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23637

(Confidential.)

SIR,

No. 27.

ACTING GOVERNOR MAY to MR. LYTTELTON.

(Received July 4, 1904.)

Government House, Hong Kong, June 3, 1904. WITH reference to my recent despatches on the subject of the Canton-Kowloon Railway, I have the honour to transmit, for your information, a copy of a letter which I have received from His Majesty's Minister at Peking, enclosing a copy of his despatch, No. 164, of the 11th ultimo, addressed to the Marquess of Lansdowne.

14th May, 1901, with enclosure (11th May, 19047

SIR,

I have, &c.,

F. H. MAY,

Officer Administering the Government.

Enclosure in No. 27.

British Legation, Peking, May 14, 1904.

I HAVE the honour to transmit to you, herewith, a copy of a despatch which I have addressed to the Marquess of Lansdowne on the subject of the Canton- Kowloon Railway.

In view of the suggestion of the Hong Kong Chamber of Commerce that the railway might be constructed with the aid of a guarantee of interest by the Colony, I have, in this despatch, called the attention of His Majesty's Government to the terms granted by the French Colony of Indo-China to the Laokai-Yunnan Fu Railway Company, which might form a useful basis for an arrangement, should it be decided to adopt the suggestion of the Chamber of Commerce.

The Officer Administering the Government,

(No. 164.) MY LORD,

Hong Kong.

I have, &c.,

ERNEST SATOW.

Peking, May 11, 1904. WITH reference to my despatch, No. 132, of April 11th, mentioning a sugges- tion of the Hong Kong Chamber of Commerce that the Canton-Kowloon Railway might be constructed with the aid of a guarantee of interest by the Colony of Hong Kong, it seems worth while to recall the terms granted by the French Colony of Indo-China to the Company formed to construct the line from Laokai to Yunnan-fu, which has been conceded by China to the French Government.

The capital of the Company is fixed at 12,500,000 francs, and the Colony makes a free contribution of an equal sum in cash. In addition, the Colony guarantees 3 per cent. interest on the bonds to be issued by the Company up to an amount of 3,000,000 francs. Further, the Colony engages to construct the line from Haiphong to Laokai, and hand it over to the Company with rolling-stock complete. The Com- pany on its side has to construct and equip the workshops, to furnish the stations and provide the tools for maintenance of the line, in return for a payment by the Colony of 2,000 francs per kilometre completed.

Bonds for the Laokai-Yunnan-fu line may be issued; as soon as one-fourth of the share capital is paid up, at a price of not less than 76 francs per 100 francs nominal. The paid-up capital will receive 4 per cent, interest during the period of construction.

When the whole line to Yunnan-fu is completed, the Company will be entitled to deduct from the gross receipts the expenses of working and maintenance calcu- lated according to a given formula, besides a sum of 400,000 francs to pay interest on its shares and the general expenses of administration. Should the gross receipts fall short of this amount, the deficit up to 2,000,000 francs will be carried to a

49

suspense account and be covered by the surplus of receipts over expenditure in subsequent years.

When there is a surplus, after covering previous deficits, the balance up to 1,000,000 francs is to be shared equally between the Company and the Colony; of the next 2,000,000, the Company is to receive one-third and the Colony two-thirds; above 3,000,000, the Company is to receive one-fourth and the Colony three-fourths. But before the surplus is divided a sum of 2,000,000 francs is to be deducted to form a reserve fund in anticipation of any future deficit. The share of profits accruing to the Colony is to be deducted from the amount of the guaranteed interest on the bonds to be furnished by it.

Thus the shareholders have a prospect of receiving a high rate of interest for their money, while the bondholders are assured at least 3 per cent., but more prob- ably 4 per cent., upon the price of issue.

These figures are extracted from the agreement between the French Govern- ment and the concessionaires who undertake to form the Company, annexed to the law of July 5th, 1901, copy of which was published in the "Journal Officiel," and enclosed in Your Lordship's despatch to this Legation, No. 183, of August 7th, 1901. It is for the Government of Hong Kong to decide whether in their opinion the financial position of the Colony would admit of their taking a leaf out of the French book for the purpose of constructing a much less costly and probably much more profitable line of railway.

I am sending a copy of this despatch to the Officer Administering the Colony of Hong Kong.

I have, &c.,

The Marquess of Lansdowne, K.G.,

&c.,

&c.,

24253

&c.

No. 28.

ERNEST SATOW.

THE BRITISH AND CHINESE CORPORATION, LIMITED, to COLONIAL

SIR,

OFFICE.

(Received July 9, 1904.)

[Ansrereil by No. 44.]

The British and Chinese Corporation, Limited,

3, Lombard Street, London, E.C., July 8, 1904.

THE Directors have carefully considered your letter of the 24th June, No. 19795/1904,* and I shall endeavour to reply to the various points raised in their order in as full a manner as possible.

Paragraphs 2 and 3. From these paragraphs the Directors gather that the pro- posal made in the Corporation's letter of the 3rd June† that the management of the Kowloon-Canton line should be placed in the hands of a Board does not meet with approval, but while in some degree concurring in the views expressed, the Directors do not feel that their opinion formerly stated in reference to control should be departed from in principle. While saying this, however, I would mention that the Directors are desirous of finding a solution of the question best calculated to facilitate the raising of the necessary capital and assuring the success of the line. In para- graph 3 of your letter it is stated that the Corporation will probably agree that the success of the line to be constructed is dependent on its being continued through British territory into a sea terminus at Kowloon, and that the Corporation may find in certain contingencies the necessity of having recourse to the' good offices of His Majesty's Government in order to ensure that the preliminary agreement shall be replaced by a definite undertaking by the Chinese Government, and that, in view of these facts, the Corporation will no doubt be prepared as far as possible to meet the views of His Majesty's Government.

The Corporation will certainly endeavour to do so, and for convenience I will take the conditions seriatim.

• No. 25.

↑ No. 21.

18985

G

PUBLIC RECORD OFFICE

Reference :-

TEC.O. 882

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PUBLIC RECORD OFFICE, LONDON

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