cussion the Chinese delegates should still find themselves where they had stood at first, as had been the case before. He did not, of course, attribute the delay in progress principally to the Japanese side. He merely urged the desirability of making speedy progress.

Baron Shidehara said that he had not yet received a very clear answer to the question he had asked. He had asked Dr. Koo whether he considered the difference between the Chinese and Japanese proposals simply as a matter of form, or whether it was his intention to say that the Chinese delegates would be ready to accept in substance the terms of the railway loan agreement.

Dr. Koo said that in answer to that question he wished to say that if the Japanese delegates would be prepared to waive the idea of the Japanese loan the Chinese delegates would be ready to consider any suggestions on the basis of the plan of deferred payment in general harmony with the substance of the existing railway loan agreements, but without taking the form of a loan and within the limits of keeping the railway under full Chinese control, operation, and management, as Baron Shidehara had stated to be his desire on more than one occasion.

Baron Shidehara said he was afraid he could not entertain much hope that the Japanese Government would consent to give up the plan or railway-loan agreement; but the question with which he was confronted was a very difficult one; he would wish that the meeting might adjourn in order that the proposition might be considered overnight.

Dr. Koo said he hoped what Baron Shidehara had just stated merely represented apprehension on his part. If the Japanese delegates should still consider as unacceptable this new suggestion, which had been made in all sincerity on the part of the Chinese delegates to meet the Japanese desire, he had to question himself whether some other means of reaching a settlement should not be sought. Since yesterday's meeting he and his colleagues had given much consideration to the Japanese position and their own position, and in order that they might not expose themselves to any criticism that they had resorted to other methods than these conversations, they had really strained themselves to find a way to meet the Japanese viewpoint. It was for that purpose that further concessions such as he had stated before, both in regard to the plan of cash payment and to that of deferred payment, had been made. The Japanese delegates on their part seemed to have some difficulty to accept these plans without incorporating some of the substance of the terms of the existing railway loan agreements in the Chinese plan of deferred payment. The Chinese delegates had gone out of their way to adopt the formula which he had just read. If that was still unacceptable he could not but feel that he and his colleagues owed it to themselves to seek some other means of reconciling the difference of views between the two delegations. He did not know whether the Japanese delegates were equally disposed to solicit the aid and friendly offices which Messrs. Hughes and Balfour had been good enough to offer both delegations, in the hope that they might be able to suggest some new way out of the difficult position in which the two delegations found themselves, so that the discussion might be settled without unnecessary delay.

Baron Shidehara said that Dr. Koo had put to him an entirely new question, which he felt it difficult to answer offhand. He

hoped that the Chinese delegates would realize the position of the Japanese delegates. He had, of course, no knowledge of what instructions his Chinese colleagues had received from home. On the part of the Japanese delegates, however, instructions were quite explicit. They had to insist upon the plan of railway loan agreement, and anything that fell short of that plan was very difficult for them to accept.

Dr. Sze said that the whole idea of the Chinese delegates was to expedite the matter. They had been making concessions one after another. To-day they had again made repeated concessions. They had gone to the utmost limit. If their last proposal was still unacceptable there was nothing left for them but to ask the good offices of Messrs. Hughes and Balfour. It would be necessary to give them time. Unless the Japanese delegates thought that the Chinese proposal could form the basis of settlement, no useful purpose would be served by causing further delay. The delay of more than two weeks had already given bad impression outside.

Baron Shidehara said that he did not wish to repeat what he had already said, but to be perfectly frank, he did not understand how the revised Chinese plan could in any way be considered as a concession on the part of China. In the instance of cash payment it had been proposed that the whole amount should be deposited, but no definite period for the deposit had been given. As for the plan of deferred payment, the Chinese delegates had simply offered bankers' notes instead of treasury notes. He did not see how that could make any difference to China.

Dr. Koo asked whether the Chinese delegates were then to understand that the Japanese delegates were not able to consider the formula just proposed.

Baron Shidehara replied that he had said he would consider that formula overnight. In saying so he did not mean that the Japanese delegates would be ready to accept it.

Dr. Koo asked if it was Baron Shidehara's idea that he did not wish to express opinion now, but that he wanted to study it first. Baron Shidehara answered in the affirmative.

Dr. Sze said that the Chinese delegates wished a speedy solution. Baron Shidehara said that the Japanese delegates entertained the same wish.

The press communiqué was issued (Annex I).

Adjourned at 8 o'clock p. m. until 3 o'clock, January 6, 1922. JAPANESE DELEGATION,

SJC-19.1

Washington, D. C., January 5, 1922.

ANNEX I.

[For the press.]

JANUARY 5, 1922.

Issued by the Chinese and Japanese delegations.

The nineteenth meeting of the Chinese and Japanese delegates on the subject of the Shantung question was held in the governing board room of the Pan American Union Building on Thursday afternoon, January 5, 1922, at 5.30 o'clock. The discussion on the Shantung Railway was continued. The meeting adjourned at 8 o'clock until 3 o'clock to-morrow afternoon.

TWENTIETH MEETING.

The twentieth meeting, held in governing board room, the Pan American Union Building, Washinton, D. C., at 3 o'clock in the afternoon of Friday, January 6, 1922.

PRESENT.

China. Dr. Sao-Ko Alfred Sze, Dr. V. K. Wellington Koo, Dr. Chung Hui Wang. Secretaries: Mr. T. Y. Tsai, Mr. T. F. Hsu, Mr. C. H. Zee, Mr. Chuan Chao, Mr. T. H. Koo.

Japan.-Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. Secretaries: Mr. S. Saburi, Mr E. Kimura, Mr. H. Saito, Mr. K. Kanai, Mr. T. Shiratori.

Also present as observers:

The United States of America.--Mr. John Van A. MacMurray, Mr. Edward Bell.

The British Empire.-The Right Hon. Sir John Jordan, G. C. I. E., K. C. B., G. C. M. G.; Mr. M. W. Lampson, M. V. O.

Baron Shidehara said that the Japanese delegates had given very serious consideration to the Chinese proposal made at the meeting of the day before and they had been compelled, with much reluctance, to state once more that, consistently with the terms of the instructions from Tokyo, they did not see how they could find their way to agree to any plan falling short of the plan of the ordinary railway loan agreement. They had repeatedly explained that the only plan which Japan could possibly accept as a substitute for the Japanese original plan of joint enterprise was the plan of a railway loan agreement on the basis of terms of similar agreements which China had concluded with various foreign nationals in recent years, say 1913 to 1914. In order to present the Japanese position in a more concrete form he would propose as the terms of arrangement the following:

"(1) The period for which the loan was to run should be fixed at 15 years, while China should have an option for redeeming the outstanding liability, upon six months' notice, after five years from the date of the agreement.

"(2) A Japanese traffic manager and chief accountant should be engaged in the service of the Shantung Railway.

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(3) The details of the final arrangement should be worked out later on at Peking between the representatives of the two parties to the agreement."

It would be observed that the terms now offered were decidedly more favorable to China than in the case of similar agreements which China had entered into with various foreign capitalists in recent years. The Japanese delegates sincerely hoped that those terms would commend themselves to the serious reconsideration of the Chinese delegates.

The Chinese delegates had further proposed the day before that the good offices of Mr. Hughes and Mr. Balfour might be asked for the settlement of the pending difficulties. While, of course, placing utmost confidence in the judgment of these statesmen, he would like to say that the terms of the telegraphic communications from

Tokyo, instructing the Japanese delegates to maintain the plan of the loan agreement, were quite explicit and that in the present situation the Japanese delegates were not in a position to agree to ask for the American and British good offices as proposed by the Chinese delegates on the previous day.

Dr. Koo said that he and his colleagues had listened to the statement of Baron Shidehara with great attention. They could not conceal their sentiment of deep regret that after so many meetings and such long discussions the Japanese delegates should revert to the question of the Japanese loan. He recalled that when first the Japanese delegates had brought up this aspect of the railway question he hoped the Chinese delegates had made clear the reasons why they could not make it the basis of discussion. The Japanese delegates were good enough to indicate their willingness to proceed on the basis of the two alternative plans proposed by the Chinese delegates. It would be recalled by the Japanese delegates also that it was at least under that impression, to put it mildly, that both delegations had devoted several meetings to the exchange of views on the details of the two Chinese proposals. Now, at this last stage of their conversations on this question, the Japanese delegates desired to insist upon a proposition which was really, to use a metaphorical expression, a virgin soil. A great deal of labor had been spent on the two alternative plans proposed by China, and the Chinese delegates had been hoping all along that much progress had been made, when the Japanese delegates abruptly insisted upon reverting to the Japanese loan plan, which had been but lightly touched upon before. Of the two Chinese plans, the first proposition was that of a cash payment. However, since the Japanese delegates had manifested great difficulty in accepting that plan, though not clearly stating so, the Chinese delegates had offered the plan of deferred payment. That had been offered because the Japanese delegates had expressed a desire to retain a certain interest in the railway. It would be hardly necessary to retrace all the ground covered, or to recount all the concessions made by the Chinese delegates step by step, in either of the two plans to meet the Japanese point of view. As late as the day before, after offering further concessions in respect of the two Chinese plans, the Chinese delegates had gone out of their way to try to meet the Japanese point of view by submitting a formula drafted solely from the desire to meet the Japanese wishes in the matter of incorporating, in a general way, the substance of existing railway loan agreements in the settlement of the railway question. Since yesterday the Japanese delegates had not only made no concessions on the stand taken by them on December 20, but the Chinese delegates felt that the present Japanese proposition was in reality a step backward. It carried the two delegations further apart. In view of Japan's inability to accept the formula which the Chinese delegates had offered reluctantly, the latter felt constrained to withdraw that formula. The Chinese delegates would therefore state again that the two plans offered were still open for the acceptance by Japan, namely, the plan of cash payment with a single deposit or the plan of deferred payment, in Chinese bankers' notes, extending over the period of 12 years with an option upon six months' notice to pay all remaining liabilities after three years, with the under

taking by China to appoint a Japanese district engineer for the period the loan remained unpaid.

As regarded Baron Shidehara's observations concerning the utilization of the good offices of Mr. Balfour and Mr. Hughes, he was not sure whether he understood Baron Shidehara correctly. He trusted that it was not Baron Shidehara's idea to intimate that the good offices of Mr. Balfour and Mr. Hughes should not be utilized at any stage of their conversations. He understood that it was the baron's idea that the good offices need not be availed of at the present moment. So far as the Chinese delegates were concerned, they desired to make as rapid a progress as possible, and in fairness to themselves and as a token of appreciation toward those two gentlemen who had offered their good offices on behalf of their respective Governments the Chinese delegates had no hesitation in inviting their good offices and in asking them to extend to the two delegations such assistance as might be useful for the progress of these conversations. Unless, however, he had misunderstood Baron Shidehara's observations on that point he did not wish to propose to refer to the exact situation with reference to the acceptance upon both sides of the friendly offers made by both Mr. Hughes and Mr. Balfour.

Baron Shidehara said that he remembered that before the two delegations had adjourned on December 20 there had been much discussion on the railway loan agreement as well as on the two Chinese alternative plans. He remembered that the Chinese delegates had not found it possible to accept the Japanese proposition, but that, on the other hand, the Japanese delegates had not been able to accept either of the alternative plans proposed by the Chinese delegation. In that situation the Japanese delegates had had to refer the whole matter to the Tokyo Government and to wait upon their instructions. The conversations had been resumed three days before, as instructions had just then been received and as, it would be remembered, the instructions had opened a new phase in the situation. Formerly the railway loan plan had not been discussed as a plan of the Japanese Government, but after the receipt of instructions from Tokyo the Japanese delegates had submitted that plan as the plan of the Japanese Government. Naturally, as Japanese delegates, he and his colleagues had to act under instructions. With regard to the latter part of Dr. Koo's remarks, he was not quite able to follow the meaning of the observations made. Dr. Koo had said that Mr. Hughes and Mr. Balfour had offered good offices. Was it his meaning that these conversations had been opened through their good offices, or that after this difficult stage had been reached they had newly offered good offices?

Dr. Koo said that on that point the Chinese understanding was that the offer of Mr. Hughes and Mr. Balfour was a continuing one. The good offices would have been of very limited usefulness were they not of a continuing character. If there were any doubt at all, the best way to clear it would perhaps be to read from the record of the present conversations prepared by the Japanese secretaries passages upon what those statesmen had said at the opening session. The Japanese minutes on December 1 read as follows:

"He (Mr. Balfour) added that he had full confidence that the representatives of the two powers would come to an agreement on