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The Syndicate's representatives point out that their instructions are to ask for the same measure and nature of control as exist under the Shanghae-Nanking Loan Agreement, but they hope to be able to obtain the necessary authority for the terms now proposed which are eminently reasonable, whereas the Chinese proposal that the bondholders' representatives should be in a minority on the Board would certainly prevent the conclusion of the loan contract.
Chow Taotai lays stress on the provincial opposition which is to be expected in the event of any terms being conceded which infringe on China's sovereign rights; Mr. Bland, in reply, points out that the Boards of Commissioners represent the Imperial Director-General and the Syndicate respectively, and that the control in all matters of administration not immediately affecting the interests of the bond- holders lies primarily with the Director-General as Representative of the Imperial Government.
Discussion of the Chinese draft of November 1903 is resumed at Article 29. The representatives of the Syndicate state that their instructions, based on the undertaking given by the Chinese Government in the Preliminary Agreement, preclude acceptance of the proposal to limit the Syndicate's interest in the net profits to 10 per cent. Mr. Bland points out that such a condition would place the Syndicate in a position of inferiority as compared with other Chinese Government railways financed, and con- structed by foreign Companies; and that recognized usage in such joint enterprises entitles those who provide the funds to share in the prosperity of the enterprise. That the terms asked amount to only one-fifth of the net profits for a minimum term of fifteen years, and as the line is not likely to be immediately remunerative, this cannot be regarded as unreasonable. The Syndicate has the right under the Preliminary Agreement to ask for 20 per cent. of the profits for a period of thirty years, but might be prepared, as a final concession, to accept 15 per cent. during twenty years. Chow Taotai auswers that it would be preferable, from the Chinese point of view, and more in accordance with precedents, to suggest 20 per cent, during fifteen years, the Govern- ment being thereafter entitled to redeem-on this question it will be necessary to obtain the Viceroy's instructions.
The question of "Loan Service Reserve Fund" is next discussed. Liang Taotai objects to its amount of four millions sterling, and to the proviso that the fund can only be used to make good deficiencies of interest and for final redemption of the loan. He considers it unreasonable that such a large sum should be deposited with the Syndicate banks and not be available for immediate redemption of bonds after the period agreed upon; he therefore proposes that the maximum amount of the fund be 2,000,000%., and that the final paragraph of the Article be amended to read "this fund may, however, be used towards redemption of the loan, one notice to be given to the Syndicate of the intentions of the Imperial Government so to use the fund, provided always that an amount be sufficient to pay the ensuing year's instalments of interest shall be reserved for that purpose.” The Article is eventually amended in this sense.
Article 30.-No discussion.
Article 31.-For "accept any commercial telegrams for transmission" read "transmit any service telegrams."
Articles 32, 33, and 34.--Unaltered.
Article 35.---It is agreed that joint signature of the Agreement shall follow the issue of the necessary Imperial Edict, it being understood that the Syndicate will give formal assurance to abide by the conditions submitted for the approval of the Throne.
Article 36.-Unaltered.
It is understood that Liang Taotai will take an early opportunity of seeing his Excellency the Viceroy in Peking and obtaining instructions on the several questions left in abeyance. In the meanwhile a résumé of the recent negotiations will be compiled and discussed at next meeting, with a view to reconciliation of the results thereof with the Syndicate's draft Agreement.
The meeting then adjourns.
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Inclosure 8 in No. 1.
Minutes of the Twenty-second Meeting held at the Office of the Haikwan Taotai at Tien-tsin, on Saturday, September 22, 1906.
Present:
Taotai Lian Tuu-yen, representing the Viceroy.
C. L. Chow,
Mr. H. Cordes, representing the Deutsche- Asiatische Bank. Mr. J. O. P. Bland, representing the Chinese Central Railways.
The Minutes of last meeting, having been forwarded to the Chinese Commissioners, are taken as read and passed.
Mr. Cordes hands to each member a copy of the draft which he has compiled, embodying the results of the last three meetings' discussion of the Viceroy's counter- proposals of November 1903. It is agreed to go over this draft at next meeting, preparatory to its translation for the Viceroy's information.
The discussion of Article 18 is resumed, baring reference to the constitution of the Boards of Commissioners and the position of te Engineer-in-chief.
Liang Tootai says that, having consulted his Excellency the Viceroy in Peking, be is in a position to state that no agreement can be made except under conditions giving to the Chinese Government a much wider measure of authority and control than is contemplated by the Syndicate. He claims that the Engineer-in-chief should be under the direct and absolute control of the Imperial Director, and that in all questions connected with the Railway the latter's decision should be final. Upon reference being made to the formal undertakings given under Imperial authority in the Preliminary Agreement of May 1899, he expresses the opinion that this is not binding upon China except upon modified terms acceptable to Chinese public opinion.
Considerable discussion ensues upon this point, Mr Cordes laying stress on the fact that the Syndicates have at all times been ready and willing to conclude the Final Agreement and to proceed with the enterprise. He points out that in the Preliminary Agreement certain essential conditions, how disputed by the Chinese Commissioners, were definitely accepted by the Chinese Government, and that Liang Taotai's present proposals as to control would constituse a direct breach of that Agreement.
Mr. Bland observes that although the Syndicate may consent to abandoning its rights to a majority of representation on the Boards of Commissioners, and may meet the Chinese Government in an amicable spirit on several points of difference, it is not to be expected that the rights granted under the Preliminary Agreement can be ignored. If the proposals now put forward by Liang Taotai were seriously maintained, it would be necessary to revert to the terms specifically stated in the Preliminary Agreement.
Chow Taotai considers that a serious objection to the Syndicate's proposals lies in the existence of two separate Boards of Commissioners and two Engineers-in-chief, his own experience having shown that such a condition of affairs must lead to continual friction. It is also unnecessarily expensive. He recognizes the necessity of this system during construction, but considers that when the line has been completed, it should be administered and controlled as an undivided Imperial railway under conditions similar to those of the Peking-Shanhaikwan line,
He also suggests as modifications likely to facilitate the conclusion of the Agreement----
1. That the keeping of the northern section's accounts in German be not insisted upon; and
2. That the purchase of materials be made not by the Syndicate Banks, but by the Boards of Commissioners by open tenders, on the understanding that the Syndicate receives its commission of 5 per cent, on all such purchases, and that preference be given in the open market to German and British goods for the German and British sections at equal rates.
After detailed consideration of Article 18, in the wording of which certain amendments are made.
Liang Taotai states that, to meet the objects contemplated by the Agreement in regard to the better security of the foreign capital invested, the Viceroy may be
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