3.
The arrangements for the control and expenditure of the loan funds, as embodied in article 14 of the agreement, are, on the whole, perhaps less stringent than the similar provisions of the initialled agreement, and differ in one important respect from the terms settled upon with Chang Chih-tung.
The present agreement stipulates that one-half of the net balance of the loan funds may be deposited with two native Government banks--the Bank of Com- munications and the Ta Ching Bank-and the Chinese Government declares itself responsible for all the funds so deposited with these native banks.
This stipulation met with much opposition from some of the foreign banks, who objected also, for reasons connected with exchange operations, to the transfer of the loan funds to China in the manner mentioned in this article, but the Chinese negotiator, who is an astute man of long business experience, would have no agreement which left the manipulation of the exchange to the foreign banks and deprived China of the higher interest obtainable in this country on her own money.
On the whole I am inclined to think that the banks acted prudently in yielding this point, and that the provisions of article 14 will, in the hands of the four Powers, prove sufficient to safeguard the interests at stake.
Tuan Fang, the new director-general of the whole line from Canton to Chengtu, leaves Peking in about a fortnight to take up the arduous duties which have been assigned to him. His Excellency, whose last post was Viceroy of Chihli, has been Governor of Hunan and Hupei, and has all the qualities necessary to make him a Not only has successful director-general. But his task is an extremely difficult one. he to make arrangements for the expropriation of the existing railway companies, one of which is working with 40,000 men on the section above Ichang, but he has to enforce a railway policy which will test to the utmost the power of the central Government to impose its will upon the provinces.
The Government here is fully conscious that it must stand or fall by the attitude which it has adopted on this question, and at no time since China entered into relations with foreign Powers has she taken a step which so fully entitles her to the consideration and sympathy of all those who wish to see her integrity maintained, not merely in name, but in reality.
I have, &c.
Enclosure in No. 1.
J. N. JORDAN.
Hukuang Imperial Government Railways: Final Agreement.
THIS agreement is made at Peking on the 22nd day of the 4th month of the 3rd year of the Emperor Hsuan Tung, corresponding to the 20th day of May, 1911, Western calendar, and the contracting parties are :----
His Excellency the Kung-Pao Sheng Hsuan-Huai, Minister of Posts and Commu- nications, duly authorised by Imperial decree to act on behalf on the Imperial Government of China, of the one part, and the Deutsch-Asiatische Bank, the Hong Kong and Shanghai Banking Corporation, the Banque de l'Indo-Chine, and Messrs. J. P. Morgan and Co., Messrs. Kuhn, Loeb, and Co., the First National Bank, and the National City Bank, all of New York, constituting the American group, hereinafter called the "banks," of the other part, witnesseth as follows:--
Article 1. The Imperial Government of China authorises the banks to issue a 5 per cent. gold loan for an amount of 6,000,0001. 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 Sinking Fund Gold Loan of 1911."
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 Chang-sha, the capital of the Hunan province, to a point in the district of Yi-chang-hsien, 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-Huaan section of the Canton-Hankow Railway line," being an estimated distance of 1,800 Chinese li, or 900 kilom., and of
A Government railway main line from a point at or near Kuangshui, in the province of Hupei, connecting with the Peking-Hankow Railway line, and passing through Hsiang-yang and Chingmenchou to Ichang, an estimated distance of 1,200 Chinese li, or 600 kilom., and from Ichang to Kueichoufu, in the province of Szechuan, an estimated distance of 600 Chinese li, or 300 kilom.--this latter section of the main line having been added in substitution for the branch liue from Ching- menchou to Han-yang originally agreed upon--the total length of this main line, hereinafter known as "the Hupei section of the Szechuan-Hank now Railway line," being about 1,800 Chinese li, or 900 kilom.
The survey lines shall be open to revision by the Ministry of Posts and Commu- nications.
The Chinese Imperial Government undertakes to call in, after having received from the banks application in writing to do so, the aforesaid gold bonds, and the banks will apply the amount necessary for the said redemption out of the proceeds of the loan, and will deliver the redeemed bonds to the Chinese Government after having made the bonds valueless. The Chinese Imperial Government will, after receipt of the redeemed bonds, cancel the inscription of the pledge of the Canton--Hankow Railway line in their archives, and will advise the banks in writing after having
done this.
It is understood that any surplus of the nominal amount of 500,0001. hereby allotted for the redemption of the gold bonds issued by the American China Develop- ment Company aforesaid which may remain after complete redemption of those bonds shall be allotted to the above-named railway lines.
Art. 3. After deduction of the amount required for the redemption of the gold bonds referred to in article 2 of this agreement, the balance of the loan proceeds shall be solely devoted to the construction of the aforesaid railway lines, including the purchase of land, rolling stock, and other equipment, and to the working of the lines, and to payment of interest on the loan during the period of construction, which is estimated at three years from the actual beginning of the works, a longer period, however, being allowed for the completion of the section from Ichang to Kueichou-fu in consideration of the engineering difficulties to be encountered. Work shall be commenced simultaneously at Wu-chang, Chang-sha, Kuang-shui, and Tchang within six months after this agreement has been signed, within which period the banks shall notify the Ministry of Posts and Communications that the sum of 600,0007. has been placed at its disposal, in case funds should be required for survey or construction purposes, or for ordering of materials, and for the resumption by the Imperial Chinese Government of the portion of these lines already constructed by the provinces concerned, the said sum to be held in Europe and [or] in the United States of America or remitted to China as the Ministry may direct as a first instalment on account of the proceeds, of the loan. This amount of 600,000, or whatever portion thereof is actually advanced, together with interest thereon at the rate of 6 per cent. per annum, shall be deducted from the first proceeds of the sale of the bonds.
It is understood that the lines of railway already constructed by the two provinces of Hupei and Hunan prior to the signature of this agreement with capital provided by those provinces themselves, together with the property of those two provincial railways, shall henceforward be taken over by and incorporated in the Canton-Hankow and the Szechuan-Hankow Government Railways Administration, and further that any supplementary funds which may be furnished in the future by the Ministry of Posts and Communications on account of a deficiency in the amount required for the construction of the Canton-Hankow and Szechuan-Hankow main lines within the boundaries of the two provinces of Hupei and Hunan, as provided for in article 15 of the present agreement, shall also rank as capital of the Canton- Hankow and Szechuan-Hankow Railway main lines within the boundaries of the two provinces aforesaid. But the returns due upon such capital shall not in any manner impair the arrangements for payment of interest and repayment of principal of the present loan.
Art. 4. The rate of interest for the loan shall be 5 per cent. per annum on the nominal principal, and shall be paid to the bondholders half-yearly. The said interest shall be calculated from the date on which the loan is issued to the public, and shall be paid by the Imperial Chinese Government during the time of construction either
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