PUBLIC RECORD OFFICE
| | | | | | | | | | | | | | | |||||
} ?། ཟ། ། 「 །]
Reference :-
C.O. 882
6
PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO
SIR,
506
Sir J. JORDAN to Sir MATTHEW NATHAN.
Peking, November 1, 1906. WITH reference to my despatch of October 13th, I have the honour to enclose, for your information, copies of the minutes of the 7th, 8th, and 9th meetings of the negotiators of the Canton-Kowloon final loan agreement, which were held on - October 22nd, 25th, and 31st.
The amendment referred to in the last paragraph of the minutes of the 9th meeting as having been agreed to, is that which Your Excellency desired in your telegram of October 27th.
His Excellency
Sir Matthew Nathan, K.C.M.G.,
&c.,
&c.,
&c.,
Hong Kong.
CANTON KOWLOON RAILWAY.
I have, &c.,
J. N. JORDAN.
MINUTES OF MEETING (the 7th) held at the Wai Wu Pu on Monday the 22nd October, at 2 p.m.
(Communicated by Mr. Bland, October 25, 1906. Received October 26, 1906.)
PRESENT:
His Excellency Tang Shao-Yi;
Kung Taotai and Mr. Hu, representing the Viceroy of Canton; Mr. En, Secretary to the Wai Wu Pu; and
Mr. J. O. P. Bland, representing the British and Chinese Corporation,
Limited.
The complete final draft, as revised from Article 14 to the end by the Canton Viceroy's deputies and Mr. Bland, was submitted, and certain amendments, pro- posed on either side were discussed.
In the latter portion of the agreement His Excellency Tang Shao-Yi took exception to two points, viz., the condition in Article 15 referring to rival or parallel lines, and that in Article 14 which limits the settlement of exchange for remittances to London to the Hong Kong and Shanghai Banking Corporation.
The first of these two questions was discussed at considerable length, His Excellency Tang Shao-Yi maintaining that the Chinese Government, being solely interested in the profits of the enterprise, would naturally refrain from building rival lines of a nature injurious to its interests, and that to give a definite under- standing to the Corporation in the matter was unnecessary. Mr. Bland, on the other hand, pointed out that definite understanding on the point was usual in loan agreements for railways and, from the bondholders' point of view, an important factor affecting the value of the first mortgage security. It was eventually agreed to modify the clause, recording simply the fact that the Chinese Government would not permit the construction of any parallel line injurious to the railway's interests.
In regard to the second question, His Excellency Tang Shao-Yi observed that, under ordinary conditions of the exchange market, the Chinese Government might suffer serious and unfair disadvantage by being bound to purchase sterling drafts for remittances on railway accounts through the Hong Kong and Shanghai Bank only; China was bound to pay the interest and principal at due dates to the Bank, but in so doing, was entitled to benefit by the exchange markets' ordinary com- petition. He described this condition as a monopoly unfair to the railway's interests and observed that if another bank was in a position to offer a better rate than the Hong Kong and Shanghai Bank the railway should be entitled to take it. He desired, therefore that the clause in question should be amended to read "fourteen days before the due dates either in sterling drafts, or in local currency sufficient to meet such payments in sterling in London, exchange for which shall be settled with the Hong Kong and Shanghai Banking Corporation at the most favourable
rates."
33
507
Mr. Bland stated that he had already referred the point to the Manager of the Bank at Shanghai, who had expressed the opinion that this condition, usual in the Chinese Government's railway agreements, could not be withdrawn. The bank were the officially recognised agents for the service of the loan, and, therefore, entitled to transact its business-the effect of the proposed amendment of this clause might be to create artificial competition to the Bank's disadvantage. The article as drafted, stated that the bank would settle exchange "at the most favour- able rates," and His Excellency would, no doubt, recognise the fact that its estab- lished reputation for fair dealing was sufficient guarantee that such rates would be given in the future as in the past.
His Excellency admitted the justice of this view and thought the Bank would, as a matter of course, transact such business, but the Chinese Government was entitled to preserve freedom of action in making these remittances on account of the bondholders. He declined, therefore, to accept the clause as drafted. Mr. Bland agreed to telegraph to the Chief Manager of the bank and submit the point.
After certain minor verbal alterations in the text of other articles, and a general review of the whole contract, Mr. Bland submitted a summary of the Consulting Engineer's estimates, lately received from the Board, and basing thereon. the opinion that a supplementary loan might be required, or additional funds pro- vided, by the Chinese Government under the terms of Article 2, asked for the amend- ment of Article 9, so as to provide in such case for a proportionate increase in the Corporation's commuted commission. This, after some discussion, was agreed to in respect of any supplementary loan, but His Excellency Tang Shao-Yi declined to accept the condition as applicable to any additional expenditure which the Chinese Government might make from its own funds.
In this connection, Mr. Bland raised the question of branch lines as a matter affecting the interests of the bondholders, and of the Corporation, respectively, and asked for the inclusion of a clause, similar to that in the Northern Railway Loan Agreement, to provide for the financing and construction of branch lines, when required by the Viceroy, either from the Chinese Government's funds, or by further loans from the Corporation. He pointed out that such lines could not be satis- factorily worked or financed except as part of the main-line system, and that it would obviously be to the detriment of the undertaking, as a security, were loans raised elsewhere, or separate administration introduced. His Excellency Tang Shoa-Yi stated that the Chinese Government might be expected to deal with the question of branch lines without prejudice to the interests of the Government rail- way, but declined to record any such conditions in the present loan agreement-for the same reason he declined to insert a clause having reference to the railway working in connection hereafter with the Hankow-Canton trunk line.
Finally the price of the loan was discussed, His Excellency expressing the opinion that the Viceroy, having fully expected 95, it was impossible to recommend to the Government an agreement at 93. The matter was fully discussed. Mr. Bland observed at the outset that he had received instructions from his Directors to state that the outlook of the money market, with bank rate at 6 per cent. was very uncertain; that it would, therefore, be necessary to include in the agreement a clause, similar to that in the Northern Railway contract, providing for extension of time or amendment of price in the event of unfavourable conditions for the issue of a loan prevailing at the time of the issue of the prospectus. Subject to this condition the Corporation would be willing to offer 934, transferring the preliminary expenses to construction account. on the understanding that the matter would be considered and at a meeting to be held on the 25th instant, Mr. Bland undertook to raise the price to 94 for the agreement as at present drafted. He took occasion, however, to point out that the uncertainty for some time past existing in regard to the finances, &c., of the Shanghai-Nanking Railway, could not fail to have a prejudicial effect upon investors in Chinese securities, which, if maintained, might entirely preclude the issue of the present loan.
Eventually, decided
His Excellency Tang Shao-Yi stated that this cause of uneasiness would no longer exist, as the authority to issue the bonds was now forthcoming and would shortly be officially communicated to the British Legation-he had no doubt the matter would be settled this week.
18885
38 27