}
2
Under my
advice Mr. Hillier returned a preliminary reply to Wang Ta-jên on the 3rd August, in the Memorandum copy of which I have the honour to inclose, pointing out that neither the Corporation nor His Majesty's Government would consent to regard the Preliminary Agreement as invalidated, hut offering to elaborate a scheme for giving effect to Wang Ta-jên's third alternative.
Mr. Hillier then proceeded to embody his views in the Memorandum which forms the second inclosure to this despatch. The proposals contained therein follow the lines of the Tien-tsin-Yang-tsze Rail vay negotiations, with the additional safeguards that the Engineer-in-Chief and Chief Accountant should be British subjects acceptable to the Corporation, and that the loan proceeds should be payable only on their certificates.
This Memorandum was sent to Wang Ta-jên yesterday after I had seen his Excellency at the Wai-wu Pu. During our conversation I stated that I had seen Mr. Hillier's proposals and considered them to represent the minimum terms which the Corporation could accept; and at the same time I warned his Excellency that all mention of controversial questions such as the rights of the gentry and the cancellation of the Corporation's Preliminary Agreement could serve no useful purpose and should be avoided.
I have, &c. (Signed)
Inclosure 1 in No. 1.
J. N. JORDAN.
Memorandum communicated by Mr. Hillier to Wang Ta-jên.
THE three alternative proposals made by his Excellency Wang Ta-jên on the 1st August, respecting the negotiations for the Soochow-Hangchow-Ningpo Railway, all imply the complete annulment of the Preliminary Agreement of 18.8.
Such a course cannot be agreed to by the Corporation, and Mr. Hillier is informed by His Majesty's Minister that His Majesty's Government would certainly refuse to consent to such a proceeding.
But if the Chinese Government merely desire to modify the Preliminary Agreement, and to negotiate a Final Agreement upon revised conditions, the third proposal in Wang Ta-jên's Memorandum appears to offer some prospect of an understanding. Mr. Hillier is therefore engaged in preparing a draft scheme of proposals based upon his Excellency's observations at the interview of the 1st August, which he will be ready to present in the course of a few days, and which he will refer to his Board after ascertaining the views of his Excellency.
August 3, 1907.
Inclosure 2 in No. 1.
Memorandum communicated by Mr. Hillier to Wang Ta-jén respecting Proposals for a Loun for the Construction of the Soochow-Hangchow-Ningpo Railway.
AN Imperial Chinese Government sterling loan to be raised through the British and Chinese Corporation for the amount required for the complete construction and equipment of the line.
2. Interest on the loan to be at the rate of 5 per cent. per annum.
3. The term of the loan to be thirty years, redeemable in twenty annual instalments, commencing from the eleventh year. If the Chinese Government wish to redeem the loan earlier, they may do so after ten years at 2 per cent. premium, or after twenty years at par, either out of Chinese Government revenue or the surplus earnings of the railway line, or from native capital subscribed.
4. Payment of principal and interest of the loan to be unconditionally guaranteed by the Imperial Chinese Government. The loan service to be paid in the first place from the surplus earnings of the railway, the deficiency being made up by the Chinese Government from other sources.
5. The security of the loan to be provincial revenues to be arranged. So long as principal and inter st are regularly paid there is to be no interference; if default takes place the Corporation to be allowed to appoint an official receiver to administer and
B
receive the revenues collected on behalf of the bondholders. The railway line is not to be mortgaged.
6. The line to be an Imperial Chinese Government railway, managed by a Chinese Managing Director, who will be deputed to deal with the British and Chinese Corporation in all necessary matters. The line to connect with the Shanghae-Nanking Railway at Soochow, and to be as far as possible uniform with that line in respect to construction, equipment, and working, due regard being had to economy, and, with this object, the constructive and executive staff and workshops of the Shanghae-Nanking Railway are to be made use of so far as available.
7. The Chief Engineer and Chief Accountant selected for the railway are to be British subjects acceptable to the Corporation. Orders of the Managing Director upon loan funds are to be accompanied by certificates of the Chief Engineer and Chief Accountant, stating the nature and cost of the work to be paid for. The Corporation will be furnished with regular statements of the working accounts of the railway, signed by the Chiet Accountant.
8. The commission on purchase of materials and the share of net profits of the line to be commuted for a cash payment on a basis to be arranged, calculated to include also the survey and other preliminary expenses already incurred by the Corporation. In return for this fixed payment, the services of the Corporation will be at the disposal of the Chinese Government, whenever called for, in matters relating to the construction, The Chinese Government will retain equipment, and future operation of the line. complete liberty of action with regard to the purchase of materials in the most suitable markets, preference being given to British materials when these are of equal price and quality.
9. These are the essential terms of the modified scheme which Mr. Hillier is prepared to recommend to the Corporation. If acceptable in principle, they will be expanded into the form of a draft Agreement to be submitted for the approval of the Wai-wu Pu.
Peking, August 6, 1907.
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