[This Document is the Property of His Britannic Majesty's Government. 290
2
"In any case reversion branch line will be covered by provision article 19, which is retained. Article 14, transfer loan funds to China at discretion Yuchuanpu, in amounts not exceeding 200,000l. in any one week. Yuchuanpu will have option deposit up to equivalent one-half net proceeds loan with Chiaotung Bank, Ta Ch'ing Government Bank; Imperial Government declares itself responsible for funds so deposited, and Yuchuanpu engages to make transfers from these funds to construction account with Hong Kong and Shanghai Banking Corporation, Deutsche-Asiatische Bank, so as to ensure uninterrupted construction. Foregoing arrangement is designed to eliminate all friction with regard to low interest allowed by group banks. Article 15, Sheng refuses deduction five and a-half points for flotation, and offers alternative either terms present agreement, including price 95 firm, or supplementary loan to be issued by banks on terms to be arranged. We propose take latter alternative. Article 18, goods purchased abroad must be passed by inspector appointed by Chinese Government, whose fee will be shared equally by group and Chinese Government, and latter will not have right reject goods on arrival in China.
EG
Foregoing terms are best we can hope to secure; and we consider delay would be very dangerous, as provinces are already protesting; revised draft will be submitted at meeting called by Sheng the 13th April, when we hope to reach settlement.'
CHINA RAILWAYS.
CONFIDENTIAL.
[14701]
No. 1.
15371
[April 20.]
SECTION 1.
Mr. Addis to Foreign Office.--(Received April 20.)
Hong Kong and Shanghae Banking Corporation, 31, Lombard Dear Mr. Greg,
Street, London, April 19, 1911. IN the accompanying memorandum I have tried to define the embarrassing position in which I find myself in arriving at a decision with regard to the latest phase of our Hukuang loan negotiations.
I am sending a copy to cach of our respective groups, in the hope that by a frank interchange of views some light may be thrown upon a difficult and complicated question which, in whatever way decided, is certain to have far-reaching results in the future.
Yours truly,
C. S. ADDIS.
Enclosure 1 in No. 1.
Memorandum by Mr. C. S. Addis respecting the Hukuang Railway Loan.
THE Hukuang negotiations have now reached a stage which demands the careful consideration of all parties concerned.
Apparently the sole object, which now remains to the immediate signature of the loan agreement is the demand on the part of the Chinese to deposit half of the proceeds of the loan during construction with the Chiaotung and Ta Ching Government Banks. The Chinese Government declares its responsibility for funds so deposited, and the Yuchuanpu undertakes to transfer from the Chinese to the European banks, as required for construction, amounts sufficient to provide for one month's estimate in advance. In addition the Yuchuanpu undertakes to furnish quarterly statements of loan funds held by Chinese banks.
Our four representatives go on to state that if these revised terms are agreed they could probably sign the loan agreement at once, and the Ministers for France, Germany, United States, and Great Britain concur with them in urging upon us the acceptance of these terms, on the grounds that, in view of the changed conditions since the date of the initialled agreement, and in consequence of provincial opposition, the Chinese negotiators are compelled to obtain some concession of the kind; and for us to disregard this necessity might lead to the complete rupture of negotiations and create an opening for the competition of other groups.
1 may say at once, frankly, that to myself these arguments are not convincing. The difficulty may be admitted of replying to the Chinese argument that the loan having been made on the guarantee of the Imperial Government there can be no objection to the proceeds being transferred to banks which are also guaranteed by the Government. What they apparently fail to see is that with us it is not a question of security, but control. And I find it difficult to believe that the Central Government, if really in earnest in the inatter, are so powerless in the face of provincial opposition as they would have us believe. Nor can I bring myself to credit the imminence of the danger of competition referred to by our representatives. To suppose at the present stage that the four Powers would stand supinely by and allow a third party to snatch from their nationals the fruits of negotiations to which the Powers themselves have been consenting parties is, to my mind, incredible.
There is also this to be said, that, no matter how the proposal is safeguarded or disguised, it really amounts to this, that we are parting with the last trace of that financial control which it was the very object of our international agreements to preserve. It should not be lightly abandoned.
These being my views, I should have no hesitation personally in advocating resistance to the Chinese claim. Nor do I believe that there would be any danger
[1985 u-1]