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[This Document is the Property of His Britannic Majesty's Government.]
C.O.
24967
TREGO
CHINA RAILWAYS.
CONFIDENTIAL.
RecP 26 JUL 09
[June 28.]
SECTION 1.
[24096]
(No. 211.) Sir,
No. 1.
Sir J. Jordan to Sir Edward Grey.-(Received June 28.)
Peking, June 8, 1909. I HAVE the honour to transmit to you herewith copy of the Hukuang Railway Agreement which, as reported in my telegram No. 104, was initialled on the 6th instant by the Chinese delegates and the representatives of the three foreign banks concerned.
The signature of the final agreement will, it is expected, take place in a few days, as soon as the necessary preliminaries connected with memorialising the throne and obtaining the Imperial approval have been completed,
This agreement follows generally the lines of the Tien-tsin-Pukow Agreement, but the important modification which I mentioned in my despatch No. 168, as having been introduced into article 14, strengthens considerably the powers of the auditor, and stiffens generally the Tien-tsin-Pukow terms.
The auditor's duties and position are, however, more explicitly defined in the subsidiary arrangement (copy enclosed) which is to be signed simultaneously with the main agreement, and to form part of that instrument. By this, he is virtually empowered to suspend the issue of the loan funds until he is satisfied that they are to be properly used, and if this stipulation is loyally observed, there should be an end of all abuses connected with the expenditure of foreign money on railway construction in China.
This arrangement likewise provides against a repetition of what occurred in the case of the Shanghae-Ningpo Railway, by curtailing the powers of the provincial railway bureaux, and placing them entirely under the control of the director-general.
To make the position still more secure, a Memorandum in ten articles setting forth the existing practice on the northern section of the Tien-tsin-Pukow line has been drawn up and appended to the Subsidiary Agreement, and it is stipulated that its provisions shall, as far as possible, be adopted in the construction of the Hnkuang Railway. There is some unnecessary verbiage in this latter document, but both Mr. Hillier and Mr. Cordes seem to regard its adoption as useful, from a practical point of view,
The Subsidiary Agreement, though considered an integral part of the Loan Agreement, is not I believe, intended for publication, although extracts from it may possibly be published in the prospectus.
It is interesting to note that the appointment of Japanese engineers, on which Chang was supposed to have laid so much stress in the earlier negotiations, is left, by a rather vague provision, to the discretion of the director-general.
As a financial transaction the Loan Agreement is already meeting with unfavourable criticism in Chinese circles. The issue price is considered too low, in view of the improvement in Chinese credit in Europe; interest on the credit balance of the portion of the money kept in Europe is fixed at 3 per cent., instead of 4 per cent., as formerly; and it is pointed out that the three banks, being leagued together, will be able to manipulate the exchange rates in a manner unfair to China.
I have, &c.
J. N. JORDAN.
Inclosure 1 in No. 1.
The Imperial Chinese Government Hukuang Railways Loan of 1909: Agreement. THIS agreement is made at Peking on the
day of the
month of the day of June, 1909, 1st year of the Emperor Hsuan-t'ung, corresponding to the Western calendar, and the contracting parties are: His Excellency the Grand Secretary Chang Chih-tung, director-general of the Canton-Hankow Railway and of the Hupei section of the Szechuan-Hankow Railway, duly authorized by Imperial Decree to act on behalf of the Imperial Government of China, of the one part, and (a) the Deutsch-
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