[This Document is the Property of His Britannic Majesty's Government.]
AFFAIRS OF CHINA.
CONFIDENTIAL.
[35986]
No. 1.
184
[October 25.]
SECTION
42969
IRECT
R 22 NOV OF
Hong Kong and Shanghae Banking Corporation to Foreign Office. (Received October 25.1
Dear Mr. Campbell,
31, Lombard Street, London, October 25, 1906.
MR. BLAND telegraphs that the Chinese decline to ratify the clause embodied in the Preliminary Agreement re Canton-Kowloon Railway, which provides that the exchange for the service of the loan shall be settled with the Bank on the day of payment. What they are holding out for is the freedom to settle exchange when and with whom they please.
In practice this would result not in fair competition, to which no objection could be taken, but in a quasi-monopoly to the continental bankers. They would be free to compete or not as it happened to suit them, with the result that the Hong Kong Bank would be left with the exchange whenever it happened to be unfavourable. As the Bank responsible for the service of the loan, we have no option in the matter; we are always obliged to remit at the rate of the day, whether it happens to suit us or not.
It is not contended that the Chinese would fail to receive the market rate, but apparently the suspicion is entertained that the rate may be "pulled" by the Bank in anticipation of an instalment falling due.
In order to remove any ground for such a suspicion we telegraphed Mr. Bland last night that we were prepared to concede to the Chinese the option to settle the rate of exchange at any time within six months prior to the date of payment of each instalment. I think this should meet the objection. Even if it were possible for the Bank to tamper with the rate for one day, it cannot be seriously argued that it could continue to do so every day for six months. Further than this we cannot go.
I understand from Mr. Bland that the British Minister is inclined to think the point in dispute is not worth fighting for, and in itself that is no doubt the case.
As a precedent, however, it would be productive of consequences so far-reaching and injurious in their effects that it is impossible for us to give way.
This is now apparently the only question in the Canton-Kowloon negotiations which stands between us and the conclusion of the Final Agreement. It is impossible to clear it out of the way without the support of the Legation behind us, and it His Majesty's Government is of opinion that we are not unreasonable in this instance in asking the Chinese to fulfil the undertaking they gave us in the Preliminary Agreement, I would respectfully urge that His Majesty's Minister at Peking be instructed accordingly.
I am, &c.
[2183 bb--) 21
(Signed)
C. S. ADDIS.