[Enclosure 2-British official translation] October 8, 1918. SIR: I have the honour to acknowledge receipt of your excellency's note of the 16th July on the subject of the railway loan agreements concluded between the Chinese Government and the firm of Messrs. Siems, Carey & Co. Your excellency's note was referred by this Ministry to the Ministry of Communications, which has now replied in the following terms: The Hangchow-Wenchow line is 400 or 500 li. in length, and lies in an important district of China. In view of these facts this Ministry cannot do otherwise than regard it as a main line. As regards the statement in the British Minister's note, that it is not open to one party to an agreement to decide arbitrarily that a line is not a branch, it is to be noted that the agreement contains no stipulation that the consent of both parties is required to decisions regarding routes, and, in the absence of any such provision, this Ministry, being charged with the control of the communications of the country, has the full right of making such decisions. With regard to the note addressed by the former Viceroy of Wuchang to the British consul general at Hankow in 1905, that note contains the following words: "In view of your services in obtaining for me the present loan for the resumption of the Canton-Hankow Railway, and the very fair terms on which it has been arranged 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." From this it is clear that rights conferred arose out of the Hongkong Government loan agreement; the note was, moreover, signed on the same day as the agreement. Accordingly, the view always hitherto held by this office, that the note was an annex to the agreement, is entirely reasonable. Again, on the occasion of the negotiation of the Canton-Hankow-Szechuan Railway loan, the United States of America, France, and Germany all took part, but Great Britain raised no protest, whence it may be inferred that she tacitly admitted that the note had ceased to be effective. The British Minister observes also that at the time of the repayment of the loan in 1915, this office show[ed] insistence in demanding the return of the loan agreement for cancellation: and he asks how it is possible that we failed to ask for the return of the note. It may, however, further be recalled that, in connection with this Ministry's demand for the return of the agreement, Sir John Jordan addressed a note to the Wai-chiao Pu on the 20th December 1915, containing the remark that "when an agreement terminates, it is ipso facto cancelled." This shows that he attached no significance to the omission. The point as to whether or not this Ministry omitted to ask for the cancellation of the note (which was nothing more than an annex to the agreement) should not, however, give rise to any legal question whatever. I have the honour to reply accordingly to your excellency's note. [File copy not signed] OPIUM AND MORPHINE TRAFFIC IN CHINA Purchase by the Chinese Government of Reserve Stock of Opium and Mandate for the Destruction thereof File No. 893.114/165 The Secretary of State to the Minister in China (Reinsch) [Telegram] WASHINGTON, July 10, 1918, 4 p. m. A cablegram dated July 3 from Peking to American newspapers reports that Chinese Government has agreed to purchase opium stocks of Shanghai combine for Treasury bills intending to resell. 91114-30-21 Please investigate and report. If true, you are instructed to say to the Minister for Foreign Affairs that the American Government which has been so greatly interested in the suppression of the opium traffic and received such earnest support from China regrets profoundly that action seemingly of a retrograde character is being taken. LANSING File No. 893.114/166 The Minister in China (Reinsch), en route to Washington, to the Secretary of State1 [Telegram-Extract] TOKYO, July 10, 1918, 6 p. m. I beg to suggest that while the corrupt transaction for the purchase by the Government of the opium stocks held by the Shanghai combine is an accomplished fact the dangerous consequences to be expected therefrom might be moderated if the attention of the Chinese Government were pointedly called to the vital importance of not jeopardizing the results of national and international opium reform work as already accomplished and as contemplated under the Hague draft treaty ratified by the United States and China. I expect to arrive Washington August 3. REINSCH File No. 893.114/167 The Chargé in China (MacMurray) to the Secretary of State [Telegram-Extract] PEKING, July 20, 1918, 10 p. m. Your July 10, 4 p. m. I am requested by the Acting Minister for Foreign Affairs to assure you that the decision of the Chinese Government to purchase the 1,600 chests of opium remaining in the hands of the combine contemplates its use solely for medicinal purposes and that there will be no retrogression from the policy of opium suppression hitherto followed by this Government. In promising to convey this assurance I took occasion to express the regret which our Government would feel if this were not the case. File No. 893.114/172 MACMURRAY The Secretary of State to the Ambassador in Great Britain (Page) [Telegram] WASHINGTON, August 28, 1918, 10 p. m. 1056. The American Legation at Peking in a strictly confidential telegram gives information of a plan entertained by certain members of the Chinese Government to revive the opium trade under control of a monopoly. It is said to be their purpose to buy for this purpose 1 Forwarded by the Ambassador in Japan. the stocks of opium now in Shanghai. Please inquire discreetly at the British Foreign Office whether any measures are in contemplation there looking towards the prevention of this reactionary movement which would undo all that Great Britain and India have made such sacrifices to achieve. LANSING File No. 893.114/174 The Ambassador in Great Britain (Page) to the Secretary of State [Telegram] LONDON, September 4, 1918, 5 p. m. 1616. In reply to your telegraph 1056, August 28, 10 p. m. Foreign Office have been informed that an agreement between the Chinese Government and the combine of opium importers at Shanghai has been concluded by which the former will take over 1,700 chests of opium in bond at a price of 6,000 taels per chest payable in 6 per cent national bonds maturing in ten years and the drug will be resold to a syndicate. But The manner in which these stocks of opium will be disposed of has not been communicated officially to the Foreign Office. according to a statement reported to have been made by the combine when announcing the signatures to the agreement, the syndicate to which the Chinese Government will resell the opium is to comprise certain leading Chinese officials and former Canton opium monopolists with headquarters at Nanking. Will work under a Government monopoly and will sell their own stocks as well as other foreign opium. British Government have neither participated in nor given their official countenance to the negotiations between the Chinese Government and the opium combine for the requisition by the former of the stocks of Indian opium remaining in bond in Shanghai and Canton on the expiration of the opium agreement of 1911. On the contrary the British Government highly disapproves of the transaction which they hope the Chinese Government may yet be persuaded to abandon. PAGE File No. 893.114/172 The Secretary of State to the Chargé in China (MacMurray) [Telegram] WASHINGTON, September 7, 1918, 6 p. m. Your August 26, 11 a. m.1 The Department is informed that the British Government has neither participated in nor given its official countenance to the negotiations between the Chinese Government and the opium combine but, on the contrary, highly disapproves of the transaction which it hopes the Chinese Government may yet be persuaded to abandon. The Department sincerely regrets that the 'Not printed. information it has received makes it plain that the plan in contemplation for the disposition of opium stocks is in contravention of the spirit of the Hague draft treaty ratified by the United States and China and jeopardizes all the beneficial results that have been accomplished, at so much sacrifice, towards the suppression of the opium traffic. You will therefore make earnest representations to the Chinese Government in this sense, cooperating as closely as possible with your British colleague. LANSING File No. 893.114/174 The Secretary of State to the Ambassador in Great Britain (Page) [Telegram] WASHINGTON, September 13, 1918, 3 p. m. 1347. Your 1616, September 4, 5 p. m. Substance telegraphed to Peking. Legation has also been advised that the information which the Department has received makes it plain that the plan in contemplation for the disposition of opium stocks is in contravention of the spirit of the Hague draft treaty ratified by the United States and China and jeopardizes all the beneficial results that have been accomplished, at so much sacrifice, towards the suppression of the opium traffic. Legation will make representations to the Chinese Government in the above sense and has been instructed to cooperate as closely as possible with the British Minister. You will so inform Foreign Office and express the hope that British Minister at Peking will be instructed to make similar representations. LANSING File No. 893.114/175 The Chargé in China (MacMurray) to the Secretary of State [Telegram] PEKING, September 21, 1918, 11 a. m. In pursuance of your telegram September 7, 6 p. m. I have consulted with British Minister who advised me that he was without instructions in the matter but that he would telegraph his Government that by your direction I had approached him on the subject. I have addressed to the Minister of Foreign Affairs a separate protest against opium transaction in the sense of your telegram cited. MACMURRAY File No. 893.114/176 The Ambassador in Great Britain (Page) to the Secretary of State [Telegram] LONDON, September 24, 1918. 2246. Your 1347, September 13, 3 p. m. The Foreign Office expresses appreciation of the action which you propose to take at Peking regarding the opium trade. Instructions have been sent to Sir John Jordan to protest strongly to the Chinese Government against the recent transaction with the opium combine at Shanghai, basing his representations on grounds different from those you have instructed the Chargé d'Affaires at Peking to make, though essentially of the same character. Mr. Balfour adds that the British Minister at Peking will be materially assisted by the suggested cooperation of our representative. PAGE File No. 893.114/185 The Minister in China (Reinsch) to the Secretary of State [Telegram-Extract] PEKING, November 25, 1918, 6 p. m. The President has issued a mandate ordering destruction of 1,200 chests of opium in Shanghai, the remainder of the stock purchased from opium combine. This wise decision deserves special recognition in view of the financial stringency of the Government. REINSCH The Secretary of State to the Minister in China (Reinsch) [Telegram] WASHINGTON, November 30, 1918, 2 p. m. Your November 25, 6 p. m. You will make appropriate expression to the Chinese Government of the Department's appreciation of their wise decision to destroy the opium stocks at Shanghai. LANSING ATTITUDE OF THE UNITED STATES TOWARD POLITICAL File No. 793.94/665 The Minister in China (Reinsch) to the Secretary of State No. 1797 PEKING, December 15, 1917. SIR: As the Department has not issued any special instructions to this Legation concerning the special motives for and the scope of the exchange of notes signed between the Secretary of State and the Special Japanese Ambassador on November 2, 1917,1 I have the honor to state it is my understanding that the policy of the American Government, as expressed in your telegram of July 10, 6 p. m., 1917,2 to the Embassy at Tokyo, remains unchanged. Should this not be the case, and should the policy of the American Government have been modified in any particular requiring special attention to |