CO129-351 - Public Offices - 1908 — Page 497

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altering the amount of the loan for the northern section to 8,000,0001, and providing for the construction of two branch lines, from Te Chou to Cheng Ting-fu and from Yen Chou-fu to K'ai Feng-fu. It was also found impossible to carry on satisfactorily at the same time the negotiations for the two sections.

These negotiations were continued for several years without arriving at any satis factory result, and a proposal was then made that the line should be constructed by the three provinces concerned without foreign assistance. As, however, the original draft Agreement had received the Imperial sanction, it was considered inexpedient to annul it altogether, and the only other course was to introduce such amendments as would render it acceptable to all parties. Lian Tun Yen was directed to take charge of the negotia. tions, under the supervision of Chang Chih Tung and Yuan Shih K'ai, with the repre- sentatives of the German and British Syndicates. After much discussion au arrangement on the following lines were agreed to:----

The loan should be quite distinct from the administration of the railway. Other sources of revenue should be assigned as security for the payment of the interest, &c., and the rights enjoyed by the two foreign Companies concerned, viz., to receive 20 per cent. of the nett profit, and to supply material to the railway, should not be considered as giving them any right to interfere in the working of the line. As security for the loan, the provincial authorities agreed to furnish an annual sum of 3,800,000 taels out of the revenue from li-kin.

As regards the question of branch lines, a Memorandum has been received from the German Minister stating that Germany will be prepared, after the signature of the Tien-tsin--P'u-k'ou Railway Loan Agreement, to discuss a settlement of this question on the following lines ---

1. Germany agrees that the line from Kiaochow to Yen Chou-fu shall become a branch of the Tien-tsin-P'u-k'on Railway, and that the line from Chinan-fu to the borders of Shantung shall be incorporated in the main line.

2. China agrees that within fifteen years she will undertake the construction of two lines--one from Te Chou to Cheng Ting-fu, and the other from Yen Chou-fu, or some other point on the main line-through Chi Ning Chou to K'ai Feng-fu; should it be found necessary to raise a foreign loan for this purpose, application shall be made to the German Bank.

A Loan Agreement in twenty-four Articles was then drawn up, the amout of the loan being fixed at 5,000,000, bearing interest at the rate of 5 per cent., and the period of the loan was fixed at thirty years. The loan might be repaid after ten years at a premium of 21 per cent., or after twenty years at par. value of 3,000,000l. should be made at 93,

A first issue of bonds to the

A period of four years was fixed for the completion of the line, and work must be commenced within six months after the signature of the Agreement. The construction and administration of the railway should be entirely under the direction of the Chinese Government, through the Director-General, who should on his own responsibility engage one German and one British Engineer-in-chief-one for each section of the line.

The memorialists consider this amended Agreement preferable in every way to the original draft Agreement, and that it does not prejudice in any particular China's right to the independent administration of the railway. As the Ministers of Wai-wn Pa agree with them in this opinion, they have the honour to request that the Agreement shall receive the Imperial sanction. After the signature of the Agreement for the main line, the Wai-wu Pu will negotiate with the German Minister a settlement of the question of branch lines in accordance with the terms of the Memorandum from the German Minister above referred to.

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On the 13th January the following Imperial Rescript was issued: "Approved."

C. O.

This Document is the Property of His Britannic Majesty's Government.

CHINA RAILWAYS,

CONFIDENTIAL.

1699490

RECP [April 41 13 MAY 08

[11441)

No. 1.

SUCTION 2.

Sir J. Jordan to Sir Edward Grey.--(Received April 4,) (No. 73.) Sir,

Peking, February 17, 1908. WITH reference to my despatch No. 248 of the 28th May last, on the subject of the Canton-Hankow Railway, I have the honour to report that His Majesty's Consul- General at Hankow, on hearing recently that Herr Cordes, of the Deutsch-Asiatische Bank, was likely to renew his application for a loan, to be devoted to the Hupei section of the Hankow-Szechuan Railway, addressed a letter to the Viceroy Chao inclosing copies of Sir Ernest Satow's correspondence with the Wai-wu Pu of September 1903, and also reminding him of the ex-Viceroy Chang's engagement on this subject.

The Viceroy replied on the 27th January by sending his Secretary to Mr. Fraser with a message to the effect that no foreign loan would be required for either of the trunk lines as funds were already provided, and that as regards engineers Mr. Ross had already been engaged (see my despatch No. 248 of last year).

Mr. Fraser then suggested the employment as Chief Engineer on the Hupei section of the Hankow-Canton line of Mr. R. St. George Moore, M.I.C.E., who is engaged as Consulting Engineer of the Hankow Waterworks.

The Viceroy thought that this gentleman was not sufficiently well known in China, and asked Mr. Fraser's assistance in inducing Mr. Kinder, of the Northern Railways, to accept the post for both the Hupei and Hunan sections, and in all probability for the whole line.

I accordingly wrote to Mr. Kinder on the 3rd February, urging him to accept the post, in the interests, not only of British trade, but of China herself; and on the 10th February received his reply, copy of which I have honour to inclose, expressing his willingness to undertake this duty under certain conditions.

In a despatch dated the 7th February, copy of which also is inclosed, Mr. Fraser reported that the Viceroy was going to apply to the proper authorities for the loan of Mr. Kinder's service.

At the same time the ex-Viceroy Chang Chih Tung has made an offer to the British and Chinese Corporation for a loan for the northern section of this railway.

This proposal conflicts with the Viceroy's Chao's asseverations to Mr. Fraser that sufficient capital is obtainable from native sources, but in view of Chang Chih Tung's present position as Grand Councillor, and of the fact that he has brought with him to Peking the correspondence which passed between Mr. Fraser and himself on the subject in 1905, it is sufficiently evident that his overtures cannot be disregarded,

But this offer to borrow British capital revives the difficulty entailed by the Anglo- French combination of interests. The Chinese pledge is to apply in the first instance to us for any capital she may require for the construction of the line, but if conditions are introduced by the French which are unacceptable to the Chinese there is little doubt that the business will be offered to our German competitor.

I therefore had the honour to telegraph to you on the 16th February pointing out the urgent necessity for the French Government to give their financiers a free hand, and I spoke in this sense to M. Bapst, my French colleague, and represented to him at the same time the advisability of waiving the claim to a share in orders for materials, which I understood was put forward by the French Government, but which their financiers would not demand on their own initiative, and which the Chinese would not accept. M. Bapst appeared to be unaware of His Government's determination on this point, and considered that all they would ask for would be that they should not be completely effaced in the loan negotiations. He asked me to telegraph to His Majesty's Government on the subject first, and promised to telegraph himself a day later.

I have, &c. (Signed) J. N. JORDAN.

[2934 d-2]