[This Document is the Property of His Britannic Majesty's Government.]
2
Inclosure 2 in No. 1.
Mr. J. Bland to British and Chinese Corporation.
(Telegraphic.)
October 16, 1907. NEGOTIATIONS re Soochow-Hangchow-Ningpo Railway. Following upon my request Liang Taotai to name special security for loan, the Wai-wu Pu assert that renewed agitation Province of Chekiang intimate signature Loan Agreement will be delayed.
It was understood between the Wai-wu Pu, the British Minister, Soochow- Hangchow-Ningpo Railway, Tien-tsin-Chinkiang Railway Agreement would be simultaneously signed. Alleged agitation Province of Chekiang may therefore delay
both.
The British Minister vigorously pressing the Chinese Government. I consider very advisable no difference opinion occurs to prevent united action.
CHINA RAILWAYS.
CONFIDENTIAL.
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(No. 413.)
Sir,
No. 1.
408
[October 21.]
SECTION 1.
Sir J. Jordan to Sir Edward Grey.~(Received October 21.)
Peking, September 2, 1907. WITH reference to my despatch No. 402 of the 20th ultimo, on the subject of the Tien-tsin-Yang-tsze Railway negotiations, I have the honour to report that it has been found necessary to modify the conditions proposed by Messrs. Hillier and Cordes for the appointment of foreign Engineers-in-chief and a Chief Accountant.
apparent,
Shortly after the meeting with Mr. Liang on the 17th August, it became from information received by Herr Cordes from Tien-tsin, that the Viceroy would in no case agree to the appointment of a foreign Chief Accountant. The two negotiators determined, therefore, in order to obviate a deadlock, to drop this point at their next meeting with Mr. Liang, which took place on the 22nd August.
This concession on their part still left to Mr. Liang the task of persuading the Viceroy to accept the appointment of British and German Engineers-in-chief, acceptable to the Syndicate Banks and responsible for the co-signature of orders for loan funds.
Small hope was held out by Mr. Liang of this clause being accepted. It involved a degree of control over the railway, and his instructions, he said, were to be liberal in all purely financial matters, but to preserve strictly and fully the Chinese management of the line,
Upon this declaration some financial points were discussed. Under the Preliminary Agreement the Syndicate Banks were entitled to a share in the profits of the railway, and to a commission on materials. The commutation of these under a single payment, in accordance with the precedent set by the Canton-Kowloon Railway Agreement, is calculated by the banks to amount to 425,000, a sum which Mr. Liang noted with apparent equanimity, and with a promise of reference to his superiors.
Before the next meeting on the 28th August Mr. Liang had held a personal consultation with the Viceroy at Tien-tsin. He was able, therefore, to lay before the two representatives of the banks a clear conception of what still remained before them. The Viceroy's attitude towards the condition regarding Engineers-in-chief was, briefly, one of grudging acquiescence, provided that the wording did not attract the attention of the gentry,
Mr. Hillier showed how the wording appeared when embodied in an Agreement, by producing his draft of the Soochow-Hangchow Railway Agreement.
Mr. Liang was not sanguine that the Viceroy would accept the terms as they stood, and they passed on to the financial questions. Of these the chief was that of com- mutation, which, as above mentioned, amounted to 425,000, or 8 per cent., on a loan of 5,000,0001. This claim the Viceroy proposed to treat on broad lines, and had authorized Mr. Liang to make a counter-offer of 4 per cent. on the amount of the loan,
A middle course was finally sketched out, subject to the approval of the principals on both sides, by means of which the banks not only stand to obtain most of what they originally demanded, but a solution will be found at the same time to the troublesome question of issue price. This arrangement is, in a few words, as follows: The Chinese expect an issue price of 94, Under present market conditions the banks are not prepared to allow them more than 92. They are willing to allow the banks 4 per cent. of the loan as "commutation." Mr. Hillier suggests, therefore, that if they will take the loan at 88 the banks will leave the exact amount of commutation" to the chances of the market. Under existing conditions they would not get less than 4 per cent. of the amount of the loan, while if the market improves they may get 6 per cent.
The main point, however, was that regarding the Engineers-in-chief, and to this Mr. Liang returned, making the alternative suggestion that, as the accounts would be kept in English, the banks could inspect them at any time. He also implied that he personally would like to see a condition introduced that the earnings of the line should be paid into the banks, and drew attention to the fact that, as the draft Agreement stood, China could take over the whole amount of the loan immediately upon issue. The
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