601
2
though the evident anxiety of the Board of Communications to borrow money may result in a modification of their attitude.
A further meeting was arranged for the 25th or 27th July.
I have, &c. (Signed)
J. N. JORDAN.
Inclosure 1 in No. 1.
Telegram received by Mr. Hillier from London, dated July 10, 1908.
GERMAN Syndicate do not want to participate in new Chinese Government loan of 7,000,000l. at 41 per cent. With reference to your wire of the 1st July, we assume that, of this amount, about 5,000,000l. will be applied to redemption of Peking-Hankow Railway. It is desirable obtain specific definition of productive objects for which balance of loan is required. Banque de l'Indo-Chine, Paris, and Hong Kong-Shanghae Bank agree to the terms proposed in your wire of the 1st July as a basis for negotiation, provided contract stipulates for appointment of European general engineer and auditor to Peking-Hankow Railway, on terms similar to those of Tien-tsin-Pukow Railway loan. In view of Peking-Hankow Railway revenue ear-marked for service of loan, above stipulation cannot be considered unreasonable; omission from prospectus would provoke unfavourable comment, and render issue of loan very difficult, if not impossible. With regard to supply of materials, it is desirable obtain preference for lenders if possible, but we do not make this condition a sine qua non.
Inclosure 2 in No. 1.
General Headings of proposed Agreement for Loan of 7,000,000l.
1. The Agreement to be signed by the Board of Posts and Communications with the Hong Kong and Shanghae Banking Corporation and the Banque de l'Indo-Chine, as contractors for the loan.
2. The amount of the loan to be 7,000,000l.
3. As the price which the loan will command on the market must depend upon the general conditions of the Loan Agreement, it will be necessary to defer its settlement until these have been finally arranged.
4. Interest to be at the rate of 4 per cent. per annum.
5. The loan to be guaranteed by the Imperial Chinese Government, and to be secured upon provincial li-kin and miscellaneous duties indicated to an amount of 3,500,000 taels. In the event of default of principal or interest of the loan, these revenues will be placed under the administration of the Imperial Maritime Customs, as similarly provided in previous loan contracts.
6. In order to comply with the custom and requirements of the market, it will be necessary to state that the loan funds are to be applied first to the redemption of the existing loan for the Peking-Hankow Railway, and the balance to productive objects to be specified, coming within the province of the Board of Posts and Communications.
7. The loan proceeds will be held in Europe at the credit of the Board of Posts and Communications, who will draw them either in one amount or in instalments as required, transfers of loan funds to China being made through the contracting banks.
8. The loan will be repaid by China in forty years. The payments to meet the yearly sum of 380,402l. for interest and principal of the loan will be made by the Board of Posts and Communications in silver to the contracting Banks in Shanghae, first out of surplus revenues of the Peking-Hankow Railway, so far as these are sufficient, and then from such revenues as the Imperial Chinese Government may think fit to assign. Other necessary arrangements connected with the payment of principal and interest of the loan not here referred to will be settled generally in accordance with the practice of previous Chinese Loan Agreements.
As the revenue of the railway is not pledged as the security for the loan, the lenders are not entitled to interfere with the railway management; but since this revenue is indicated as furnishing the regular funds for the payment of principal and interest of the loan, the Imperial Chinese Government will, during its currency, appoint a European to fill the post of General Superintendent Engineer of the line, and will cause the railway accounts to be audited and published annually, in accordance with the practice of the Imperial Northern Railways.
9. When materials have to be procured from abroad for the maintenance of the Peking-Hankow railway line, or for carrying out the productive objects designated for the expenditure of the loan funds, the Imperial Chinese Government will, as a mark of consideration to the lenders, give preference to the manufacturers of their countries, when prices and qualities are equal to those of others.
10. The Agreement will be sanctioned by Imperial Edict, and, after signature, the Board will request the Wai-wu Pu to communicate it officially to the British and French Ministers in Peking,
July 14, 1908.
Inclosure 3 in No. 1.
Memorandum of Counter-proposals handed to Mr. Hillier at Interview of July 21, 1908.
(Translation.)
1. The Agreement to be signed by the Board of Posts and Communications and the contracting banks, viz., Hong Kong and Shanghae Banking Corporation and the Banque de l'Indo-Chine.
2. The loan to be for 7,000,000l.
3. The price to be fixed later on when the conditions of the Agreement have been determined.
4. Interest to be 412 per cent. per annum.
5. Purpose of the loan to be for productive objects to be undertaken by the Board of Posts and Communications.
6. Proceeds of the loan will be paid over in whole or in part in Europe as the Board of Posts and Communications may require; transfers to China being made by the contracting banks if their rates are as favourable as those of other banks.
7. The loan will be repaid in forty years, and the annual instalments of capital and interest will be paid in gold, either in China or in Europe, as the Board of Posts and Communications may decide; if in China, the exchange will be fixed after arrangement with the Board, which will then make payment in silver to the two contracting banks.
8. The loan to be guaranteed by the Chinese Government which will assign as security provincial li-kin and miscellaneous revenues amounting in value to the greatest sum due in any one year for payment of principal and interest of this loan, and in case of default the provincial authorities will hand over these li-kin and miscellaneous revenues to the two banks.
9. The Agreement will be sanctioned by Imperial Edict, and after signature by the Board of Posts and Communications the Wai-wu Pu will be moved to communicate it officially to the British and French Ministers.
10. No matter what use may be made of this loan, neither the lenders nor their representatives must inquire (i.e., it shall be no concern of the lenders or their representatives, &c.).
11. Before the Agreement is signed the matter shall rest between the two negotiators and shall be no concern of the diplomatists.