[This Document is the Property of His Britannic Majesty's Government.]
AFFAIRS OF CHINA.
CONFIDENTIAL.
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[1368]
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3447
[January 13.]
122
SECTION 3.
3 FEB 11
No. 1.
(No. 461.) Sir,
Sir J. Jordan to Sir Edward Grey.--(Received January 13, 1911.)
IN his despatch No. 386 of the 28th October on the subject of Chinese loans,
Peking, December 22, 1910. Mr. Max Müller mentioned that the Viceroys at Canton and Nanking had each asked the Hong Kong and Shanghai Bank for a loan of 3,000,000 taels to relieve the financial stringency in their respective provinces.
Negotiations for the first-named loan are still pending, but an agreement for the second was signed at Nanking on the 11th instant by the Financial Commissioner, on behalf of the Viceroy of the Liang Kiang and representatives of the three banks participating in the loan, namely, the Hong Kong and Shanghai Bank, the Deutsch- Asiatische Bank, and the Banque de l'Indo-Chine.
I have the honour to enclose copy of this agreement together with copy of previous correspondence between the legation and the Wai-wu Pu with regard to the guarantee of this loan by the Chinese Government.
The banks, in conformity with the agreement come to as a result of an exchange of views in June and July last, namely, that "they would decline to entertain proposals for the issue of a Chinese provincial loan except on the condition that the redemption of the loan is unconditionally guaranteed by the Imperial Chinese Government" (Hong Kong and Shanghai Bank to Foreign Office, the 13th July, 1910), decided on this occasion to ask for something more than the communication to the legations concerned of an Imperial Edict authorising the loan, as provided for in the Wai-wu Pu's despatch of the 15th May, 1908 (translation of which was sent to you in my despatch No. 235 of the 25th May, 1908), and they accordingly asked the Viceroy to insert a clause in the loan agreement stating that the Imperial Government guaranteed the due payment of interest and repayment of principal. A clause to this effect was inserted in the draft agreement, article 8, but it was so worded as to leave room for some doubt as to its exact meaning. Accordingly at the bank's: I, in conjunction with my French and German colleagues, addressed a note to the request, Wai-wu Pu on the 17th November (Enclosure No 2), enquiring if the authorisation conveyed in a previous note from the Wai-wu Pu under date of the 10th November covered the stipulations contained in article 8, and on the 8th December, I received a note from Prince Ch'ing stating that this 3,000,000 taels loan had been "sanctioned by Imperial Decree, that is to say, the Viceroy is authorised to guarantee on behalf of the Government that payment of interest and repayment of principal of this loan shall he duly made" (Enclosure 3).
This "confirmation of the authorisation by Imperial edict of the terms and conditions of the loan," as it was described by the Peking agent of the Hong Kong and Shanghai Bank, was evidently deemed satisfactory by the banks, who forthwith signed the loan agreement.
Subsequently, however, some doubts seem to have arisen as to whether the wording of article 8 could be construed into an unconditional Imperial guarantee, and I was asked by Mr. Hillier, on behalf of the banks, for an authoritative interpretation of the meaning of the article. This I did not feel justified in giving, as it seemed to me that the Viceroy's guarantee on behalf of the Imperial Government might possibly be interpreted to mean no more than a pledge of the revenues of the provinces over which the Viceroy rules, and does not necessarily commit the Chinese Government to meeting payment of interest and principal from the general revenues of the Empire. I expressed, however, my readiness to put any query on this point which the banks
desired to the Chinese Government.
This system of desultory provincial loans, the expenditure of which is probably very loosely controlled by the central Government, is, in my opinion, doubtful finance in the present condition of China, and I have suggested to the Hong Kong and Shanghai Bank that future loans of this kind should be consolidated into one Imperial loan. Mr. Hillier seems to share these views.
These provincial loans, which are now being asked for by Canton, Hupei,
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