[This Document is the Property of His Britannic Majesty's Government.]
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CHINA RAILWAYS.
CONFIDENTIAL.
[36195]
No. 1.
[October 19.]
SECTION 2.
Sir J. Jordan to Sir Edward Grey.-(Received October 19.)
(No. 385. Confidential.) Sir,
Peking, September 1, 1908. THE negotiations between the Hong Kong and Shanghae Banking Corporation and the Board of Communications respecting a Peking-Hankow Railway Redemption Loan, which were suspended under the circumstances stated in my despatch No. 354 of the 4th August, were resumed in consequence of the receipt on the 24th August of a telegram by Mr. Hillier from his principals in London. According to this telegram, information had come from Paris that the "Société d'Etudes" was on the point of concluding a loan for 4,000,000l. at 5 per cent, and 95, to be issued in London through Martin's Bank. It would seem that this information originated from my French colleague, who was doubtless told of it by M. Prudhomme, the local representative of the Belgian Company.
Mr. Hillier made inquiry at the Board of Communications, where it was confirmed that the negotiations were nearly concluded. The Belgians were willing to do without Customs control of pledged revenues, and without a definite statement of the purposes of the loan, but they were still holding out for the purchase of 700,000l. worth of Belgian material and for some retention of the existing French character of the line. The loan was for 7,000,00071., of which the first issue was to be 4,000,000l., and the Belgians were relying on many of the present bondholders accepting new bonds in preference to cash.
Mr. Hillier doubted whether a loan could be floated successfully in London on these terms, but his principals held otherwise, and instructed him confidentially that in any case they could not afford to let the business go out of their hands. He placed the Hong Kong and Shanghae Bank's new proposals before Mr. Liang Shih-yi on the 29th August, and forthwith settled a loan for 7,000,000, in two issues, at 95 and 5 per cent., to be redeemed in forty years, or, in the alternative, at 93 and 5 per cent. for the first twenty years, and 44 per cent, for the remaining twenty years. The proceeds are to be applied to productive undertakings in the Empire of China, and coming within the "functions and Department of the Board of Posts and Communica- tions."
I am told privately that, besides the redemption of the existing Pekin-Hankow Railway bonds, the two principal purposes of expenditure will be the completion and extension of the Kalgan Railway, and the establishment of a national service of merchant steamers to Europe and America. The securities are provincial li-kin and miscellaneous duties, and, in case of default, the Chinese Government will instruct the provincial authorities coucerned to hand over the specified provincial -kin and miscel- laneous duties to the two banks. I should add that Mr. Hillier has kept M. Casenave informed throughout, and I understand that the French group desire to take half the loan, provided the whole of the 7,000,0001. are floated in one issue.
Mr. Hillier laid a draft Final Agreement before Mr. Liang yesterday, and he informs me to-day that only a few minor points remain for discussion,
I have, &c. (Signed) J. N. JORDAN.
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