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pointed out that definite understanding on the point was usual in loan agreements for railways and, from the bondholders' point of view, an important factor affecting the value of the first mortgage security. It was eventually agreed to modify the clause, recording simply the fact that the Chinese Government would not permit the construction of any parallel line injurious to the Railway's interests.
In regard to the second question, H.E. T'ANG SHAO-YI observed that under ordinary conditions of the exchange market, the Chinese Government might suffer serious and unfair disadvantage by being bound to purchase sterling drafts for remittances on Railway accounts through the Hongkong and Shanghai Bank only; China was bound to pay the interest and principal at due dates to the Bank, but in so doing, was entitled to benefit by the exchange markets' ordinary competition. He described this condition as a monopoly unfair to the Railway's interests and observed that if another Bank was in a position to offer a better rate than the Hongkong and Shanghai Bank the Railway should be entitled to take it. He desired therefore that the Clause in question should be amended to read "fourteen days before the due dates either in sterling drafts, or in local currency sufficient to meet such payments in sterling in London, exchange for which shall be settled with the Hongkong and Shanghai Banking Corporation at the most favourable rates."
Mr. BLAND stated that he had already referred the point to the Manager of the Bank at Shanghai, who had expressed the opinion that this condition, usual in the Chinese Government's railway agreements, could not be withdrawn. The Bank were the officially recognised Agents for the service of the loan, and therefore entitled to transact its business - the effect of the proposed amendment being to alter this Clause.