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His Excellency Tang eventually expressed his willingness to modify his previous decision so far as to agree that after tender British goods should have preference at equal prices, and that 5 per cent, commission would be paid on all purchases of British goods.
Mr. Bland recapitulated the arguments already advanced, and expressed the opinion that it would be useless to lay such a proposition before the Directors of the Corporation. He further drew attention to the fact that the Chinese Government, which had hitherto put forward the views of the provincial authorities and gentry as a reason for modifying the terms of the Shanghae-Nanking Loan Agreement was, in the present instance, endeavouring to impose conditions far more stringent than those desired by the Provincial Viceroy.
His Excellency Tang Shao-yi stated that the terms of the Shanghae-Nanking Railway's Loan Agreement could not be made applicable to the present negotiations. He contested the validity of the preliminary Agreement, because the Corporation was not intrusted with the construction of the entire line from Canton to Kowloon city, maintaining that the building of the railway between these two points by the Corporation was an essential condition of that Agreement, whereas it now appeared that the Corporation was only concerned with the section in Chinese territory. He claimed for the Chinese Government the same discretionary powers as those exercised by the Hong Kong Government.
Mr. Bland, in reply, stated that at the time of sanctioning the preliminary Agreement of March 1899 the Chinese Government was fully aware that the Corporation's construction rights were limited to Chinese territory, and that the expression "British Kowloon" in clause 1 of that Agreement could only mean the frontier of the leased territory, and was never intended to mean Kowloon city. By the Concession granted in September 1898 the Corporation was given the right to finance and build a Chinese railway in Chinese territory on terms not less favourable than the Luhan Concession; several points had already been conceded to meet the views of the Chinese Government, and in view of conditions admittedly altered since that date, but his Excellency's present proposals were tantamount to denial of all rights and advantages under the Concession.
His Excellency Tang Shao-yi, after consultation with the Canton Viceroy's delegates, stated that the terms offered could not be further modified, and Mr. Bland, being unable to accept them, undertook to report the situation to the Board and to convey their reply in due course.
The meeting then proceeded to consider the remaining clauses of the Canton Viceroy's proposals.
Article 10.--No discussion.
Article 11.--His Excellency Tang Shao-yi considered that the question of railway telegraphs was an internal matter for regulation by the Chinese Government, and that this clause was therefore superfluous in the loan Agreement; it would, however, find a place in the working Agreement to be arranged with the Hong Kong Government.
Article 12.--The Chinese Representatives agreed that all receipts from traffic should be deposited in the Hong Kong and Shanghae Bank, but his Excellency Tang Shao-yi claimed that the usual market rate of interest on the daily balance should be allowed, as in the case of other Chinese Government railways; also, that in the event of large accumulations of profits, the Chinese Government should dispose of the same in the same manner as those of the Northern Railways. Mr. Bland undertook to obtain the views of the Bank in the matter, suggesting at the same time, that the procedure adopted for the Shanghae-Nanking Railway should be followed.
Article 13.--No discussion.
Article 14.--His Excellency Tang Shao-yi stated that the Chinese Government would henceforward charge all railway construction with the proper amounts payable for duty and li-kin, this also being a purely Government question. No taxes or stamp fees would be imposed on the interest or revenues of the line. The question of li-kin on goods carried by the railway was a matter for arrangement under the working Agreement.
Article 15.--Agreed that the Hong Kong and Shanghae Bank's commission of per cent. is payable on all sums disbursed by the Bank on account of the service of the loan during and after construction. His Excellency Tang Shao-yi stipulates, however, that in the purchase of sterling drafts to pay the half-yearly amounts due for interest and capital, the Chinese Government shall be free to buy in the open market.
Article 16.--Considered by the Chinese Representatives to be superfluous.
Article 17.--No discussion.
Article 18.--A reasonable time limit to be conceded under the conditions stated, its period to be a matter for amicable arrangement between the Corporation and the Chinese Government.
Article 19.--His Excellency Tang Shao-yi observed that the freight charges, &c., are matters to be regulated by the Director-General of the Railway in consultation with the Traffic Manager and Engineer-in-chief, and that the final arrangements are a matter for discussion and inclusion under the working Agreement.
Article 20.--Mr. Bland pointed out that this clause as drafted by the Viceroy would be prejudicial to the Chinese Government's interests, inasmuch as the investing public would not be likely to buy bonds under the conditions proposed. He suggested that a premium of 2½ per cent, be paid on all bonds redeemed before the lapse of 25 years. This question was left open.
As regards the method of repaying the capital, Kung Taotai explained that the Viceroy's intention is to redeem the bonds in 40 drawings, one each year after the tenth year.
Article 21.--Not discussed.
Articles 22 and 23.--Mr. Bland pointed out that the loan Agreement would not be possible in England if the Chinese text were authoritative, nor could it be signed before the issue of the sanctioning Edict.
The Canton Viceroy's proposals having now been discussed seriatim, Mr. Bland observed that if the existing difficulties as regards price and commission on materials could be met by the Chinese Government's indorsing the Canton Viceroy's fair and reasonable conditions, the conclusion of the Agreement should not entail any great delay; if not, he feared the negotiations had reached a deadlock. There were certain further points to be brought forward, arising out of the Corporation's draft Agreement, but he thought it would be better to allow these to stand over until an agreement were come to on the essential conditions.
His Excellency Tang Shao-yi hoped that the Corporation would see its way to accepting the China Government's terms—i.e., a loan at 96 and commission on importations from England.
The Meeting then adjourned, it being understood that the Board's reply would be communicated when received.
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