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PUBLIC RECORD OFFICE

Reference :-

TLC.O. 882

9

PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH—NOT TO

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LV.

From HIS BRITANNIC MAJESTY'S MINISTER, Peking, to GOVERNOR, Hong Kong. (Despatched 4.10 p.m., September 19, 1906: Received 4.40 p.m., September 19, 1906.) Your telegram of 18th September. There has been no material progress-

JORDAN:

DEAR SIR MATTHEW,

Enclosure 2 in No. 300.

Mr. BLAND to GOVERNOR, Hong Kong.

Peking, September 7, 1906. I AM sending the minutes of meetings in re the Canton-Kowloon negotiations regularly to Messrs. Jardine Matheson and Company, and have requested them to communicate the same to you in due course. Having a spare copy of the record of the third meeting, at which matters reached what looks like a deadlock intentionally caused by the Chinese, I now enclose it, so that you may be in possession of the information as soon as possible.

Having adopted a basis of negotiations similar to that of the Northern Railways loan, we are, ipso facto, prevented from imposing many of the conditions contem- plated under our original proposals, which were based on the Nanking agreement. For this reason the Chinese claim to postpone, for settlement under the working agreement, such matters as lekin, freight charges, telegraphs, &c., holding that in these the Corporation is no longer concerned. They claim absolute control and a free hand in these matters. It is a matter for regret, in the interests of all concerned (including the Chinese) that we were not encouraged to adhere to the terms of the Nanking agreement, for the difficulties of the present situation are very great.

Believe me, &c.,

CANTON KOWLOON RAILWAY.

J. O. P. BLAND.

MINUTES OF MEETING (the 2nd) held at the Wai Wu Pu on Wednesday, the 29th August, at 3 p.m.

PRESENT:

His Excellency Tang Shao-yi;

Kung Taotai and Mr. Hu, representing the Viceroy of Canton; Messrs. Chu Pao-Fay and En, Secretaries to the Wai Wu Pu; and Mr. J. O. P. Bland, representing the British and Chinese Corporation,

Limited.

Mr. Bland's minutes of the last meeting have been compared with those recorded in Chinese, His Excellency Tang Shao-yi observed that they were practically identical. Mr. En was directed to forward a copy of the Chinese text to Mr. Bland for record.

Proceeding to discuss the clauses of the Viceroy of Canton's draft agreement in their order, and omitting all present reference to the preamble, His Excellency Tang Shaq-yi stated the proposals of the Chinese Government, as follows:---

Article 1. An Imperial Chinese Government loan for £1,500,000 would be issued, of which the Corporation would be asked to raise one million the remainder of the bonds being taken firm by the Viceroy of Canton. On the bonds thus allotted to China, the Corporation's commission and ordinary flotation expenses would be paid, but no expenses for underwriting, the 2 per cent. usually expended under this heading being credited to China.

Mr. Bland enquired whether the intention was to guarantee that the Viceroy would subscribe and pay for £500,000 of the bonds, this amount to be reserved for China? On this point there seemed to be some uncertainty, Kung Taotai being without definite information. He suggested that if the amount reserved was not fully taken up in China, arrangements might be made for disposing of the unsold halance in London. Mr. Bland explained the conditions under which loans are floated in London, observing that subscriptions could be simultaneously received in

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Shanghai, Hong Kong, and England, and suggested that the Chinese Government should either state definitely the amount of bonds to be reserved for China or that the Viceroy of Canton should take firm and be responsible for a fixed amount. The matter was left open, the meeting proceeding to discuss the question of price.

His Excellency T'ang Shao-yi suggested a 41 per cent. loan, which, according to his information, should be obtainable at 95. This proposal was, however, aban- doned as impracticable, and the loan left at 5 per cent. As regards the price, His Excellency observed that whercas on previous occasions (e.g., the Northern and Nanking Railways) the Corporation had been obliged to pay large commissions to Chinese officials in order to conclude the contracts, no such necessity would arise in the present case, and it should therefore be possible for the Corporation to deal at easier rates. He thought China should receive the benefit of this economy. His proposals, after long discussion, were either that the Corporation should undertake to give a fixed price of 964 per £100 or to float the loan deducting 44 points from the issue price; he requested Mr. Bland to telegraph submitting these terms for the Corporation's consideration.

Mr. Bland, while undertaking to comply with this request, observed that (apart from the fact that 96 was an impossible rate) it was extremely improbable, after recent experience in the Shanghai-Nanking Railway loan, that the Corporation should consent to name any fixed price in the loan contract, even if the loan consisted of one issue only, inasmuch as the Corporation could not guarantee itself against fluctuations of the money market. It had been shown in the Nanking Railway loan that when the price of Chinese securities improved, the Chinese Government declined to be bound by the fixed price agreed to in that loan contract, claiming, and obtaining, the profit which by agreement was to go to the Corporation. If, however, the price should fall, the Corporation would be compelled to carry out its agreement. Under such conditions it was impossible to name a fixed price, and Mr. Bland therefore hoped that the Chinese Government would conclude the present agreement on the equitable basis of a fixed commission payable to the Corporation to cover all expenses of the loan and to remunerate the Corporation for its services in floating the same. The minimum rate at which the Chinese Government could expect the Corporation to do this business (in the absence of the profit certificates to which the Corporation was properly entitled under the terms of the concession) would be 5 points below issue price he thought that if the other conditions of the agreement were amicably arranged, the business might well be done on these terms.

Article 2. The Chinese Government's intention, based on experience gained in the Northern Railway, is to build a single line of railway. The provision of land, bridges, &c., for double lines would be a matter for the Viceroy's consideration, and no pledges need be given. There could be no possible necessity, in His Excel- lency's opinion, for a double line at present. Mr. Bland observed that the matter was one for experts, but that the Viceroy had, in his own draft, recognised the advisability of providing for future development of traffic. Questions of construc- tion must depend upon local requirements, survey, &c., but the decision taken by the Chinese Government might affect the flotation of the loan.

Article 3. Proposed to delete all reference to the Salt Gabelle and to include the remainder of this article under Article 1.

Article 4. His Excellency T'ang thought that this article needed little amend- ment, but reference to the additional £500,000 would be unnecessary if it were definitely decided that the Viceroy of Canton would subscribe for bonds to that

amount.

Article 5. Deleted.

Article 6. His Excellency Tang Shao-yi desired the omission of that para- graph which stipulates for reference, in case of disagreement between the Viceroy and the Corporation's representative to the Wai Wu Pu and Legation.

Article 7. No alterations proposed.

Article 8. His Excellency Tang Shao-yi desired the omission of this clause, condemning it as unnecessary and conflicting with China's dignity, but, after discussion, agreed to recognise the precedent recorded in all similar agreements heretofore concluded by China, modifying the wording in one or two particulars.

Article 9. The discussion of this article was renewed from the point at which it was left at the last meeting, but no decision was arrived at, His Excellency T'ang holding to the view that the Corporation's rights did not involve responsibility for