Courtesy Reuters

The Sale of the Chinese Eastern Railway

THE Chinese Eastern Railway has bred trouble ever since it was conceived of in 1896. It led to the Russo-Japanese War of 1904, it continued for over thirty years to create international suspicion, it caused the "near" war between China and the Soviet in 1929, and now once more it forms a bone of contention in the Far East. How does it happen that a railway with only 1,067 miles of single track, and annual gross receipts normally of only about 40,000,000 rubles, at the pre-war rate of exchange, should be able to stir up so much trouble? Why should Russia's proposed sale of a half interest in it to Japan attract attention the world over?

To begin with, we may recall that the modern history of Manchuria started with the construction of the Chinese Eastern Railway, and is interwoven with the history of its activities. Since its completion in 1902, the Chinese Eastern (with its southern branch, now known as the South Manchuria Railway) has been the center of all the political and economic activities of Manchuria, both domestic as well as international. In the original contract of 1896, which Count Witte negotiated with Li Hungchang on the occasion of the Tsar's coronation, it was agreed that the Chinese Eastern Railway should be owned and operated by a private company. Among other things, this contract provided that the shares of the company could be acquired only by Chinese and Russians, and that the President of the company should be of Chinese nationality, appointed by China. It further provided that at the end of thirty-six years of operation (that is, in 1938) China should have the right to redeem the railway by paying the capital cost of construction plus the accumulated losses of operation, and that at the end of eighty years China should enter gratis into possession of the railway and its appurtenances. Excessive profits, after the sums allowed shareholders as dividends, should be applied to the redemption fund on behalf of China. Capital expenditure and operating deficits,

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