(This Document is the Property of His Britannic Majesty's Government.]
CHINA RAILWAYS.
CONFIDENTIAL.
IC
[45212]
No. 1.
[December 13.]
SECTION 3.
(No. 430.) Sir,
Sir J. Jordan to Sir Edward Grey.-(Received December 13.)
Peking, November 23, 1909.
I HAVE the honour to transmit to you herewith a memorandum, furnished to me by Mr. Hillier, of the terms of a loan for 6,000,000 taels which the British, French, and German banks here propose to conclude with the Viceroy of Manchuria. The money will, I understand, be advanced by the three banks from the funds at their disposal in Shanghae, and recourse is not likely to be had to the last stipulation of the agreement, which authorises the banks, if necessary, to offer the bonds for subscription to the public.
Nevertheless, this policy of provincial borrowing seems to me one that should be discouraged as likely to lead to eventual trouble. The present loan, it will be noticed, is to be applied in part to the repayment of an advance of 1,100,000 taels made by the Hong Kong and Shanghae Bank to the Viceroy of Manchuria over a year ago, aud I understand that the payment of interest on the latter loan is overdue, and has not heen met with the punctuality which has hitherto characterised Chinese transactions of this kind. To contract fresh loans to pay off the interest and principal of former loans does not appear to be altogether sound finance.
But the security offered is. I am informed, considered ample, and financiers are doubtless the best judges of their own interests. As long, however, as banks and other firms are willing to make loans of this kind, it is difficult to see how the views of the China Association, as expressed in their letter of the 12th October, which was enclosed in your despatch No. 331, are to be enforced in practice. That body rightly considers that the value of the Imperial guarantee is steadily declining, and holds that inland taxation forms a shadowy security which would render foreclosure impossible in case of provincial default.
Granting that this assumption is correct, there remains the question as to what form of procedure should be adopted in order to provent, not international competition, but, as in this case, an international combination from making loans on the strength of provincial revenues. I have had some experience in attempting to dissuade British subjects from lending money to China without what seemed to be proper safeguards, and I fear that my advice has generally been regarded as unnecessary interference.
I have, &c.
J. N. JORDAN.
P.S.---Since the above was written, Mr. Hillier has informed me that the interest on the loan of the 9th November, 1908, was paid on the 20th instant, and that the delay was probably due to an oversight.
Mr. Hillier also stated that the Americans have now offered the Viceroy of Man- churia a loan of 10,000,000 taels secured upon provincial revenues with the usual edict, but without an Imperial guarantee, and he pointed out that by the terms of the agreement of the 9th November, 1908, copy of which is enclosed, the Hong Kong and Shanghae Banking Corporation had secured a preference for any further loan for Manchurian requirements. The three groups would, he thought, be prepared to waive the Imperial guarantee and compete with the Americans for a loan secured on the revenues of Manchuria, and he asked my views on the subject.
I deprecated competition for provincial loans on these terms, and Mr. Hillier is, I understand, now suggesting that the three groups should invite the Americans to join them, and that the loan should be made by all four. The transaction would be sanctioned by an Imperial decree communicated to the legations in accordance with the Wai-wu Pu's circular of the 15th May, 1908, copy of which was enclosed in my despatch No. 235 of the 25th May, 1908, but an Imperial guarantee is considered as unattainable, and would be dispensed with,
J. N. J.
[2538 π--3]
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