CO129-331 - Public Offices - 1905 — Page 13

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and any commissions are not to be reckoned. In Mr.

Ross' opinion the traffic on the Chinese section

would not suffice to pay interest on the loan besides

working expenses, and consequently provision must be

made in fixing the amount of the loan for at least

one year's interest, if not for two. As the Hong-

kong Government will no doubt be able to raise the

capital required for the British section much more

cheaply than the Chinese Government for theirs, while

the land will no doubt be acquired more cheaply and

there will be no commissions to pay, the Chinese .

Government will, it appears, be at a disadvantage if

interest is to be allowed only on the amount actu-

ally expended on construction and equipment. The

enclosed copy of a rough pro-forma estimate shows

that under this clause, while the amount of the Loan

is estimated at £1,500,000, only £1,000,000 of this

will rank as entitled to interest in calculating the

net profits. The Engineer's estimate for the con-

struction and equipment of the British section is

put down in the same document at £488,317, but Mr.

Ross states that he was authoritatively informed that

it would be nearer £600,000. The net profits if

divided according to mileage would be as 4 to 1, but

if divided according to the actual amount of capital

expended on construction and equipment would work out

as 5 to 3. On this question therefore there is like-

ly to be much opposition from the Chinese side.

I enclose also copy of a letter addressed to me

by Mr. Ross in which these questions are discussed

and Your Lordship will see that he advises the

amount of the loan should be stated as "not more than

£2,000,000".

Copy of this despatch, with enclosures has been

forwarded to the Governor of Hongkong.

I have &c.,

(Signed)

Ernest Satow.

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