the unique development of the famous loess deposit, with its wonderful fertility, which renders North China one of the most productive of grain-producing regions in the world. It is of interest too, in that its inhabitants, at least in the southern portion, are largely cave-dwellers. "According to the varying compactness of the loess in different places, and to the amount of traffic over it," says Mr. Archibald Little in this connection, “we find that, in the course of centuries, the roads, like the rivers, have cut out ravines with vertical walls of varying depth, their floors rising and falling, and their courses winding through the country in bewildering perplexity. Along these roads, and out of their vertical walls, the inhabitants have excavated their dwellings,originally simple caves in the loess, now developed into houses of two and three storeys with wooden doors, window frames, and inside staircases-houses warm in winter and cool in summer and marvellously free from damp!" And as one travels by the railway, something of this phenomenon can be observed when approaching the south bank of the Yellow River, where a series of loess hills rise with ingeniously contrived cave-dwellings at varying attitudes in the hillsides.

To proceed, however, the line, in brief, traverses a richer country agriculturally than that traversed by the PekingNewchwang line, and when the Pekin Syndicate's concession areas in Honan and Shansi have been developed it will serve what is thought to be one of the most inexhaustible coalfields in the world. Furthermore, a concession has been obtained for working valuable mines at Lincheng, in the province of Chihli, in connection with the railway. Again, the importance of the two terminals must not be overlooked in estimating the factors that should make for success. In the north is the capital, with a great population, supplied to a large extent with the necessaries of life from the rich plains to the south-west, while at the southern terminal lies primarily Hankow, the third treaty port in China, with Hanyang in the angle formed by the confluence of the Han River and the Yangtze, and Wuchang on the opposite bank of the Yangtze in close proximity. These three cities form together the industrial centre of China, the "Chicago of the East," as they have been called, and between them they boast several factories, including a large match factory, 1 The Far East, p. 25.

antimony ore works, the Hupeh Arsenal and Small Arms factory, and the important Hanyang Government Iron and Steel Works. Furthermore, in course of time the rich province of Shensi will be reached by the branch line between Kaifengfu and the capital city of Hsianfu, so that there should be every chance of favourable development in that region.

On the other hand, the line will be subjected to some competition from the coast railway between Tientsin and Nanking, which it is believed by some will prove a serious rival; though, on the other hand, when one remembers the great undeveloped wealth of Honan and Shansi, it is difficult to subscribe to this view. There will, of course, be competition, but it will necessarily be of limited extent, as it will exist almost entirely in respect of through traffic between Peking and the Yangtze, the bulk of which, as far as the carriage of goods is concerned, must as a matter of course still remain with the steamship companies between Shanghai and Tientsin.

In conclusion, mention should be made of a chord that has been proposed between Paotingfu and Tientsin, the Belgian Syndicate being exceedingly anxious to obtain the right to construct it as a branch of the Ching-Han line. The Administration of the Imperial Railways of North China, however, are opposed to the scheme.

It is a line that in the nature of things will some day be required, and which would greatly benefit Tientsin. But at the present time there is certainly no necessity for its construction, from the railway point of view; for though the advantages to the Ching-Han railway of a connection with a northern seaport are sufficiently obvious, the present amount of traffic between Paotingfu and Tientsin over the existing lines is not sufficient to justify the outlay, from the Chinese standpoint, especially in view of the fact that the line would traverse a country supplied already with excellent water communications.

In preparation for eventualities, however, an understanding has been arrived at between the two railways, to the effect that when the time comes for the line to be built the eastern half shall be undertaken by the Northern Railway and the western by the Ching-Han Administration.

CHAPTER XII

THE HANKOW-CANTON OR YUEH-HAN RAILWAY

THEA

HE construction of a trunk line connecting Hankow, or rather Wuchang, immediately opposite Hankow, on the south bank of the Yangtze, with Canton was first advocated by Sir MacDonald Stephenson. In every subsequent scheme for a comprehensive system of railways in China such a line has occupied a prominent position. Yet though the necessity, or at least the desirableness, for its construction is so great as to be almost axiomatic, but very inconsiderable progress has as yet been made towards that end.

In 1898 a concession was granted to a powerful American combination, from whom great things were expected. After a lapse of seven years, during which time an insignificant section of the work had been undertaken, the concession has been cancelled. China is thus at the point from which she started, save that she is financially poorer by reason of having had to pay a remarkably heavy price for a few miles of railway, and for the privilege of being reinstated in her original position.

The present chapter is mainly occupied with the history of that concession. It is an instructive little story, and by no means devoid of interest. Moreover, although it is open to the criticism that it is in the nature of an argument in a circle, and from the point of view of progress virtually advances us nothing, it has nevertheless a distinct importance of its own which entitles it to careful narration. We must therefore revert to the stirring times of '97 and '98, the period of the inception of the enterprise.

It will be remembered that in 1896-97 American financiers sought to interest themselves in the Peking-Hankow Railway, but were forced to retire in the face of Belgian opposition. It is generally understood that when this occurred Director General Sheng Hsuan Huai pledged himself to give the American syndicate the concession for the Yueh-Han line. But whether this was so or not, the negotia

tions for the southern trunk were soon brought to a satisfactory conclusion, and in December 1897 the Throne was memorialised to allow the formation of a Chinese company to undertake the construction of the road, and make arrangements for raising the necessary funds. No specific mention was made of the introduction of American capital, and only towards the end of the Memorial is any indication to be found of the intention, to which expression is given in the following somewhat cryptic language :

"There are grave objections to allowing either England, France, or Germany to undertake the work, and your Memorialists suggest that Wu Ting Fang, the Minister at Washington, should be communicated with. He is a Cantonese, and will not fail to do his best to find a scheme."

It being by this time more than ever realised by the Central Government in Peking that if China herself was unable to find the money for the construction of her railroads, the true policy was to create as nearly as possible an equal division of rights between the Powers interested, the suggestion was acceded to, Sheng and the Viceroy being in due course authorised to form a company on the required lines. Meanwhile a draft contract had been prepared and despatched to Washington for the consideration of the American Development Company, which had been formed under the auspices of Mr. Calvin Brice and others some time previously, with a view to undertaking railway enterprise in China. This contract was subsequently signed on the 18th of April 1898 by Mr. Wu Ting Fang, acting on behalf of Sheng, described in the preamble as director general of a company, formed under the name of the Chinese Railway Company, in accordance with the terms of the Imperial edict.

Under the contract the American-China Development Company undertook to provide £4,000,000, the estimated sum required for the construction and equipment of the line, including rolling stock, the Chinese Government agreeing to secure the loan by the issue of 5 per cent. Imperial gold bonds at 90 per cent., the bonds themselves being secured by a first charge on the line. The bonds were to run for fifty years, subject to an option for their redemption at any time by the railway company, on terms set forth in detail in the eighth clause of the agreement. The building of the line 1 The text of this contract is not included in the Appendices, as it is now a dead letter.

was left entirely in the hands of the Development Company, the railway company and Sheng undertaking to arrange for rights of way and other facilities and privileges necessary for the construction and operation of the system; the only limit imposed upon the Americans in this connection was the requirement for a preference to be given to Chinese over foreign materials, when obtainable on equal terms as regards quality and price. The fourth clause provided that the Development Company should receive as remuneration for superintendence and services 5 per cent. of the entire cost of construction, except land and earth works. By way of further consideration the Development Company were to enjoy for a limited period a fifth share of the nett profits of the working of the line. Clause seven contained provision for the survey of the route as soon as possible after ratification of the contract, and for the completion of the work within three years of its being commenced.

By an addendum the reversion of the Peking-Hankow Railway, in the event of the cancellation of the agreement of the 27th of May 1897, in favour of the Belgian Syndicate, was vested in the Development Company. But this right, as things have turned out, has not proved of any value.

Within a few days of the execution of this agreement the Spanish-American War broke out, and although the ratification by the Chinese Government was soon forthcoming in the form of an Imperial edict, nothing further was done until after the conclusion of the war in the following autumn, when a survey party, under Mr. Barclay Parsons, as Chief Engineer, and Mr. Charles Denby, as Interpreter and Manager, was despatched to China. About the same time, or a little earlier, the Empress Dowager had executed her now historical coup d'état, for all practical purposes dethroning the Emperor Khuang Hsu and taking the reins of government into her own hands; and the effects of this anti-reform, and consequently anti-foreign, move were beginning to make themselves felt when the party arrived in November in Shanghai. The difficulties that had to be encountered were therefore considerably greater than those originally contemplated.

At the outset the party was met with the absolute veto of the Chinese authorities, on a survey being made through the province of Hunan, and were urged to take a line through Kiangsi. There is no reason to think that this opposition was due to any obstruc