This Document is the Property of His Britannic Majesty's Government
486
2
Mr. Liang immediately changed his attitude and proceeded to discuss business with Mr. Hillier, and, after much discussion, the choice of two alternatives was given to him: (1) either that the redemption of the Pei-Han Railway should be specified as an object of the loan, upon which the banks would give a written assurance that they would not in any way interfere in the management; or (2) that the Loan Agreement should state the object to be the redemption of railways generally and the development of productive works. These alternatives were placed by him before his chiefs at once, and Mr. Hillier was enabled to communicate to London without delay the conditions stated in the inclosed telegram of the 25th September.* M. Casenave telegraphed to Paris supporting Mr. Hillier's views (a copy of his telegram is inclosed*), and I informed you in my telegram No. 153 of the same date that, in my view, the Chinese would break off negotiations if those terms were not accepted.
On the 26th September London telegraphed to Mr. Hillier that you approved acceptance provided the French agreed, but that the latter considered the Chinese assurance too vague, and desired a specific mention of the Peking-Hankow Railway, in a separate letter if not in the Loan Agreement. To this Mr. Hillier, with my concurrence, replied on the 28th September that if the designation of the Peking-Hankow Railway was insisted upon the condition must be put forward in the form of an ultimatum, and pointed out that a risk of losing the loan would be run, as it was probable that the Chinese Government might prefer to come to some arrangement with the Belgians. M. Casenave made a strong representation in the same sense to his principals in the telegram of the 28th September, copy of which I have the honour to inclose.*
I have, &c.
(Signed) J. N. JORDAN,
P.S.-To-day Mr. Hillier received a telegram from London stating that the banks accept the terms proposed in his telegram of the 25th September, provided that the joint letter is so expressed as not to conflict with existing obligations of the Chinese Government in connection with the Canton-Hankow, Hankow-Szechuan, and other railways.
J. N. J.
* Not printed.
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CHINA RAILWAYS.
CONFIDENTIAL.
[40912]
(No. 474.) Sir,
No. 1.
Rec? [November 28. 17 DEC 08
SECTION 1.
Sir J. Jordan to Sir Edward Grey.-(Received November 23.)
Peking, October 25, 1908.
WITH reference to my despatch No. 445 of the 11th instant, I have the honour to inclose translation of an interesting Memorial of the Board of Communications, published in the "Official Gazette" of the 20th instant, in which it is mentioned that the guiding principles of the Board in negotiating the recent loan were to prevent foreign bondholders and banks from having grounds for interference in the management of the railways or other works for which the loan was required, and to avoid any definite stipulation as to the disposition of the money. The statement that 80 per cent. of the proceeds are to be devoted to the redemption of certain railway loans really refers to the bonded debt of the Peking-Hankow line, there being no other Chinese railway loans which can be thus redeemed.
I have, &c.
(Signed) J. N. JORDAN.
Inclosure in No. 1.
Extract from the "Official Gazette" of October 20, 1908.
Memorial by the Board of Communications with reference to a proposed Loan Agreement with the Hong Kong and Shanghae Banking Corporation and the Banque de l'Indo-Chine.
(Translation.)
ON the 4th October an Imperial Decree was received sanctioning a Memorial by the Board, wherein they proposed that a loan of 5,000,000l. should be raised from the Hong Kong and Shanghae Banking Corporation and the Banque de l'Indo-Chine, and that a further Memorial should be submitted as soon as the terms of the Loan Agreement had been arranged and had been approved by the Wai-wu Pu.
The guiding principles which the Board have kept in view in negotiating this loan have been that neither the bondholders nor the banks having charge of the loan should have the right to interfere in any way whatsoever, and that there should be no definite stipulation as to the disposition of the funds. After considering the matter for over a year, and discussed the matter with several capitalists, we finally decided that the proposals of the Hong Kong and Shanghae Bank and the Banque de l'Indo-Chine were the most suitable, and, after several months of negotiations with them, we have now decided upon an Agreement in fifteen Articles, of which the following are the important points:—
The amount of the loan is 5,000,000l.; 80 per cent. of the proceeds are to be devoted to the redemption of certain railway loans, and the remaining 20 per cent. to be employed in productive works under the direction of the Board. The term of the loan is thirty years. Interest is at the rate of 5 per cent. for the first fifteen years and 4 per cent. thereafter. The loan is issued at 94, and all the expenses of flotation and issue, such as underwriting, commission, telegrams, advertising, postage, printing, stamp duty, &c., are to be borne by the banks. The principal is to be repaid in twenty instalments, commencing with the eleventh year; but the Chinese Government shall have the right to redeem the whole issue or increase the regular redemption after the fifteenth year and up to the twenty-third year by paying a premium of 2¼ per cent., and after that date without paying any premium at the par value of the bonds. Service of principal and interest will be paid from the surplus revenue from productive works under the direction of the Board, any deficiency being made up from other sources of revenue. The payment of principal and interest is further secured by a first charge on the revenue from miscellaneous duties in the Provinces of Chihli, Hupei,
[2030 x-1]
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