ment, and insisted that something definite must be settled at Peking before this course was repeated. There was no doubt that the railway was wanted, and that some progress had been made by the appointments of Messrs. Moore and Ross as engineers; but there was an utter lack of funds, and until the question of capital was placed on a sound basis much of the present expenditure would be wasted. A loan was necessary, and it was the duty of the Chinese Government to decide on this at once and take advantage of the present favourable conditions of the money market.
This morning M. Bapst told me that since our conversation of the 22nd he had learnt that there is a Belgian proposal to have the amount represented by the unredeemed bonds incorporated in the capital, to be subscribed by the three provinces for the construction of the line, with the object doubtless of thereby obtaining a voice in the construction. M. Bapst also stated that no interest has been paid on the unredeemed bonds during the past three years, and that the Chinese, when applied to, deny liability, and always refer the Belgians to the American Development Company. In this attitude the Chinese Government are probably relying on Article 17 of the Washington Supplemental Agreement of the 13th July, 1900, which prevented the Americans from transferring their rights to other nations or people of other nationality,
I have, &c. (Signed)
Inclosure in No. 1.
J. N. JORDAN.
Memorandum by Mr. Bland re Negotiations for Loan to Hunkow-Canton Railway, Hupei-Hunan Section.
IN May 1907 I went to Hankow and saw his Excellency Chang Chih-tung in regard to the loan which he wished to raise for the construction of railways (1) from Wuchaug to Changsha; (2) from Wuchang to Ichang. The result of these negotiations (hampered by Japanese intrigues) and of those subsequently conducted by Mr. Hillier (when German participation was eventually suggested by the Viceroy) was practically identical, viz., after obtaining all available information as to terms, his Excellency Chang requested me to return to Peking and obtain the authority of the Yu Chuan Pu for the proposed loans; in Mr. Hillier's case it was the Board of Finance that was to be consulted, but on neither occasion was there shown any evidence of a sincere desire to negotiate the proposed loans on reasonable terms.
During the negotiations for the Tien-tsin-Pukow Railway, his Excellency Liang Tun-yen, on behalf of his Excellency Chang, suggested to Mr. Cordes and myself that a loan of 2,000,000l., or 3,000,000l. should be arranged simultaneously with the Tien-tsin-Pukow Railway contract, but was informed that this was impracticable.
After the conclusion of the Tien-tsin-Pukow Railway Agreement, his Excellency Liang informed me on the 13th February that his Excellency Chang was anxious to negotiate a loan for the northern section of the Hankow-Canton line." I informed him on that occasion, and at a subsequent interview on the 28th February, that the Corporation was prepared to conclude an Agreement on terms generally similar to those of the Tien-tsin-Pukow Railway Agreement, but at the same time I recommended that a construction contract should be arranged, whereby the rapid construction of the line would be guaranteed and the flotation of a loan facilitated. At this juncture occurred the removal of his Excellency Chao Erh-hsun from the Wuchang Viceroyalty, and at an interview on the 11th March his Excellency stated that his Excellency Chang Chib-tung now desired to postpone negotiations until the new Viceroy, Chien Kuei-lung, had taken over charge.
Subsequently, however (28th March), it was intimated to the Chinese Government by the Belgian Minister that so long as the outstanding bonds of the American China Development Company, held by Belgians, remained unredeemed it was not open to his Excellency Chang to negotiate for a British loan for the construction of the Hankow-Canton Railway; moreover, that in view of the letter given to the "Société d'Etudes" by his Excellency Sheng on the 26th July, 1898, relative to an alleged preferential right to the Hankow-Canton Railway, the Chinese Government was debarred from entering upon negotiations with British capitalists. This protest would appear to have caused his Excellency Chang to reconsider his intention to raise a foreign loan.
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Referring to the Belgian protest, it is to be observed (1) that the alleged preferential right given by his Excellency Shêng in the letter referred to was specifically stated to be effective only in case the American China Development Company's provisional contract "should not become a definitive one"--which it did; and (2) that in the Agreement made between his Excellency Chang and the American China Development Company on the 29th August, 1905, for repurchase of the Syndicate's construction rights, it is clearly stated that, notwithstanding the fact that bonds for 2,222,000 dollars (gold) had been already sold by the Syndicate and were then outstanding, the Chinese Government should re-enter absolutely upon all its rights and privileges in connection with this railway, admitting only its liability to pay the interest and principal of the said bonds whenever due. The American China Development Company's rights and powers were therefore definitely restored to China, and any claims preferred by bondholders must be strictly limited to claims financial.
Were this not so the Agreement made ten days later (on the 9th September, 1905), by his Excellency Chang and His Britannic Majesty's Consul-General at Hankow (whereby a British preferential right to finance Chinese Government railways in Hupeh was conceded in return for the loan of funds required to repurchase the Hankow-Canton Railway Concession) would evidently be valueless, and his Excellency Chang's position in the matter open to serious objection.
On the 6th May I saw his Excellency Liang Tun-yen, and, reminding him of our previous understanding in regard to negotiations for the proposed loan, suggested that as his Excellency Ch'en Kuei-lung had now assumed office, the matter might be taken up without further delay. His Excellency Liang, being on sick leave, said he was unable to take any official action. He advised me, however, to write to his Excellency Chang, suggesting that negotiations be commenced. This I did on the 9th instant, but without receiving any reply.
If his Excellency's objections to negotiating the proposed loan are due to the Belgian protest, it would appear advisable that the Chinese Government should be requested to pay off the outstanding bonds and to give effect to the understanding recorded in the Agreement made with His Britannic Majesty's Consul-General at Hankow.
J. O. P. BLAND.
May 20, 1908.
(Signed)