CO129-337 - Public Offices & Foreign Office - 1906 — Page 156

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Mr. Kinder states that for the lines in operation, including the 40 miles outside Wall, "the annual receipts will average 2,000,000 taels, and the working expenses 1,200,000 taels."

This, at the present rate of exchange, means, in round figures:

This balance would yield a clear 5 per cent. on a loan of 2,000,000l., and it may be remarked that this result is obtained notwithstanding the fact that the line stops short 40 miles outside the Great Wall at a merely insignificant place en route for objective points of Ying Kau and the centres of grain trade in the North—so that at present working at least 100 miles of the line cannot be said to be earning anything like what it should command if its objective points had been reached.

A knowledge of the volume of passenger and goods traffic carried over the lines is quite sufficient to convince anyone accustomed to the working of railways that on proper management the foregoing is a moderate estimate of the earning power of the line.

The port of Tang Ku with the very important distributing centres of Tien-tsin and Peking, the coal mines of Tangshan, the military forts and encampments at Shan-hai-kwan and Lutai; the rising watering place and sanitorium for foreign settlers at Pei-tai-ho so extensively patronised, together with the facts of the people being everywhere anxious to avail themselves of the facilities of transit afforded them, the vast population to be served, and the general resources of the country to be dealt with, offer on the whole the best possible guarantee for the remunerativeness of judicious expenditure on railway accommodation.

It may be of interest to remark that the climate of Manchuria is thoroughly healthy—our nearest home parallel being Canada: a rainless winter, cold delightfully dry, bright and brisk; very little snow—the spring and fall of the year being exceptionally temperate, and only a short period of summer forming the rainy season in which the heat is at all oppressive.

With regard to the prospects of traffic on the extensions (in which you have a collateral interest), it may be said that they are at least quite as good as those on the lines in operation.

The country north-east of the city of Kin-chou, forming the lower watershed of the Ta-ling Ho and Liao Ho, is an immense fertile plain all under cultivation, and producing largely in excess of its local requirements.

The trend of trade in this extensive agricultural district bounded on the north by the waters of the Liao Ho is all towards Ying Kau and inside Wall.

In addition to the ordinary sources of railway traffic in the country, there is the prospect of the development of a very large coal traffic from the Nan Piao Coal Mines situate some 30 miles north-west of our extension line from Kiao-chau. It is intended to connect these with our line by a branch, later on, and to work them as a separate undertaking; but as you are at present only interested in these to the extent of their value as a source of railway traffic, it will suffice to quote Mr. Kinder on these and extension traffic generally where he says:

"I am confident that the opening up of the (Nan Piao) mines and others near will have a splendid future, as the demand for this fuel is rapidly increasing all along the China coast, while a large native consumption is assured when a cheaper means of transport will be provided by the railway. Sin-min-ting is the centre of an important grain trade, most of which will go west by rail or to Ying Kau for shipment to Japan and the China coast. I have, therefore, no doubt at all that these (extension) lines when once in full working order, say, two years after opening for traffic, will pay 4 per cent. interest on the outlay incurred."

I may remark that the earning power of these extensions is estimated by Mr. Kinder with a large margin of reserve or high factor of safety, so very commendable in dealing with a railway in its infancy in a new country and constituting a new enterprise, in spite of all the evidence that exists to warrant the presumption of a more liberal return.

The produce and requirements of this country to the south and west of the Liao Ho form an important factor in the trade of Ying Kau, and when the coal of Nan Piao (which there is nothing in North China to equal in quality and in facility of access) is secured, a very large trade may be anticipated.

In view of the extensive requirements of traffic to the sea-port, a very fine site of 1,000 acres with deep water frontage for wharves, &c., has been obtained on the western bank of the Liao Ho at Ying Kau.

I may add, in conclusion, a résumé of the points affecting the security for the loan:

The security to be offered for the loan now under negotiation is—

1. A mortgage of 257½ miles of railway (plus the earnings of a further 40 miles) all in operation, and including rolling-stock and all appurtenances belonging to a railway system in a sound and thriving condition, and with an estimated earning power more than sufficient to pay interest on the loan. The capital sterling cost of this part of the security alone is considerably in excess of the amount of the loan required.

2. The loan now sought is to be applied to the building of 258 miles of new extensions, and to the improvement of portions of the existing line, additional workshops and wharfage, accommodation, &c., and the profits arising from all this expenditure—the distribution of which is secured under British control and management—are estimated to amount to at least another 4 per cent., forming on the whole an aggregate security of over 9 per cent. on the amount of your loan, accruing from a property upon which over 4,000,000l. will have been expended.

3. To the foregoing is to be added an Imperial guarantee for the payment of interest and repayment of principal.

Should you want information upon any other phase of the subject, I shall be most happy to supply it before my return to China.

I have, &c.,

(Signed) JAMES GINNELL, District Engineer, Imperial Chinese Railways.

To the Chairman and Directors, British and Chinese Corporation, Limited, 3, Lombard Street, London, E.C.

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