CHAPTER XIII

THE PEKIN SYNDICATE RAILWAY

MONG those who visited China after the conclusion of the Chino-Japanese War, with a view to taking observations, was the Commendatore Angelo Luzatti, who arrived in Peking in 1896, and took up his quarters in the Italian Legation.

After a period of unobtrusive inquiry and quiet study of the state of affairs then prevailing, Mr. Luzatti returned to Europe with no one clearly defined project in his mind, but immensely impressed with the many possibilities of the situation. These impressions he succeeded in imparting to others, and in the spring of 1897 an Anglo-Italian combination was formed in London with a capital of £20,000, and registered under English law as the Pekin Syndicate Limited. Mr. Luzatti then returned to China well furnished with the sinews of

war.

The Syndicate, which had taken care to be prepared for all emergencies by endowing itself with the widest powers in a great variety of directions, primarily aimed at securing mining concessions, and the highly mineralised province of Shansi shortly became the immediate object of Mr. Luzatti's attentions. This gentleman had now secured the services of an able lieutenant in the person of Mr. Ma Kie Chong, an English and French-speaking Chinese, who had spent some years as secretary of Legation in London, and was of sufficient standing 1 to have the entrée into Chinese official circles.

1

The mineral wealth of Shansi has long been known. In 1870 Baron von Richthofen made a geologic reconnaissance of the province, and formed conclusions which have been confirmed by

1 He held the rank of Taotai, and at one period of his career had been Director of the China Merchants Steam Navigation Company,

subsequent observers. Their nature may be gathered from the following extract from his book on China:

"Professor Dana, in comparing the proportions in which in different countries the area of the coal land is to the total area, says that the State of Pennsylvania leads the world, its area of 43,960 square miles embracing 20,000 of coal land. It is very probable that on a closer examination the province of Shansi in China, with an area of about 55,000 square miles, will take the palm from Pennsylvania by a considerably more favourable proportion. But this is not yet all the advantage on the side of the Chinese coal-fields. Another is afforded in the ease and cheapness with which coal can be extracted on a large scale. There are several mines where the finest anthracite, apparently equal to the best Pennsylvania, is sold at one shilling per ton, all of it lumps of several cubic feet in size."

After a year of hard work and the lavish expenditure of money Mr. Luzatti negotiated an agreement whereby the Syndicate acquired the sole right for sixty years to open and work coal and iron mines and petroleum deposits wherever found, throughout certain specified districts and prefectures, in this richly endowed province. The agreement was signed in Peking on the 21st of May 1898, and duly ratified by the Tsung-li Yamen, acting under Imperial edict issued a few days previously. Just a month later a contract on similar terms was signed, extending the Syndicate's rights over that part of the contiguous province of Honan situated north of the Yellow River. Thus taking the Yangtze as a dividing line, the area covered by the concession lies about the centre of North China, at the lower end of the roughly rectangular portion of country formed by the Yellow River on the west and south, the borders of the provinces of Shansi and Honan on the east, and on the north by the Great Wall. It is triangular in shape, with its base on the Yellow River, and is traversed in the south-east by the Ching-Han Railway. Water communication exists to Shantung by the Yellow River, and by the Wei River and Grand Canal to Tientsin. In the north the concession area is crossed by the Chengtingfu-Taiyuanfu Railway, under construction by the RussoChinese Bank, and both on this and the Ching-Han line most favoured rates have been secured by the Syndicate.

The grant of the concession having been obtained, the capital of the Syndicate was immediately increased to £1,520,000 by the issue of 1,500,000 £1 shares, known as the Shansi shares, and in the following year an expedition was sent out, under Mr. J. H. G.

Glass, C.I.E., to ascertain, in the first place, if the coal-fields and iron ore deposits were of the extent and value represented, and if petroleum existed as had been reported.1 Secondly, observations were to be directed to ascertaining how far it was feasible to construct railways connecting the mines with navigable waters for the transport of the products to suitable marts; and rough surveys and estimates for the construction of such lines, as local conditions indicated as most desirable, were also to be made.

The clause in the agreements in virtue of which these surveys were undertaken is in each case the seventeenth, which mutatis mutandis are in identical terms:

"Whenever it may be necessary for any mine to make roads, build bridges, open or deepen rivers or canals, or construct branch railways to connect with main lines or with water navigation to facilitate transport of Shansi coal, iron, and all other mineral products from the province, the Syndicate, on reporting to the Governor of Shansi, is authorised to proceed with the works, using its own capital without asking for Government funds."

This clause has been interpreted as giving the right to construct a railway from the coal-fields, not only to the nearest convenient head or navigation leading to the Yangtze, but even to the Yangtze itself. Consequently, Mr. Glass's expedition first made surveys through Southern Honan to Siangyang on the Han River, but, finding an insufficient depth of water at that place, surveyed for a line to Pukou opposite Nanking on the Yangtze, which they ultimately recommended as the southern objective of the Syndicate. Surveys were also made for a line connecting Taokou in North-eastern Honan, head of navigation on the Wei River, and Tzechoufu in Shansi, one of the richest coal areas in the concession.

With the expedition's report before them, the directors of the 1 On this point the expedition reported in November 1899 as follows: “Observations tend to show that the account given by Baron von Richthofen of the mineral wealth of Shansi in coal and iron may be accepted as absolutely true. On our journey from the north of Shansi to the south, coal was in evidence everywhere. If we did not see it cropping out at the sides of hills and in the valleys it was still in evidence, for it was being carried on the backs of mules and donkeys to distant markets. At all the towns in the coal regions it is freely used by the people, and at every inn we stopped at it is used for cooking and general purposes. It emits practically no smoke, has a slight but clear flame, does not alter much in form, and leaves very little ash.”

Syndicate decided to commence with the construction of the railway between Tzechoufu and Taokou, and to postpone construction in any other direction to a future time. A contract for the construction of the railway was accordingly made with Messrs. Pearson & Sons Limited, and mining and railway engineers were despatched to Honan in 1900. They had hardly arrived, however, when the Boxer outbreak occurred, and a hurried retreat south to the Yangtze had to be effected.

A delay of two years ensued until 1902, when it was deemed possible to recommence operations in the interior. Work on the railway was commenced at once, and a mining camp was formed at a place called Jamiesen, which has since become popularly known as Jamieson Town, after Mr. George Jamieson, G.M.G., late Agent-General of the Company, and formerly Consul-General at Shanghai.

Jamiesen is situated in the Chinghua coal-field in Northern Honan, which it had been decided to develop before commencing at Tzechoufu in Shansi. The railway scheme was consequently modified, it being considered that present requirements would be met by a line from Taokou to Pashan, a point on the projected route some 35 miles short of the ultimate objective. Starting from the latter place, it proceeds to Hsinhsianghsien by way of Weihuifu, where it is crossed by the Ching-Han line carried on a viaduct, with which connection is made by a short branch. Thence it proceeds through Jamiesen to Pashan in the centre of the Chinghua coal-field. Up to this point the line runs almost due east and west, but there it will take an abrupt turn northwards when continued to Tzechoufu.

The line was completed to Pashan, a distance of 90 miles from Taokou in 1905. It is a single track of 75-pound rails, and has been well constructed under the original direction of Mr. R. I. Money, and latterly of Mr. T. J. Bourne, at a total cost of rather under £7000 per mile.

At present the line has a small passenger traffic, which will doubtless increase as the country becomes opened up. In the nature of things, however, it must be many years before it becomes really anything more than a mineral line, and only when the Chinghua coal - field has been developed in accordance with the plans of the Syndicate is it possible that the line may pay a moderate return on the capital invested.

By an agreement1 made in July 1905, between the Syndicate and the Chinese Government, the latter agreed to take over the line from the Syndicate at a price to be satisfied in gold bonds bearing interest at the rate of 5 per cent. per annum, the line remaining for all practical purposes under the control of the Syndicate until the bonds have been redeemed.

In order to bring the conditions into harmony with those under which other Chinese railways have been constructed, the sum of £614,600, which has been actually expended on the construction of the line, is treated as though it represented the proceeds of a loan underwritten by the Syndicate at ninety. The nominal amount of the supposed loan is £700,000, effect being given to the arrangement in the second clause of the agreement as follows:

66

Out of the above amount of £700,000 there will be issued to the Syndicate 6829 bonds of £100 each, which the Syndicate takes firm at the price of 90 per cent. of face value, equivalent to £614,600 cash, in order to refund the above amount of capital. This will be done on the day when the line is handed over to China, and interest on the bonds will accrue from date of issue."

The loan is to run for thirty years, and to be redeemed by annual drawings commencing in 1916. It is secured by a first mortgage on the line, and guaranteed by the Imperial Chinese Government. As regards working arrangements, the line has been formally handed over to Sheng Ta-jen, Director General of the Chinese Railway Administration, but it will continue to be operated by the Syndicate, provision for the remuneration of their services in this connection being made by the sixth clause of the working agreement.

"The Pekin Syndicate, during the time of this contract for the working of the line, shall be entitled to receive from the Imperial Chinese Railway Administration, on making up the yearly accounts, 90 per cent. of the surplus profits of each year. By surplus profits is meant what is left over after providing for payment of interest and redemption of capital."

The agreement-which affords a remarkable illustration of the Chinese dislike of foreign-owned railways in the country, and their desire to secure wherever possible at least a theoretic control regardless of cost-is extraordinarily favourable to the

1 There are two agreements, a loan contract and a working agreement. See Appendix C., Nos. 1 and 2.