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Sir J. Jordan finally informed Prince Ch'ing that the Ministers would be prepared to agree to the omission of the the branch line, provided a satisfactory arrangement were come to with the banks on the remaining alterations within a short time, and in order to enable this to be done it was arranged that the banks should meet Shêng at the Yuchuan Pu on Friday the 7th April at 2 P.M.
Inclosure 2 in No. 1.
Nates of Meeting held at Yuchuan-Pu on April 7, 1911.
Present: His Excellency Shông Kung Pao, Lord Li, Wu Yu Shêng, Mr. Chao,
Messrs. Hillier, Mayers, Cordes, Casonave, Straight, and Brent.
HIS Excellency Shêng described briefly result of his interview with the Ministers at Prince Ching's residence on the 5th April, at which he had been present. His Excellency said that the omission of the branch line on which he had to insist would not involve a reduction in the amount of the loan, viz., 6,000,0007.
It was estimated that after payment of the Belgian bonds, which would absorb about 475,0007., and deducting the discount of the loan, a sum of about 5,200,0001. would be left for construction of the main lines. These will, it was roughly estimated, be about 1,000 miles in length, and would therefore probably require more than the present issue.
Mr. Hillier asked his Excellency if he could give any assurance with regard to the reversion of the branch line to the groups in case the provincial companies failed to construct it with their own capital.
His Excellency said that in omitting this branch line he had two objects in view: first, as a sop to the provincial agitators; and second, to save the Government from undertaking à line which was convinced would never pay, since it would run parallel with the Yang-tsze. The provincial company could of course construct it if they chose, but he would warn them against the folly of doing so, and would at the same time place on record in his memorial to the Throne his own strong views on the subject. In these circumstances, it was obvious he could not consistently give us the assurance requested, although it was in effect contained in article 19, relating to the future construction of branch lines, which he had left undisturbed.
The conversation then passed on to the various points raised by the board's counter-draft of the 25th February.
(Note.---Numbers refer to articles in counter-draft.)
Article 2.-Retention of original clause relating to Belgian bonds was agreed to. Article 3.-Arrangements whereby funds already expended by provincial com- panies, or to be furnished later by the Yuchuan Pu, are to rank as capital, were explained as follows :---
It was his Excellency's intention, if possible, to buy out the provincial companies with loan funds; if they refused to come to terms, their claims would in no case impair the priority of the present loan.
His Excellency agreed to interest at 6 per cent. on the advance of 500,0001.
Articles 4 and 5.-His Excellency agreed to half-yearly payments both of interest and principal.
Article 6.-This point was not discussed.
Article 7-His Excellency agreed to payment in Shanghai and (or) Hankow sycee, but insisted on retaining option of payment in national currency when effectively established. His Excellency said that he would throw up the negotiations rather than concede this point.
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Article 9-His Excellency agreed to omit obscure references in this article to conversion of Kuping and Haikuan taels, and agreed to reinsert provision for administration by Customs in case of default.
Article 13.--Notice of prospectus agreed to seven days instead of fourteen days. Article 14-Interest 3 per cent. on gold funds agreed to, but his Excellency pressed for a higher interest in silver, and the right to keep silver funds on fixed deposit; he also wanted complete liberty to transfer funds to China when he considered exchange to be favourable. It was explained that nothing over 2 per cent. could be
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given for silver funds, whereupon he insisted that the Chinese Government must he allowed to deal with its own funds as it thought best.
He proposed to retain sufficient gold funds abroad to pay for imported materials, and to bring the rest out to China as it suited him, depositing one-half with group banks and one-half with the Chiaotung and Taching Banks.
It was pointed out that recent reports with regard to these two banks did not inspire confidence,
His Excellency replied with some asperity that these were mere rumours, he was engaged in reorganising their management; they were in effect Chinese Government banks, and the Government made itself responsible for them.
It was agreed that this matter should be left for consideration and reference bome to the groups.
With regard to the functions of auditor, referred to in the "despatch," his Excel- lency refused flatly to admit that document, but agreed to the insertion in the agreement of the following clause :---
If the auditor should find that there are any irregularities in the payments to be made, he may ask the managing director for specific details, and if the managing director is unable to furnish definite explanations, the auditor may refer the matter to the Yuchuan Pu for their instructions.'
Article 14, Supplementary Loans.-His Excellency refused to bind himself to a discount of 55 per cent, on the market price of the loan, and offered the alternative of :-
1. Taking any supplementary loan on the terms of present agreement, including fixed price of 95 ; or
2. Leaving all the terms to be arranged when the time comes.
Article 17.- His Excellency refused to insert condition that chief engineer should be acceptable to groups, but offered to insert provision that after selection "notice would be given to the banks, and if they have objections, &c." (as in counter- draft).
Article 18.-His Excellency refused to withdraw his condition that inspectors should be paid by groups, and when pressed said he was strongly inclined to cut down purchasing commission to 2 per cent.
He eventually agreed to leave commission at 5 per cent. provided half the inspector's fees were paid by groups, and he consented to omission of clause allowing for rejection of goods on arrival in China.
His Excellency adhered to all the other terms of his revised clause, but said that if the Hanyang Ironworks could not satisfy demands of railway he would, of course, purchase abroad.
It was arranged that a redraft should be made by us, based on the initialled agreement, and introducing the modifications above discussed, and that the same should be submitted to his Excellency as soon as possible.
His Excellency said he had given way to us very much to-day, and expressed the hope that we might find some point on which it would be impossible to come to an agreement, as otherwise he much feared that this business was going through, and he foresaw that it would throw great responsibilities on his own shoulders.
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