3. The Island of Chiposan and Potato Island.

4. The whole water area of the Bay up to the highest watermark at present known 5. All islands lying seaward from Kiaochow Bay, which may be of importance for its defence, such as Tolosan, Chalienchow, etc.

The High Contracting Parties reserve to themselves to delimit more accurately, in accordance with local traditions, the boundaries of the territory leased to Germany and of the 50 kilom. zone round the Bay, by means of Commissioners to be appointed on both sides.

Chinese ships of war and merchant vessels shall enjoy the same privileges in the Bay of Kiaochow as the ships of other nations on friendly terms with Germany; and the entrance, departure and sojourn of Chinese ships in the Bay shall not be subject to any restrictions other than those which the Imperial German Government, in virtue of the rights of administration over the whole of the water area of the Bay transferred to Germany, may at any time find it necessary to impose with regard to the ships of other nations.

ART. 4. Germany engages to construct the necessary navigation signs on the islands and shallows at the entrance of the Bay.

No dues shall be demanded from Chinese ships of war and merchant vessels in the Bay of Kiaochow, except those which may be levied upon other vessels for the purpose of maintaining the necessary harbour arrangements and quays.

ART. 5. Should Germany at some future time express the wish to return Kiaochow Bay to China before the expiration of the lease, China engages to refund to Germany the expenditure she has incurred at Kiaochow and convey to Germany a more suitable place.

Germany engages at no time to sublet the territory leased from China to another Power.

The Chinese population dwelling in the leased territory shall at all times enjoy the protection of the German Government provided that they behave in conformity with law and order; unless their land is required for other purposes, they may remain

there.

If land belonging to Chinese owners is required for any other purpose, the owner will receive compensation.

As regards the reestablishment of Chinese customs stations which formerly existed outside the leased territory but within the 50 kilom. zone, the Imperial German Government intends to come to an agreement with the Chinese Government for the definite regulations of the customs frontier, and the mode of collecting customs duties in a manner which will safeguard all the interests of China, and propose to enter into further negotiations on the subject.

SECTION II.-RAILWAYS AND MINES.

ART. 1. The Chinese Government sanctions the construction by Germany of two lines of railway in Shantung. The first will run from Kiaochow to Chinan and the Boundary of Shantung Province via Weihsien, Tsingchow, Poshan, Tzechwan and Tsowping. The second line will connect Kiaochow with I-chow, whence an extension will be constructed to Chinan through Laiwu-Hsien. The construction of the line from Chinan to the boundary of Shantung Province shall not be begun till after the completion of the construction of the line to Chinan, so that a further arrangement may be made with a view to effecting a connection with China's own railway system. What places the line from Chinan to the provincial boundary shall take in en route shall be specified in the regulations to be made separately.

ART. 2. In order to carry out the above-mentioned railway work a Chino-German Railway Company shall be formed with branches in one or more places, and in this Company both German and Chinese merchants shall be at liberty to raise the capita. and appoint directors for the management of the undertaking.

ART. 3. All arrangements for the above purposes shall be determined in an all: tional agreement to be concluded by the High Contracting Parties as soon as possible. China and Germany will settle this matter by themselves, but the Chinese Govern. ment will accord favorable treatment to the said Chino-German Railway Company in constructing and operating the above-mentioned lines and extend to them other privileges enjoyed by Chino-Foreign Companies established in other parts of China The above article is conceived only in the interest of commerce: it has no other design. Positively no land or territory in the Province of Shantung may be annexed in the construction of the above-mentioned railways.

ART. 4. In the vicinity of the railways to be built. within 30 li of them, as fe instance, in Weihsien and Poshan Hsien on the Northern line from Kiaochow to Chinan and as in Ichow Fu and Laiwu Hsien on the Southern line from Kiaochow

The

Chinan. German merchants are permitted to excalate coal secessary works may be undertaken by Chinese and German merchants Comunand af the marital. The mining regulations shall also be subsequent), negotiated with 47 The Chinese devernment will, according to what has been stipulated for in the cpcerning the construction of rail wars also accort favorable treatment . The German merchants and workmen. and extend to them other pri Heger en,6, mţ 192 Chine-Frein Companies established in other carte of China

This Article is also concet ed only in the interpets of commeter and hat nun whet

determinations of the location of line shall be left to the Company's engineers. A sketch plan of the line's location, done in a scale of 1: 25000 shall be submitted to the Governor of Shantung for information and only thereafter land may be purchased. The construction of the railway cannot be begun before the land has actually been purchased.

The purchase of land shall be done peacefully and quickly as hitherto, so that the construction of the railway be not delayed by purchasing land or by difficulties aris ing from disputes with individual owners. To avoid all such difficulties the abovementioned Chinese official shall act as mediator when land is purchased and shall settle all disputes eventually arising. The land shall be purchased in an honest way according to the locally customary ruling price.

The Company shall not be allowed to buy more land than necessary for the railwayenterprise, and future extension thereof.

Meanwhile the following minima may be purchased:

For stopping points a plot of land 630 m long and 70 m wide.

For country stations a plot of land 730 m long and 100 m wide.

For small town stations a plot of land 850 m long and 130 m wide.

For stations of larger towns the plots of land have to be larger, corresponding to actual importance of the place in question. The land necessary for the supply of earth to construct embankments is not included in the foregoing areas. 1 m is equal to 2 feet 9.6 inches, 1 foot is equal to 0.338 m.

ART. 4. Wherever water courses are met, sufficient flow has to be provided for by building bridges and culverts so that agriculture may suffer no damage.

ART. 5. The road is to be located in such a way as not to damage or cut through city walls, fortifications, public edifices and important places.

ART. 6. Houses, farmsteads and villages, temples, graves and above all high class graveyards belonging to the gentry which are fenced in and planted with trees shail be avoided by the railway as far as possible. So far as this is impossible the local authorities shall give notice to the owners two months beforehand and settle with them a compensation of an amount enabling to erect graveyards, etc. of the same condition at another place without sustaining any loss of money.

ART. 7. In surveying the land to be purchased the "kung" shall be used as unit One kung is equal to 5 official feet, one foot is equal to 0.338 m. One Mu is counted to be 360 kung or equal to 9000 square feet.

As to the land tax to be paid by the Shantung Railway Company the same regulations shall be applied as in force for the most-favoured Railway Company in any other place of China.

ART. 8. Injuries done to crops during preparatory or construction work are to be made good by the Company according to prices to be settled with the local authorities. ART. 9. The salaries of the assistants placed by the local authorities at the disposation of the Railway at its wish shall be paid by the latter. These salaries shall not be included in the price of land purchased.

The money for the land is to be paid into the hands of the District-Magistrate, who is responsible for the proper payment to the different owners entitled to receive the

money.

The District-Magistrate also has to hand over the title deeds to the Railway Company. ART. 10. The Railway Administration intending to rent houses for offices and residences near the work places shall apply to the District-Magistrate who will make the necessary arrangements with the owners and will on its behalf conclude the contracts.

ART. 11. The purchase of material necessary for the construction of the railway shall be transacted in a fair manner and the usual market-price shall be paid for same. If necessary the intervention of the District-Magistrate shall be applied for.

ART. 12. The exchange of different kinds of money shall always be done at the rate ruling on th day.

ART. 13. The Railway Company is not permitted to construct without special permission of the Governor of Shantung other railroads than those mentioned in the Kiaochow Convention, including the branch line to Poshanhsien.

Branch lines connecting coal and other mines and places where building or hallasting materials are to be taken, connecting with the main line, may be built without special authorization. It is however understood that previous notice of the construction of such lines has to be given to the Governor of Shantung.

ART. 14. Foreigners, travelling or doing business in the interior of the Province of Shantung, in order to enjoy better protection. must be provided with passports duly sealed by the proper Chinese and German authorities. Chinese local authorities cannot assume responsibility if such a passport is not produced.

ART. 15. German and Chinese employees of the Railway Company are to be pro vided with certificates attested by the seals of the Railway Administration and of the local Authorities, in order, when necessary, to prove their official capacity

The engineers, when surveying, shall be accompanied by an official, delegated by the District-Magistrate. This official shall, if necessary by police force, render ammiał ance in protecting the property of the Railway Company and the survey poles

Persons fraudulently pretending to be employees of the Railway Company shall ha arrested and punished by the Local Authorities.

ART. 16. If troops are needed, outside of the 100 li (50 kilometer, zone, they shall he despatched by the Governor of the Province of Shantung. No formien trooper ma 7 he employed for this purpose.

The Governor of the Province of Shantung binds himself to take effenti za masowas Azzing the period of surveying as well as when the railway is under construction of opened for traffic to prevent any damage being done to it by the mob or by fachada tar This mail vay having for wie surose the development of exmmer& diall act side of the 100 li zone, be permitted in "ransor formugi feonge mudd war nala male empired by them In case there should se war set won Ching and a fowoduje

power and the way should at the time will se manages then the man nstantinue in there he sms ram sections are cele de nem and he

Senator JOHNSON of California. Does the possession of the harbor and of the economic rights that have been referred to give Japan practical control of the entire Province of Shantung?

Mr. FERGUSON. Yes; because it gives her the right to police the railroad, which she has already exercised by the appointing, not of ordinary police but of gendarmes, a part of her army organization. That scatters troops along the whole line of the railway for 256 miles. Senator JOHNSON of California. Can you tell us something about the economic resources of Shantung?

Mr. FERGUSON. The output of the three coal mines, one at Fangtsze, one at Hungshan, and one at Kin-ling-hsien, is about 1,000,000 tons of coal per annum. There are iron mines at Poshan, the possibilities of which have been variously estimated. A German engineer made a fairly low estimate of the possible output of them. They have not been developed. A Japanese expert engineer made a much higher estimate of the possible output of iron. There are also silicate deposits which are used in the manufacture of glass, a very old manufacture in that Province.

The cultivation of silk in the northern part of the Province is one of the great industries. For a very long time a large portion of the silk imported into the United States came from Chefoo. In the northwesterly part of the Province the cotton industry has been recently developed.

The Province is a very rich one, both agriculturally and in minerals. Senator JOHNSON of California. In comparison with other Provinces in China, what would you say of the productivity and richness in resources of the Province of Shantung?

Mr. FERGUSON. It is in the second class of China Provinces. The most productive Provinces are Kiangsu and Cheh-king. Then, I should say next to those two Provinces would come this Province of Shantung.

Senator JOHNSON of California. Are there any possibilities of commerce or trade in which the United States might be interested with Shantung Province ?

Mr. FERGUSON. The United States has very large commercial interests, in the sale of United States exports, and in the imports from that Province.

Senator JOHNSON of California. The distributing point being what? Mr. FERGUSON. Formerly the distributing point was entirely Chefoo, but after the German occupation of Kiaochow and the development of that harbor and the building of the railroad in 1904, a good many of the products were diverted to the port of Tsingtau.

Senator JOHNSON of California. Then, we have a material interest in Kiaochow and in the Province of Shantung!

Mr. FERGUSON. A very large interest; I should say, proportionately to other Provinces in China, a larger interest than the average interest of the United States in the Provinces of China.

Senator JOHNSON of California. Do you know whether or not the request was made by our Government of the Chinese Government to enter the war? I think the President testified to that yesterday, and your statement would be only cumulative.

Mr. FERGUSON. I might say that I was one of the persons who communicated that request on behalf of the minister to the Chinese Government, and was cognizant of the request and saw the request.