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responded to the Governor's views in a manner which has
the approval of the Colonial Office.
There was never any intention and it would be
against our interests to issue more Bonds than would be
necessary to complete the Railway and enable the Chinese
Government to comply with the terms of the Working Agree-
ment to be entered into with the Colonial Government,
but it was thought well to suggest a safe figure, as the
Loan Agreement makes no provision for what is to be
done in the event of the Loan proving insufficient.
The cost of the land is at present an unknown quan-
tity and from our experience with the Chinese in connec-
tion with the Shanghai Nanking Railway we feared that
the acquisition of land might under Chinese methods be
a formidable item.
The contemplated Agreement between the Government
of Hongkong and the Chinese Government moreover stipu-
lates for the provision of Working Capital and for im-
provements from time to time, which stipulation had
also to be borne in mind.
And further although our Engineers' estimates of
the cost and period of construction are we believe ample
Chinese land jobbery and obstruction to which the enter-
prise is so exposed might be so effective as to upset the
calculations and involve not only additional expense in
actual construction but in additional Interest during con-
struction in the event of the period of construction ex-
ceeding the estimated two years.
In view of these contingencies we hope Sir Edward Grey
and the Governor of Hongkong will realise that our proposal
that the amount of Loan should be fixed so as to include
a very large margin for issue only in case of need, was
based upon serious considerations.
In regard to the Governor's opinion that the Loan
should be issued in instalments of not more than £500,000
each we beg to point out that there are objections to the
adoption of this course.
Every issue will be the subject of negotiation with
the Chinese and the opportunity to them of making demands
and creating obstruction, even to the point of causing a
suspension of operations by blocking the issue of Bonds
+
It seems therefore to us that the number of such opportun-
ities should be limited as much as possible.
The Corporation having to take the Loan at fixed price
the...