279
PUBLIC RECORD OFFICE
Reference :-
EPIC.O. 882
6
PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO
notice at any time after five or ten years from date of payment of last instalment of capital.
As to the Szechuan-Hankow section, it might do good if we intimated that our explorers had investigated and found the best trace for it, as Chang has only his students' idea.
One good thing about Chang's new proposal is that it must prevent his accepting the German tender at present, and, as the Germans stipulate for a Chinese Govern- ment loan in the tender I saw, the Wai-wu Pu can, of course, block anything contrary to their note to you of September, 1903.
Apologizing for a very long letter,
43487
(Confidential.)
No. 186.
I am, &c.,
E. H. FRASER.
FOREIGN OFFICE to COLONIAL OFFICE.
(Received December 9, 1905.)
The Under-Secretary of State for Foreign Affairs presents his compliments to the Under-Secretary of State for the Colonies, and is directed by the Secretary of State to transmit, for the information of To Sir E. Satow, No. 187, December 7, 1905. Mr. Secretary Lyttelton, the accompanying copy of a telegram, as marked in the margin, relating to the Hankow-Canton Railway.
Foreign Office,
December 8, 1905.
Enclosure in No. 186.
The Marquess of Lansdowne to Sir E. SATOW (Peking). (No. 187.) (Telegraphic.)
Foreign Office, December 7, 1905, 8 p.m. Your telegram, No. 230 [of 5th December. Hankow-Canton Railway.]. As you will for the present be fully occupied with Canton-Kowloon, and other concessions already under discussion, I agree that we can afford to wait.
43315
No. 187.
COLONIAL OFFICE to CROWN AGENTS. [See No. 188.]
GENTLEMEN,
Downing Street, December 8, 1905. WITH reference to the letter from this Department of November 3rd,* I am directed by Mr. Secretary Lyttelton to forward to you the enclosed copy of a tele- gramt from the Governor of Hong Kong with regard to the proposed loan.
2. Mr. Lyttelton would be glad if you would furnish the information for which Sir M. Nathan asks as soon as you are in a position to do so.
• No. 160.
I am, &c.,
C. P. LUCAS.
↑ No. 184.
44106
SIR,
No. 188.
CROWN AGENTS to COLONIAL OFFICE.
(Received December 13, 1905.)
Hong Kong Loan.
Whitehall Gardens, London, S.W., December 13, 1905.
I HAVE the honour to acknowledge the receipt of your letter of the 3rd of November, No. 38126/1905,* and we think that the views expressed in our letters of the 16th and 26th of Octobert must have been misunderstood, as we have not at any time advocated the abandonment of the system of raising loans by means of Inscribed Stock.
2. In our first letter we pointed out that the conditions under which the money lent to the Viceroy of Wuchang was to be repaid were quite exceptional, and that therefore it would be desirable to raise the necessary loan in the shape of Debentures. At the same time, however, we expressed the opinion that as regards the remaining portion of the loan, i.e., that required for the Kowloon-Canton Railway, we were of opinion that it should be raised in the form of Inscribed Stock. 3. In our second letter we suggested, as further legislation was required, that the existing legislation should be repealed and that fresh legislation should be passed enabling loans to be raised in the shape of either Stock or Debenture, as might prove most advantageous at the time of issue, and I now beg to state at length the reasons which led us to make this recommendation.
4. In the first place, however, I beg to say that the suggestion that borrowing by Debentures is an "antiquated system" is hardly correct. The system is, of course, an old one, but it is not antiquated in the sense of being out of date or obsolete, and in many respects it has never been improved upon. It is strongly in favour with the Stock Exchange and with the banks and financial houses in consequence of the facility with which Debentures are dealt with, and the system possesses from the point of view of the borrower the advantage, when the Debentures are liquidated by drawings, that the debt is discharged at the same rate of interest as the Securities themselves bear, whereas, in the case of an invested Sinking Fund, it may, and often does, happen that the investments for the Sinking Fund have to be made at a lower rate of interest than the loan itself bears. In the case of borrowing by Debenture the stamp duty also is only 2s. 6d. per cent. as compared with 12s. 6d. per cent. in the case of Stock.
5. It was, however, on wider grounds that the recommendations contained in our letter of the 26th of Octobert were made. Since the outbreak of the war in South Africa a complete change has come over the stock and money markets. Previously there was more money seeking investment than was provided for by the issue of 1st class securities, and, consequently, every issue of the 1st class, and many others of much lower class, were absorbed by the Stock Exchange and the investing public almost as quickly as they were issued. Since the outbreak of the war this condition of affairs has, however, altogether altered. The market has been swamped by the great issues of Consols and other Imperial Government Securities such as Treasury and Exchequer Bills, the Irish Land Stock, The Water Board Stock, and the Transvaal Guaranteed Loan, together with simultaneous issues of a great number loans on behalf of Colonial Governments and Municipal Bodies. As a consequence, vast masses of these securities still remain in the hands of the Stock Exchange and of the financial houses, and they are being financed by means of advances obtained from the banks. Such advances, however, never carry less than Bank rate of interest, and very frequently a much higher rate, e.g., quite recently speculators holding large masses of Consols have had to pay as much as at the rate of 5 per cent. per annum from Stock Exchange settlement to settlement, for the monies they have borrowed from the banks to enable them to avoid parting with their securities.
6. In these circumstances, it is matter of notoriety that many of the financial houses and members of the Stock Exchange have lost large sums of money in con- nection with the accommodation they have obtained from the banks to enable them to avoid sacrificing securities bearing a low rate of interest, which they have had
↑ No. 151.
• No. 160.
Nos. 147 and 151.
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