arthur has been lent to Russia by China only temporarily as a winter anchorage -an assurance which the Japanese Government credited. On December 29th the British Admiral on the China Station telegraphed that the Immortalité and Iphigenia were at Port Arthur. On the 22nd Sir Claude had informed Lord Salisbury that the Chinese Government had had an offer from Russia of a 4 per cent. Loan at 93, guaranteed by the Russian Government; the land-tax and likin revenue to be the security, and the quid pro quo asked being that Russia should have the financing, construction, and control of all railways in Manchuria and North China, and that a Russian should be appointed Inspector-General of Customs when that post became vacant. In reporting this circumstance, Sir Claude said he was asked by the Tsung-li-Yamên whether the terms offered to China in June would still be granted by the Anglo-German Syndicate, under which terms there was to be no foreign control of the revenue, to which control China objected. Sir Claude asked for instruction as to the attitude of Her Majesty's Government, and said that the Agent of the Hong Kong and Shanghai Syndicate was telegraphing that day to London. He (Sir Claude) had promised the Chinese Government that he would answer within seven days. Lord Salisbury replied (December 28th) that Her Majesty's Government were considering the question, and asked Sir Claude to advise as to what might fairly be asked, "if we could offer entire or partial guarantee, or advance the

money ourselves." On the 30th Sir Claude recommended that the following concessions should be asked for in return for a direct or guaranteed loan:-(1) Requisite control of revenue; (2) Railway from Burmese frontier to Yang-tsze Valley; (3) Guarantee against the cession of territory in the Yang-tsze Valley to any other Power; (4) Talienwan to be made a Treaty Port; (5) Greater freedom of internal trade; (6) Freedom for foreign goods from likin in the Treaty Ports. A letter from the China Association (3, Lombard-street, E. C.) is printed, urging the British Government to give the guarantee for the loan. On December 26th, Mr. Goschen (St. Petersburg) wrote Lord Salisbury that Count Mouravieff had spoken about Port Arthur, putting the anchorage of the Russian men-of-war at that port on the ground of convenience; but stating that the hospitality thus afforded by China was of less importance than formerly would have been the case, because Vladivostock was at present furnished with an exceptionally powerful ice-breaker which, it was hoped, would make the port available for ingress and egress during the winter months. "In fact," continued the Count, "Vladivostock remained, as heretofore, their centre in the Far East, and the headquarters of their land and sea forces, so that the mere fact of the Russian Squadron wintering at Port Arthur made no change whatever in the situation." On January 8th, 1897, Lord Salisbury telegraphed to Sir Claude that if all the conditions of Loan as advised by him were accepted, Her Majesty's Government would pay to Japan the remaining indemnity, which he understood to be about 12 millions, China to pay 4 per cent. in gold, net, on whatever amount was so paid, for fifty years, for principal and interest, which would extinguish the Loan. Certain securities were mentioned, and the revenues pledged were to be audited by an Englishman, and, in case of default, to be placed under English control. On January 12th Lord Salisbury telegraphed to Sir Nicholas O'Conor (St. Petersburg), that the Russian Ambassador had in conversation referred to the presence of two of Her Majesty's ships at Port Arthur, and "that the circumstance had produced a bad impression in Russia." Lord Salisbury replied that "he saw no ground for complaint in the presence of the British ships in a bay where they had a Treaty right to enter, but that, as a matter of fact, they had been sent thither by Admiral Buller, without any orders from home, and that he (Lord Salisbury) believed that in the ordinary course they would soon move to some other anchorage." On January 12th Sir Edmund Monson (Paris) reported that M. Hanotaux had asked for information on the subject of a Loan, and had said that in the event of an isolated guarantee by England "there would be risk of a good deal of jealousy in other quarters." On January 16th Sir

Claude reported negotiations re Loan with the Yamên, who asked that a route should be indicated for a railway from Burmah to the Yang-tsze Valley, and objected to the opening of Talienwan as a Treaty Port. Russia had protested against its opening "in the strongest manner, and had warned them that they would incur the hostility of Russia by doing so." Sir Claude invited the Yamên to explain Russia's hostility, unless she had ulterior designs on the place. 'They fully admitted that its opening would protect China against its annexation, and therefore be in China's own interests. I said I was astonished to find they were not free to open a Treaty Port in any portion of Chinese territory. Yamên had previously seemed to welcome ideas of opening Talienwan, advantages of which they see clearly, but they are evidently greatly frightened by Russian threats.

I asked for a port to be

As

opened in Hunan and Nanning, as well as Talienwan. To two former demands they showed themselves inclined to agree." On January 12th Count Mouravieff again alluded (to Mr. Goschen) to Port Arthur, saying that the anchorage of the Russian Squadron was merely a temporary measure, but that, after the wintering of the vessels there, the Chinese Government had given Russia the prior right of anchorage" le droit du premier mouillage." Lord Salisbury telegraphed to Sir Claude (January 17th) that he would not insist on Talienwan being made a Treaty Port if he thought it impracticable, "though we should give it up with great regret.". Other demands were to be maintained. to the route for the Burmah Yang-tsze Railway, the Indian Government were being consulted. Li Hung Chang hoped (January 17th) that the request for Talienwan to be opened as a Treaty Port would be withdrawn, "as it was violently opposed by Russia." The terms on which the English Loan was offered were preferable to those offered by Russia. The next day Sir Claude advised that the Yamên had agreed to grant the following securities:(1) What remains of Maritime Customs; (2) Likin; (3) Salt; (4) Native Customs; (5) In case of default, securities to be under English control. The Russian Minister (January 19th) again inquired as to the position of the Chinese Loan. He urged very strongly that if England insisted on Talienwan being a Treaty Port, it would be an encroachment on the Russian sphere of influence, and would deny to Russia in the future" that right to the use of Port Arthur to which the progress of events had given her a claim." "I asked what possible objections he could have to making Talienwan a free port if Russia had no designs on that territory." The reply was, that without any such designs it was generally admitted that Russia might claim a commercial débouché upon the open sea, and that she ought to be at liberty to make such arrangements with China as she

could obtain. Lord Salisbury answered that the most-favoured-nation clause forbade China to give Russia at Talienwan more favourable terms with regard to customs dues than she gave to other Treaty Powers. From a despatch from Berlin (January 19th), it appeared that Germany did not oppose the Loan being accorded to England. On January 19th Sir N. O'Conor reported that Count Mouravieff "complained of the action of the British gunboats in entering Port Arthur." "These proceedings," he said, "were looked upon here as so unfriendly as to set afloat rumours of war with Great Britain; and the Russian Ambassador had consequently received instructions to make representations in a friendly spirit. That Talienwan was to be a Treaty Port, as one of the conditions of the Loan," Count Mouravieff proceeded, "could not be regarded as a friendly action, if it were true." On 21st Sir Claude said he had learned from the Yamên that "active steps to thwart Loan were in progress." The Yamên insisted upon the whole arrangement being contingent upon the amount_being 16 millions, which were offered by Russia. In addition to conditions already stated, China would agree to the non-alienation of the Yang-tsze Valley to any other Power than England. On 28th the Russian Ambassador again referred to Lord Salisbury and the visit of two British war-vessels to Port Arthur.

The Russian Government were anxious to maintain the most friendly relations with us in the Far East, and hoped we would endeavour to avoid any friction in their sphere of influence." Lord Salisbury replied that the only British vessel there was the Iphigenia, and that she "would be leaving in a few days, and that her visit was by orders of the Admiral, issued at his own discretion, and not under directions of Her Majesty's Government. I added, however, that British ships of war had a perfect right to visit Port Arthur and other Chinese ports in that neighbourhood, and that such visits afforded no ground for raising objections, or deserved that any importance should be attached to them." On the 24th Lord Salisbury acquainted Sir Claude that it was impossible, for Parlia mentary reasons, to advance £4,000,000 above the £12,000,000 required to pay the Japanese indemnity, unless the object of such a step was legitimate, and was duly specified. On January 25th Sir Claude was informed by the Yamên that the Russian Government had "protested against the Loan in the strongest manner, on the ground that it would disturb the balance of influence in China. French Government had also protested against opening of Nanning and the railway clause." Sir Claude persuaded the Yamên to resist these protests, and said that if China did not, "she must be prepared for the consequences." The Yamên asked time to consider the decision. On January 27th Sir Claude reported that it was officially an

nounced at St. Petersburg that British men-of-war had received orders to quit Port Arthur immediately, in consequence of Russian representations. This was having a most injurious effect at Pekin. Lord Salisbury replied that the statement that the Admiral had been directed to withdraw ships from Port Arthur was a pure invention. The Chinese Government then

sought a middle course by suggesting

as

that the Loan should be divided between Russia and England. On the 23rd Sir N. O'Conor reported that Count Mouravieff, referring to the opening of Talienwan, said that the port was one of the few places on the north coast of China free from ice during the winter. That being so, Her Majesty's Government having in a public speech recognised the right of Russia to have an open port, it was hardly to be expected that the Russian Government should approve of the demand. On January 31st Sir Claude telegraphed to Lord Salisbury :-"Yamên at a meeting yesterday informed me that they greatly appreciated the generosity and goodwill displayed by Her Majesty's Government in offering to help them by guaranteeing a Loan. They considered the financial terms very generous, and the concessions such as they could grant, because they were much for the benefit of China as for foreign Powers, and they would gladly accept our offer if left to themselves, but Russia had used such threats that they saw no way out of the difficulty but coming to some arrangement with Japan, and borrowing neither from England nor Russia. I pointed out that if Russia were prepared for a hostile move she could easily find some other pretext, and that China had better make her stand in a matter where she would have general sympathy. They said that a promise of protection against Russia was the only thing that would help them. They said that the French Chargé d'Affaires had again been to see them, and had spoken very violently against the opening of Nanning." Lord Salisbury (February 2nd) informed Sir N. O'Conor (St. Petersburg) that the Russian Ambassador had had another conversation with him with reference to Port Arthur and Talienwan, and added: "The only circumstance which created apprehension in this country was the report that Russia intended to cause some port to be opened to her own imports which should not be opened, or should only be opened under a higher tariff, to the imports of other nations. This would be an infraction of the most-favoured-nation treatment assured to us by Articles XXIV. and LIV. of the Treaty of Tientsin (26th of June, 1858), and would be very deeply felt in England. It would, moreover, even on protectionist grounds, be of no advantage to Russia, for the most important part of whatever trade might take this route would pass on across the Russian frontier, where, of course, Russia could impose what duties she pleased." Sir Claude (February 3rd)

telegraphed that Prince Kung informed him that the decision of the Chinese Government was to borrow from neither Power. Sir Claude impressed upon the Prince that, loan or no loan, Her Majesty's Government would insist on the Inspector-Generalship of Customs being held by an Englishman, and would require an assurance to this effect. Li Hung Chang, on the following day, officially informed Sir Claude that this decision was "in consequence of threat of rupture by Russia." The message of Grand Secretary Li was as follows:-" The Chinese Government has been warned by Russia that their acceptance of a Loan guaranteed by Great Britain will entail an interruption in the friendly relations existing between the two Empires. In consequence of the minatory attitude assumed by Russia, the Chinese have been obliged to come to a decision not to take a Loan from either the Russian Government or that of Her Majesty, and the British Minister at Pekin has been informed accordingly." Lord Salisbury immediately telegraphed :-"If the Chinese Government enter into negotiations for obtaining a Loan from European financiers, Her Majesty's Government must insist on at least an adequate share being assigned to British banks, and, if you consider such a step desirable, you are authorised to give the Tsung-li-Yamên a very serious warning to this effect, and to state that, the friendly relations existing between the two countries will be seriously imperilled if there should be any appearance of excluding this country.' On February 9th Lord Salisbury wrote to Sir N. O'Conor, that M. de Staal had had a conversation with him relative to Russia's assurances. In a speech in the House of Lords, Lord Salisbury had said the Ambassador had given him a written assurance that any port ceded to Russia as a commercial outlet, would be a Free Port. M. de Staal had pointed out that this assurance was "verbal " not "written," and that he had only meant that the port was to be a Treaty Port-not a "Free" Port. Lord Salisbury informed Sir Nicholas that he could not admit the applicability of the word "verbal," inasmuch as M. de Staal had shown him a copy of the telegram conveying the assurance of the Russian Government. His lordship continued: -"With respect to the other correction, I said that he had actually used the word 'open,' by which I had imagined he meant 'free.' I thought that if he had meant a Treaty Port, he would have used the word. I did not doubt, however, that I had given insufficient weight to the general context. As far as we were concerned, a Treaty Port was not much inferior in value to a Free Port; and the course of policy it implied was more agreeable to our own contentions, in that it preserved for the port in question the Conventional Tariff, which could hardly be set aside without violence to existing Treaties." A despatch is printed from M. de Staal, giving his version of the mis

understanding. The paragraph subjoined is the most important:-" It appears to me that a slight misunderstanding has crept into the distinction to be drawn between a Free Port and a Treaty Port. It is perhaps due to a difference of terminology. The English term 'Free Port' appears to correspond to the French term 'port franc (porto franco '), that is, a port where goods imported are exempt from all import dues, whereas a Treaty Port, while being equally open to international commerce, subjects it nevertheless to the observance of the Customs Regulations and Tariffs in force in the country where the port is situated." On February 14th Sir Claude Macdonald was able to telegraph to Lord Salisbury that he had obtained the following assurances of concessions from the Chinese Government (independently of any question of a loan):-"1. Internal navigation will be opened before middle of June to British steamers. Sir R. Hart has been instructed to frame Regulations. Wording of my despatch, which Yamên accept, is as follows: Chinese Government consent that foreigners shall equally be permitted to employ steamers or steam launches, whether Chinese or foreign owned, wherever use of native boats is now by Treaty permitted.' 2. Form of assurance as regards Yang-tsze is as follows:-" In reply to my despatch reminding them of the great importance that has always been attached by Great Britain to the retention in Chinese possession of the Yang-tsze region, and demanding an assurance that China would never alienate any territories of the provinces adjoining the Yang-tsze to any other Power, Yamên quote my Despatch in full, and say it is out of the question that territory in the Yang-tsze region should be mortgaged, leased, or ceded to another Power. 3. Yamên have written despatch stating that, owing to the great preponderance of British trade over that of other Powers, Chinese Government intend that the post of Inspector-General shall in the future, as in the past, be held by an Englishman. If at any time British trade with China at the ports should fall below that of any other nation, Chinese Govern-ment will no longer be bound to appoint an Englishman Inspector-General. I was unable to induce them to pledge themselves to open port in Hunan in less than two years, though they promised to shorten the time if possible. What they fear is an outbreak in that province." Lord Salisbury telegraphed that Sir Claude had obtained very valuable concessions, and was greatly to be congratulated on the skill and perseverance he had shown. On February 19th Sir Claude further telegraphed that a preliminary agreement for a loan of £16,000,000 had been signed by the Agent of the HongKong and Shanghai Bank, that the likin revenues were to be placed under Customs control, and that the Bank had ten days for a definite acceptance. On February 25th a Chinese minister told Sir Claude