interest in the question and gave evidence of a lively desire to further the negotiations. His Excellency was, however, dominated by his fear of the literati of the three provinces, who, if the wishes of the more reasonable and representative among them were not taken into account, would cause the people under their influence to obstruct land purchase and construction work. The Government of China was at this moment not in a position to withstand this pressure. It was therefore necessary to steer a middle course between the foreign claims based on the Preliminary Agreement and the demands of the gentry. Only thus could anything beneficial accrue from the under- taking. His Excellency promised to bring all his influence to bear on the literati if Mr. Cordes would lend his assistance in that sense. Towards the end of the interview, during which Mr. Cordes confined himself to an explanation of the draft Agreements, the Viceroy noted down fifteen points which seemed to his Excellency to embody the essentials of a satisfactory solution. A copy of them was supplied to Mr. Cordes for communication to Mr. Liang. These fifteen points were not to be considered as unalterable demands on the part of the Viceroy, but merely contained the expression of his Excellency's view of what was required, according to his knowledge of the conditions as above expressed, to direct the negotiations into the proper channel.
The points were as follows:-
1. Loan not to exceed 5,000,000%. (China only took up 5,000,0001, for the Lu-Han line; the most economical arrangements possible in the circurestances must be made.)
2. A single track to be laid first of all. (The Viceroy added verbally that it would be well to buy in advance the land for a double track.)
3. The whole line to be completed in three years' time.
4. The Yellow River bridge at Lao K'ou (Lokow) to be likewise completed within that period. (Verbally. An effort should at any rate be made--the time limit might be extended.)
5. Loan to be at 94. Interest 5 per cent. per annum.
6. Interest only payable for first ten years. Amortization to begin from eleventh year. If funds allow the loan can be paid off in full in the eleventh year, or the instalments can be increased.
7. If the capital sum should be repaid in the eleventh year, no premium of 2 per
cent. to be paid.
8. The line shall not be pledged as security for the loan, but certain revenues of the three provinces will be pledged. Yüan Shih-kai will decide which,
9. A German engineer will be engaged for the northern section, and a British engineer for the southern. Both will be independently selected and appointed by the high Chinese authorities intrusted with the management of the line. These engineers will be under the control and orders of the Chinese Directors.
10. The British and German engineers have only to concern themselves with the work of construction and may not interfere in other matters.
11. It has hitherto been stipulated that the Syndicate (and) the engineers shall receive 20 per cent. of the working profits. This must be renounced in order to prevent delay in amortization. Mr. Liang will discuss means to concede an extra bonus in commutation.
12. The arrangements regarding the amount of commission accruing to the banks on purchase of material, or in the event of a different solution of this question (by commutation) shall be made by Mr. Liang. (The Viceroy explained that a sum as commutation might be computed on the lines of the 35,000, allowed by the Canton- Kowloon Agreement.)
13. Work must be simultaneously begun on the northern section from Tien-tsin and on the southern section from Pukow, as well as on the central section north and south from Chinan.
(This means no
14. Germany shall construct no competing " line.)
other line in Shantung.
15. If, when the construction nears completion, the amount of the loan does not suffice, the Deutsch-Asiatische Bank and Hong Kong and Shanghae Banking Corporation can negotiate a supplementary loan.
July 2, 1907.
(Translation.)
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Inclosure 2 in No. 1.
Notes on Mr. Cordes' Interview with Mr. Liang, July 12, 1907.
CHANG CHIH-TUNG'S fifteen points were discussed with Liang. Mr. Cordes declared that the finding of a good security was the most important point, and urged Liang to ask the Viceroy Yüan, in whose hands the decision lay, at Chang Chih-tung's own suggestion, what provincial revenues he had in mind, and whether the salt revenues of the three provinces could be car-marked; or, failing that, the li-kin of Chihli, Shangtung, and Kiangsu. This did not commend itself to Liang. He was doubtful how the Viceroy would take such a question, even if asked verbally. Liang personally would prefer the Maritime Customs revenue to be pledged. He did not care to deal with the provincial Governments, which were entirely in the hands of the unreasonable gentry. He had that day received a most uureasonable telegram from the Shantung Governor regarding the Shantung portion of the security for the railway loan. The obligations arising from the Preliminary Agreement were Chinese Imperial ones, and the provinces should have no more to do with the unravelling of the affair than was absolutely necessary. Liang then wrote to Sir Robert Bredon asking the amounts of customs receipts in recent years and the total sum hypothecated for foreign loans. Later, Sir Robert Bredon called on Mr. Cordes in the bank and stated that he estimated about 15,000,000 taels were not hypothecated to the service of foreign loans. But according to the Protocol of 1901 the indemnity of 450,000,000 taels was secured on the customs.
[Protocol to that effect quoted.]
Peking, July 12, 1907.
Inclosure 3 in No. 1.
(Signed)
H. CORDES.
Draft Tien-tsin-Yang-tsze Final Agreement: Chinese Offer.
ARTICLE 1. The Imperial Government of China authorizes the Syndicate banks
and called "the Imperial Chinese
to issue a 5 per Cent. Gold Loan for an amount of 5,000,0007.
The loan shall be dated the per Cent. Tien-tsin-Yang-tsze Railway Loan."
5
Art. 2. The loan is designed to provide the capital for the construction of a Government Railway line from a point connecting the Imperial Railways of North China at or near Tien-tsin through Techon and Tsinanfu to Theien, near the southern frontier of Shantung, hereinafter known as the northern section of the Tien-tsin- Yang-tsze Railway line, and from Ihsien to Pukou (opposite Nanking, on the Yang-tsze-kiang), hereinafter known as the southern section of the Tien-tsiu-Yang-tsze Railway line, the total length of these two sections being about 1,085 kilom., equal to about 2,170 Chinese *
The survey line shall be open to revision by the Director-General,
Art. 3. The capital so provided will be solely devoted to the construction of the above railway line, and will include the funds required for the purchase of land, rolling-stock, and other equipment and for working the line, together with interest on the loan during the period of construction, which should not exceed three years from the actual beginning of the works, the commencement of the works not to be delayed beyond six months after this Agreement has been signed, within which period the sum of 500,000l. shall be placed at the disposal of the Director-General, in China or Europe as he may direct, as a first instalment on account of the proceeds of the loan. This amount of 500,000, together with interest thereon not exceeding a charge of 6 per cent, per annum, shall be deducted from the proceeds of the first sale of the bonds.
Art. 4. The rate of interest for the loan shall be 5 per cent, per annum on the nominal principal, and shall be paid for account of the Imperial Chinese Government during the time of the construction out of the proceeds of the loan and afterwards out
*
Roughly 700 miles.
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