Lawrence John Lumley Dundas Zetland.

An Eastern miscellany online

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my opinion two — first, the restricted purchasing
power of the people ; and second, the absence
of modern methods of transport. There are, no
doubt, other obstacles in the way which are
sufficiently serious, such as, for instance, the
chaotic condition of China's currency and the
irregularities and abuses of taxation ; but to
embark upon a discussion of all the disabilities
under which trade is carried on in China would
be a task of too great magnitude to attempt
in the course of a lecture of only an hour's


duration. I shall, therefore, content myself
with a reference to the two former. In the
earlier part of my paper I called attention to
the vast undeveloped resources of China, and
pointed to the future which awaits the countr3^
With the systematic development of these re-
sources, remunerative employment would be
found for that vast army of men in China
who, as Dr Arthur Smith has pointed out, "are
driven by the constant and chronic reappear-
ance of the wolf at their door to spend their
life in an everlasting grind." Cheapness runs
riot in China, and wages are proportionately
low. Here are examples from my own observa-
tion. The boatmen who took me down the Min
river in Ssuch'uan received from their Chinese
captain Is. 7d. per man for the journey of
seven days — 2fd. per man per day for able-
bodied labourers working from dawn till dark.
In the centre of the silk -weaving districts of
Ssuch'uan I found the pay of skilled workmen
averaging fd. a foot, and the daily earnings of
a skilful workman at this rate of pay aggre-
gating 4d. In another part of the same pro-
vince the members of the Blackburn Commercial
Mission found the wages of the weavers engaged
in manufacturing cotton cloth to amount to
Is. 6d. per week of six days.

It will be seen that wages on this scale do


not admit of the wage -earner putting by a
great sum in the course of the year for the
purchase of foreign goods.

How closely the purchasing power of the
people in Western China is dependent upon
what they are themselves able to sell is illus-
trated by the following facts which came under
my own notice. In the town of Sui Fu, a con-
siderable centre of distribution on the borders
of the provinces of Ssuch'uan and Yiin-nan, the
President of the Piece - Goods Guild told me
that in 1905 the trade in grey shirtings and
cotton "Italians" done between the town and
the province of Yiin-nan amounted to 60,000
taels, whereas, owing to the failure of the Yiin-
nan opium crop in the spring of 1906 the same
trade amounted in that year to only 30,000
taels. This seems to indicate clearly that the
people buy foreign goods in proportion to their
ability to export their own produce in payment.
We may not unprofitably glance, then, at the
figures of China's import and export trade. In
the year 1906, which I have taken for my
statistical illustrations throughout this paper,
China bought from Great Britain goods to the
value of 15 J million pounds. On the other
hand, she was only able to sell to us goods
to the value of less than 4 millions,^ being thus

1 £3,952 960.


left with an adverse balance of over 11^ millions
on the year's transaction. The figures of her
trade with all foreign countries during the same
period are as follows : —

Imports £67,523,618

Exports 38,916,838

Giving a total adverse balance for the year of £28,606,780

This seems to point to the readiness of the
Chinese to buy foreign goods up to the limit of
their purchasing power ; and we are, I think,
entitled to make this deduction, that her pur-
chase of foreign goods will expand in proportion
to the increase in her purchasing capacity, and
that her purchasing capacity will in its turn
be determined by the development or otherwise
of her latent resources.

Now I come to the second of the two main
obstacles — namely, the absence of modern means
of transport. This is a matter of the greatest
importance, since accessibility is one of the con-
ditions necessary to convert such things as coal
and iron ore from mere inorganic matter into
marketable commodities. At the present time
the vast area of China is traversed by thousands
of miles of mediaeval communications — perilous
water-ways, unimaginable cart-roads, and tortu-
ous coolie -tracks. It is, however, precisely in


this direction — the direction of improved com-
munications — that China is making most head-
way under the stimulus of her growing ambitions
and her new-born aspirations, and I propose,
therefore, to conclude my paper with a brief
description of recent railway enterprise in China.
This subject is of particular interest to English-
men for an additional reason to that provided
by the prospects of increasing trade following
upon the opening up of the country by railways,
for, according to my calculations, Europe has
at the present time approximately £30,000,000
invested in various railway enterprises in China
and Manchuria, a preponderating proportion of
which is British capital.

The evolution of railway construction in China
during the past twelve years is of extreme in-
terest, since it reflects the various stages in the
history of the gradual emancipation of China
from foreign control, so far as that movement
has at present gone. The first railways which
were built were constructed, controlled, and, in-
deed, owned by foreign Governments. This was
during the period when the partition of China
was in the air, and when "spheres of influence"
were consequently the order of the day. Rail-
ways coming under this category are the Russian
railway in Manchuria, a great part of which is
now in the hands of Japan, the German railway


in Shantung, and the French railway at present
being built in Ylin-nan. China soon became
alive to the danger of these political weapons
in the hands of the foreigner and to the part
which they were playing in ushering on the
break up of the Empire, and in the summer of
1900 she entered her protest through the agency
of the " Boxers."

Thereafter came a change in the relations
between Europe and China which was reflected
in the changed conditions under which the next
series of railways was built. When equilibrium,
which had been so rudely shaken in 1900, was
more or less restored, foreigners again came for-
ward with schemes for constructing railways. Far
greater respect, however, was now shown to
China, and though such lines as were under-
taken were built under foreign management and
financed w^th foreign capital, and a share" of their
profits hypothecated to the foreign concession-
aires, they were nevertheless regarded as Chinese
Government enterprises. The three lines that
were constructed under these conditions are the
Peking - Hankow railway, the Ching - ting - Tai-
yuen-fu line, and the Shanghai-Nanking railway.

Then came the Titanic struggle in Manchuria,
amid whose fertile plains and wooded mountains
men of the East warred desperately with men
of the West. China looked on with drawn


breath, pondering many things, as the represen-
tatives of East and West rough-hewed their
destinies at her gates, and when the great out-
standing lesson of the war emerged, when it
was made clear that, cceteris paribus, the people
of the East were a match for the people of the
West, seed which had already been sown sprang
suddenly to life ; theories which up to now had
been amorphous and indefinite became the
cardinal articles of a new belief Once more the
changed attitude of China towards Europe was
reflected in her railway agreements. Capital
was wanted and capital had to be borrowed,
but henceforth the terms upon which such
capital was borrowed were going to be China's
terms and not the terms of the foreign conces-
sionaire. Under these chang-ed conditions various
loan agreements were contracted, and the feature
which calls for comment in these transactions
is to be found in the fact that in each succeed-
ing agreement the terms have been more favour-
able to China and consequently less favourable
to the foreigner.

First came a contract in March 1907, for a
loan for the construction of the Canton-Kowloon
railway. In this case the railway is mortgaged
as security for the loan, and the British engineer-
in-chief and chief accountant, for whose appoint-
ment provision is made under the terms of the


agreement, have a certain measure of authority
and responsibility conferred upon them as re-
presentatives of the bondholders. Since the
Canton-Kowloon loan agreement, loan contracts
have been arranged for the construction of two
other important railways — namely, for the
Tientsin - Pukow railway, the agreement for
which was signed in January 1908 ; and for the
Shanghai-Hangchow-Ningpo line, the agreement
for which was signed in March 1908. In these
cases the loans are guaranteed by the Chinese
Government, but the railways themselves are
not mortgaged as security, and the European
experts have no position except that of etnployes
in the service of the Chinese Railway Adminis-
tration. I am by no means certain that the
average investor in these last two ventures
realises how great is the change in the con-
ditions under which he has invested his money,
and I am inclined to think that when it does
dawn fully upon him, he will make up his mind
that next time the Chinese want his money
they will have to offer him something more
than an Imperial edict by way of security.

Money will, unquestionably, be wanted for
further railway projects. According to M. de
Lapeyriere, an engineer on the Shansi railways,
there are in China proper at the present time
1728 miles of railway already open, 1087 miles


under construction, 3618 miles sanctioned, and
a further 2575 miles already projected. The
question of chief importance to China is, of
course, on what terms will the money required
be forthcoming? Her determination to regain
as far as possible complete ownership and control
of existing railways is shown by her recent loan
of £5,000,000 from England and France for the
purpose of buying back the Peking - Hankow
railway, and we may be sure that she will
endeavour to raise her railway loans in future
on conditions similar to those on which she
borrowed the money for the Tientsin-Pukow and
Shanghai-Ningpo lines. This, no doubt, displays
a very proper and a very natural sentiment on
the part of the Chinese, but there are features
of the "rights recovery movement" which are
likely to have a steadying effect upon European
investors. In the case of the Shanghai-Ningpo
railway, for instance, no sooner had the Chinese
Government contracted their loan agreement with
a British syndicate than they handed over the
construction and control of the line to two private
Chinese companies in the provinces of Chekiang
and Kiangsu, in spite of the fact that it was
specifically recorded in the agreement that the
construction and control of the line were vested
in themselves. Needless to say, the prospects
of such undertakings becoming remunerative are,


under such circumstances, greatly diminished,
and the value of the investment is depreciated
accordingly. Still more ominous have been
certain recent developments in connection with
the Imperial railways of Northern China. These
lines, which connect Pekingf with such im-
portant places as Niu - chwang and Mukden in
Manchuria, passing through Tientsin and Shan-
hai-kuan, are the only lines of any importance
that I have not so far mentioned. The reason
is that they were constructed under peculiar
circumstances and do not fall within any one
of the three categories into which I have
divided all other railways in China. The main
line was in the first instance constructed for the
Chinese Government by British engineers and
financed by the Viceroy of Chih - li. In 1898,
however, a loan was contracted with British
capitalists for the extension of the line beyond
the great wall. Russian aggression in North
China was at that time a serious and a grow-
ing menace, and the British Government, realis-
ing the advantage of China strengthening her
hold upon the regions to the north and east of
Peking, took up an attitude of active benev-
olence towards the transaction which proved of
the greatest benefit to China. To make a long
story short, this railway is a Chinese property.
The Chinese Government exercises full control


and enjoys the whole of the profits of the
enterprise. Her representatives are entirely
responsible for the administration of the line ;
but the bondholders have this security — namely,
the supervision of its maintenance, receipts, and
expenditure by a British engineer - in - chief and
chief accountant. The satisfactory working of
this arrangement is sufficiently demonstrated by
a glance at the latest returns of the receipts of
the railway. The average number of miles open
to traffic during the year ending September
30, 1907, was 572. During this time 3,276,202
passengers travelled by the line, and the total
gross earnings amounted to 9,744,866 dollars.
The working expenses totalled 3,686,320 dollars,
leaving a net profit on the year of 6,058,546
dollars. The " rights recovery " fever has, how-
ever, even spread to the Imperial Railways of
North China. The present Minister of Com-
munications, Chen -pi, who is described by Dr
Morrison, the well-known correspondent of ' The
Times,' as " one of the most corrupt and in-
competent officials at present holding high office
in China," has thought it necessary to disturb
the smooth working of the concern by under-
mining the authority of Mr Kinder, the British
engineer-in-chief Objectionable contracts have
been entered into behind Mr Kinder's back,
British emj^loyes have been summarily dismissed.


with the result that Mr Kinder has himself
tendered his resignation.

The moral of all this is that the hare-brained
apostles of the new patriotism are for the moment
in the ascendant, and are intoxicated with the
wine of recent success. Nevertheless, no one
knows better than does the well-informed Chinese
how dangerous to his country's credit must be
any undue prolongation of a policy of this kind.
Chinese administration unchecked by foreign
supervision does not yet inspire that confidence
which is essential if capital is to be attracted
instead of being frightened away. Let me con-
clude my brief survey by a quotation from an
admirable article on Chinese Railways and
Foreign Capital by the Shanghai correspondent
of ' The Times ' : —

" It is a far cry from Lombard Street to Peking.
Nevertheless, capital is a sensitive organism with
strangely developed intuitions of danger ; and
there can be but little doubt of the danger to
China's ultimate credit, and therefore to the
interests of the bondholder, if any considerable
amount of foreign capital should be invested
in enterprises under purely Chinese administra-
tion. On this point the best informed Chinese
are agreed. They are aware that, in the absence
of European experts, and failing the moral effect
of regular administrative methods and organisa-


tlon, there is but little prospect of any com-
mercial enterprise under Chinese official direction
proving permanently successful under existing
conditions." -^

It is possible that a rebuff will have to be
administered to the hooligans of reform before
sane and sober counsels prevail once more.
When the time comes when it is realised by
China as a whole that it is in co-operation with
the foreigner upon mutually beneficial terms
rather than in a Chauvinistic exclusion of him
that her salvation lies, Englishmen will be ready
to come forward, as before, with capital and skill
to help forward the great movement of regenera-
tion which even now stirs the pulses of the
most ancient and the most long-lived Empire
which the world has seen.

1 ' The Times,' August 18, 1908. I have based the above survey of
railway construction in China on the article in question.




Signed at St Petershurgh, August 31, 1907, and ratified
September 23, 1907.


His Majesty the King of the United Kingdom of Great
Britain and Ireland and of the British Dominions beyond
the Seas, Emperor of India, and His Majesty the Emperor
of All the Russias, animated by the sincere desire to
settle by mutual agreement different questions concerning
the interests of their States on the Continent of Asia,
have determined to conclude Agreements destined to
prevent all cause of misunderstanding between Great
Britain and Russia in regard to the questions referred
to, and have nominated for this purpose their respective
Plenipotentiaries, to wit :

His Majesty the King of the United Kingdom of Great
Britain and Ireland and of the British Dominions beyond
the Seas, Emperor of India, the Right Honourable Sir
Arthur Nicolsou, His Majesty's Ambassador Extraor-
dinary and Plenipotentiary to His Majesty the Emperor
of All the Russias ;

His Majesty the Emperor of All the Russias, the
Master of his Court Alexander Iswolsky, Minister for
Foreign Affairs ;


Who, having communicated to each other their full
powers, found in good and due form, have agreed on
the following : —

Agreement concerning Persia.

The Governments of Great Britain and Kussia having
mutually engaged to respect the integrity and independ-
ence of Persia, and sincerely desiring the preservation
of order throughout that country and its peaceful de-
velopment, as well as the permanent establishment of
equal advantages for the trade and industry of all other

nations ;

Considering that each of them has, for geographical
and economic reasons, a special interest in the main-
tenance of peace and order in certain provinces of Persia
adjoining, or in the neighbourhood of, the Kussian frontier
on the one hand, and the frontiers of Afghanistan and
Baluchistan on the other hand; and being desirous of
avoiding all cause of conflict between their respective
interests in the above-mentioned provinces of Persia;

Have agreed on the following terms : —

I. Great Britain engages not to seek for herself, and
not to support in favour of British subjects, or in favour
of the subjects of third Powers, any Concessions of a
political or commercial nature — such as Concessions for
railways, banks, telegraphs, roads, transport, insurance,
&c.— beyond a line starting from Kasr-i-Shirin, passing
through Isfahan, Yezd, Kakhk, and ending at a point
on the Persian frontier at the intersection of the Kussian
and ^Afghan frontiers, and not to oppose, directly or
indirectly, demands for similar Concessions in this region
which are supported by the Kussian Government. It
is understood that the above-mentioned places are in-
cluded in the region in which Great Britain engages
not to seek the Concessions referred to.


II. Russia, on her part engages not to seek for her-
self and not to support, in favour of Russian subjects,
or in favour of the subjects of third Powers, any Con-
cessions of a political or commercial nature — such as
Concessions for railways, banks, telegraphs, roads, trans-
port, insurance, &c. — beyond a line going from the
Afghan frontier by way of Gazik, Birjand, Kerman,
and ending at Bunder Abbas, and not to oppose, directly
or indirectly, demands for similar Concessions in this
region which are supported by the British Government.
It is understood that the above-mentioned places are
included in the region in which Russia engages not to
seek the Concessions referred to.

III. Russia, on her part, engages not to oppose, with-
out previous arrangement with Great Britain, the grant
of any Concessions whatever to British subjects in the
regions of Persia situated between the lines mentioned
in Articles I. and II.

Great Britain undertakes a similar engao-ement as
regards the grant of Concessions to Russian subjects in
the same regions of Persia.

All Concessions existing at present in the regions
indicated in Articles I. and II. are maintained.

IV. It is understood that the revenues of all the Persian
customs, with the exception of those of Farsistan and of
the Persian Gulf, revenues guaranteeing the amortization
and the interest of the loans concluded by the Govern-
ment of the Shah with the "Banque d'Escompte et des
Pr^ts de Perse" up to the date of the signature of the
present Agreement, shall be devoted to the same purpose
as in the past.

It is equally understood that the revenues of the
Persian customs of Farsistan and of the Persian Gulf,
as well as those of the fisheries on the Persian shore of
the Caspian Sea and those of the Posts and Telegraphs,
shall be devoted, as in the past, to the service of the
loans concluded by the Government of the Shah with

2 C


the Imperial Bank of Persia up to the date of the
signature of the present Agreement.

V. In the event of irregularities occurring in the
amortization or the payment of the interest of the
Persian loans concluded with the "Banque d'Escompte
et des Prets de Perse " and with the Imperial Bank of
Persia up to the date of the signature of the present
Agreement, and in the event of the necessity arising
for Russia to establish control over the sources of
revenue guaranteeing the regular service of the loans
concluded with the first -named bank, and situated in
the region mentioned in Article II. of the present Agree-
ment, or for Great Britain to establish control over
the sources of revenue guaranteeing the regular service
of the loans concluded with the second - named bank,
and situated in the region mentioned in Article I. of
the present Agreement, the British and Russian Govern-
ments undertake to enter beforehand into a friendly
exchange of ideas with a view to determine, in agree-
ment with each other, the measures of control in ques-
tion and to avoid all interference which would not be in
conformity with the principles governing the present


The High Contracting Parties, in order to ensure
perfect security on their respective frontiers in Central
Asia and to maintain in these regions a solid and lasting
peace, have concluded the following Convention : —

Article I. — His Britannic Majesty's Government declare
that they have no intention of changing the political
status of Afghanistan.

His Britannic Majesty's Government further engage to
exercise their inflvience in Afghanistan only in a pacific
sense, and they will not themselves take, nor encourage
Afghanistan to take, any measures threatening Russia.


The Russian Government, on their part, declare that
they recognise Afghanistan as outside the sphere of
Russian influence, and they engage that all their political
relations with Afghanistan shall be conducted through
the intermediary of His Britannic Majesty's Government ;
they further engage not to send any Agents into

Article II. — The Government of His Britannic Majesty
having declared in the Treaty signed at Kabul on
the 21st March 1905, that they recognise the Agree-
ment and the engagements concluded with the late
Ameer Abdur Rahman, and that they have no intention
of interfering in the internal government of Afghan
territory. Great Britain engages neither to annex nor
to occupy in contravention of that Treaty any portion
of Afghanistan or to interfere in the internal administra-
tion of the country, provided that the Ameer fulfils the
engagements already contracted by him towards His
Britannic Majesty's Government under the above-
mentioned Treaty.

Article III. — The Russian and Afghan authorities,
specially designated for the purpose on the frontier or
in the frontier provinces, may establish direct relations
with each other for the settlement of local questions
of a non-political character.

Article IV. — His Britannic Majesty's Government
and the Russian Government affirm their adherence to
the principle of equality of commercial opportunity in
Afghanistan, and they agree that any facilities which
may have been, or shall be hereafter, obtained for

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Online LibraryLawrence John Lumley Dundas ZetlandAn Eastern miscellany → online text (page 22 of 24)