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the auditor to act in all respects in conformity with the conditions of the present agreement, which he must neither infringe nor pervert.
A further point to be noted is that the Chinese officials acting in this business are in no way entitled to any commissions whatsoever, and the banks shall not privately offer them gratuities. If it should be discovered that private offers of gratuities have been made, the banks will be held liable to a heavy monetary penalty.
Again, on the conclusion of this loan it will be necessary forthwith to organise an administration. The practice to be followed hereafter by the said administration has been laid down by the director-general in a set of ten working regulations, of which a copy is annexed hereto.
The foregoing particulars have been expressly and explicitly referred to and set down in this letter because they are not dealt with in sufficient detail in the agreement itself, and they are to be loyally observed by each party.
Copies of this letter are hereby made in quadruplicate, one to be held by each party.
Peking, June
1909.
Ten Working Regulations drown up by the Director-General for the Administration of the Hupei-Hunan Section of the Canton-Hankow Railway, and the Hupei Section of the Szechuan-Hankow Railway.
The original Tien-tsin-Pukow Railway agreement was made as complete as possible, after careful deliberation, and involved no loss of China's sovereign rights. The general principles have been recorded therein, but the details of operations have not been inserted in the agreement. A general statement of the actual practice at present in force on the northern section is set forth under the following heads :----
1. The Managing Director.-Subject to the control of the director-general and assistant director-general, has general authority over the affairs of the whole section, including the appointment of the Chinese and foreign staff, the regulation of salaries, dismissals, promotions, the distribution of rewards and punishments, the arrangements for carrying out engineering work of every kind, as well as the Chinese and foreign official correspondence, the allotment of funds and the ordering of materials. these matters the signature of the managing director is required.
In all
2. The Engineer-in-chief- Has the direction of the engineers of every grade employed on the whole section. His special duty is the carrying out of engineering work of every kind. When matters are referred to him for his opinion or for investi- gation, he should prepare suitable proposals without delay and submit them to the managing director, whose decision is necessary before they can be put into effect.
3. The Chinese Stoff-As the number of persons in China possessing a thorough knowledge of railways is still small, all Chinese engaged for the service of the railway are required to give special attention to engineering work with a view to gaining experience. Whilst they are on probation their salaries are on
a low scale, but they will be rewarded with an increase of pay if it is found after some months that they have shown real application and ability. Those who are remiss or who have earned a bad reputation will be dismissed at once with a view to avoiding extravagance and waste.
4. The Foreign Staff-As the most important points with regard to the foreign employés are their professional knowledge and their character, enquiries must be made about their antecedents and reputation. Before engineers of any grade are engaged, their diplomas, certificates, and letters of recommendation must be carefully examined, and these should serve as a guide in allocating the various posts. The engineers are all under the engineer-in-chief, but subject to the general control of the managing director.
5. Requisitions of Funds. With regard to requisitions, the managing director directs the engineer-in-chief to furnish him with an estimate of the amounts required during the following three months for works of every kind. When the managing director has sauctioned this estimate he notifies the bank to have the necessary sum in readiness to be drawn out and expended as required.
5. Accounts. The accounts are kept in accordance with the most modern and convenient methods. Whenever a sum of money is expended the amount is entered both in Chinese and foreign languages in the ledgers so as to be accessible both to
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Chinese and foreigners. Every account must be signed four times: once by the person receiving the money, once by the Chinese and (or) foreign accountant in Chinese employ, once by the administration's foreign and (or) Chinese comptroller of accounts in Chinese employ, and-after these three persons have already signed-by the (managing director.
7. Tenders. Whenever materials are to be purchased the engineer-in-chief is directed to prepare specifications giving particulars of the quality and pattern of the materials to be supplied. These specifications are submitted to the managing director, who issues a notice inviting tenders, to be opened on a certain date, after which the orders will be allotted. In selecting tenders the guiding principle is to choose the lowest, but when the price named is exceptionally low care must be taken to ensure that the materials are not of bad quality, and the utmost caution must be exercised in regard to this point.
8. Purchase of Land.--When land is to be purchased for the railway the engineer must first prepare a detailed plan stating the extent of the land and the class to which it belongs, together with the number of all graves, houses, trees, gardens, or wells which are wanted. This plan is forwarded to the deputy stationed on that section of the line, who, in concert with the land purchase deputy and the local official, notifies the owners of the land and in their presence measures the land, defines its limits, and pays the price fixed by the regulations.
9. Purchase of Materials.-In purchasing materials every effort must to be made to have recourse in the first instance to materials of Chinese origin, and which Chinese merchants are able to supply, with a view to preventing the profits leaving the country.
10. Contracts for Work.-Hitherto trouble has always been very liable to arise owing to the untrustworthy nature of some contractors, who have either absconded without doing the work or have cheated their employers and workmen, and it is therefore essential that precautions should be taken. Under the regulations for contracts which have now been laid down only men who have already carried out engineering works, have furnished satisfactory guarantees, and deposited security will be eligible to undertake contracts.
Enclosure 7 in No. 1.
Final Agreement respecting the Hukuang Railways Five per Cent. Loan,
THIS agreement is made at Peking on the
day of the fourth month of day of June,
the first year of the Emperor Hsuan-tung, corresponding to the 1909, Western calendar, and the contracting parties are:
His Excellency the Grand Secretary Chang Chihtung, director-general of the Canton-Hankow Railway, and of the Hupei section of the Szechuan-Hankow Railway, duly authorised by Imperial decree to act on behalf of the Imperial Government of China, of the one part, and (a) the Deutsch-Asiatische Bank, Shanghae, and (b) the Hong Kong and Shanghae Banking Corporation associated with the Banque de l'Indo- Chine, hereinafter called the "banks," of the other part.
Article 1. The Imperial Government of China authorises the banks to issue a 5 per cent. gold loan for an amount of 5,500,000. The loan shall be of the date on which the bonds are issued to the public, and shall be called " The Imperial Chinese Government 5 per cent. Hukuang Railways Loan of 1900.”
Art. 2. This loan is designed to provide capital, first-
For the redemption at a premium of 2 per cent., with accrued interest, of certain unredeemed gold bonds of the total par value of 2,222,000 dollars, United States currency, issued by the American China Development Company on behalf of the Imperial Chinese Government, and secondly-
For the construction of a Government railway main line from Wuchang, the capital of the Hupei province, through Yo-chou and Changsha, the capital of the Hunan province, to a point in the prefecture of Ch'en-chou on the southern boundary of Hunan, connecting with the Kuang-tung section of the Canton-Hankow railway line, the total length of this line, hereinafter known as "The Hupei-Hunan section of
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