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 These issues, definite and technical, involving no problems of principle or policy, were obviously suited for arbitration or judicial discrimination, but they remained unsettled and served to intensify the mutual resentment of Chinese and Japanese.

Of much greater importance, and far more complicated, was the issue over the construction of the railway from Tunhua to Kwainei. This section would complete the railway from Changchun to the Korean border, where it would connect with a Japanese railway running to a nearby Korean port. Such a line, giving direct entrance to Central Manchuria and opening a region rich in timber and mineral resources, would be of economic value as well as of great strategic importance to Japan.

The Japanese were insistent that this line should be built and thai they should participate in its financing. They claimed that China had given treaty assurances to this effect. The Chinese Government had promised, they pointed out, in the Chientao Agreement of September 4th, 1909, to build the line "upon consultation with the Government of Japan", the promise being given in part as a consideration for Japan's relinquishing the old claims of Korea to the Chientao region in Manchuria. Later, in 1918, the Chinese Government and the Japanese banks signed a preliminary agreement for a loan for the construction of this line and, in accordance with the agreement, the banks advanced to the Chinese Government the sum of 10,000,000 yen. This, however, was one of the Nishihara loans, a fact which, in the view of the Chinese, affected the validity of the engagement.

Neither of them, however, was a definitive loan contract agreement, obliging China, without condition and before a specific date, to permit Japanese financiers to participate in the construction of such a line.

It was alleged that formal, definitive contracts for the construction of this line were signed in Peking in May 1928, but there was much uncertainty regarding their validity. Such contracts were doubtless signed, under very irregular circumstances, on May 13th-15th by a representative of the Ministry of Communications of the Government at Peking, then under Marshal Chang Tso-lin. But the Chinese contend that the Marshal, who was then hard-pressed by the Nationalist Armies and was about to evacuate Peking, gave his consent that this official should sign, under "a duress of compulsion", due to threats of the Japanese that, if he should not sanction the contracts, his retreat to Mukden would be endangered. Whether Marshal Chang Tso-lin himself also signed the contracts has been a matter of dispute. After the death of the Marshal, the North-Eastern Political Council at Mukden and Marshal Chang Hsueh-liang both refused to approve the contracts on the ground that they were faulty in form and negotiated under duress and had never been ratified by the Peking Cabinet or the North-Eastern Political Council.

The underlying reason for the opposition of the Chinese to the contructionconstruction [sic] of the Tunhua-Kwainei line was their fear of Japan's military and strategic purposes and their belief that their sovereign rights and interests would be threatened by this new Japanese approach to Manchuria from the Japan Sea.

This particular railway issue was not primarily a financial or commercial problem, but involved a conflict between the State policies of Japan and China.

There were additional issues over through-traffic arrangements between the Chinese and Japanese lines, rate questions and rivalries between the seaport of Dairen and such Chinese ports as Yingkow (Newchwang).

By September 1931, the Chinese had built unaided and were owning and operating railways with a total length of nearly a thousand kilometres, of which the most important were: the Mukden-Hailung, the HailungKirin, the Tsitsihar-Koshan, the Hulan-Hailun and the Tahushan-Tungliao