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[This Document is the Property of His Britannic Majesty's Government.]
B
34533
AFFAIRS OF CHINA.
October 20.]
REC
CONFIDENTIAL.
Rro II NOV 10,
SECTION 4.
[38205]
(No. 345.) Sir.
No. 1.
Mr. Max Müller to Sir Edward Grey.—(Received October 20.)
Peking, October 4, 1910. IN continuation of my despatch No. 382 of the 22nd September, I have the honour to report that Mr. F. F. Birchal called here on the 29th ultimo and informed me that a 7 per cent, gold loan for 450,0007, had been successfully floated in London on Saturday, the 24th ultimo, through the London City and Midland Bank. This loan, Mr. Birchal explained, was part of the Peking-Hankow Railway Redemption loan sanctioned by Imperial edict in October 1908 and the bonds had been issued under the authority of the Board of Communications confirmed by the Chinese Minister in London, who had signed the contract with Mr. Birchal's firm. He added
that the 91. bonds had been very favourably received on the London market and that in all probability a further issue of 400,0007 would be made under similar conditions, but at a reduced rate of interest, namely 6 per cent., in a few months time. He had not heard of any part of this loan being placed in Japan.
Mr. Birchal did not apprehend that any difficulties would arise in connection with the payment of interest and redemption of the bonds, but should such occur the bondholders would, of course, look to the British Government for the protection of their interests. I thought it advisable to point out to Mr. Birchal that as those bonds were bearer bonds forming part of an internal loan the issue of which had not been formally communicated to the British legation, the holders accepted them at their own risk, and I said that, in my opinion, the British Government could not under these circumstances be expected to interfere on behalf of the bondholders in the event, for instance, of the Chinese Government declining to recognise the conversion of these bonds from a silver to a gold basis.
As I have not yet scon the prospectus of the loan I do not know what has been said by the promoters with regard to the position of the Chinese Government in the matter, but two statements made by Mr. Birchal in the course of conversation point to the possibility of certain false impressions having been created in the minds of the bondholders.
In the first place, Mr. Birchal's statement that this loan is to be devoted to the redemption of the Peking-Hankow Railway can hardly be correct seeing that the line was finally repurchased from the Franco-Belgian concessionnaires on the 10th December, 1968, and banded over to the Board of Communications on the 1st January, 1909. It is generally understood that the larger portion of the loan is required for the extensive repairs to the line referred to in my former despatch, although if the Peking-Hankow line, as stated in a balance sheet recently issued, made a net profit of 3,610,000 dollars on its first year and a half's working under purely Chinese control, it is not quite clear why the Board of Communications should find it necessary to borrow money at 7 per cent. to defray the cost of repairs.
In the second place, Mr. Birchal's assertion that the Board of Communications had formally authorised the issue of these bonds in London would, to say the least of it, appear to be premature. The president designate of the board, Tong Shao-yi, has not yet reached Peking, and as you will observe from the correspondence, copy of which I have the honour to enclose, both the former president, Isi Shih-chang, who is now a member of the Grand Council, and the acting president, Shen Yün-pei, have committed themselves in writing to the opinion that the "board will not recognise the claim in the London prospectus for a rate of interest at 7 per cent."
The impression I had formed that this loan constitutes a revolt against the domination of the British and allied " groups " receives confirmation in a leading article which appeared in the "Peking Daily News" of the 29th September, extracts from which I have the honour to enclose. This paper which, if not exactly officially
* This is no doubt the one which Messrs. M, Samuel are making enquiries about.-B. A. [2958 u-4]
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