CO129-352 - Public Offices - 1908 — Page 502

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from the surplus earnings of the Northern Railway, the first half-year's interest on the Shanghae-Hangchow-Ningpo Railway Loan. I note that your Excellency considers that, inasmuch as the Hong Kong and Shanghae Bank now hold in London funds of the Shanghae-Hangchow-Ningpo Loan more than sufficient to meet the said payment of interest, it is unnecessary to refer to the procedure laid down in Article 9 of the Loan Agreement. I note also that in your Excellency's opinion the liability for interest is at present insignificant, calculated on the amount actually received by the bank to date from subscribers to the loan,

In reply, I have the honour to point out that, by Article 4 of the Loan Agreement, interest is to be calculated from the date of the issue of the loan to the public, and that by Article 2 payment of interest on the loan during construction is not to be met from the loan funds.

Finally, the provision of Article 9 is unconditional, viz., that, until the next half-yearly instalment of interest for the loan shall have been deposited with the bank, no deductions or payments shall be made from the earnings of the Northern Railway other than those required to meet the obligations stated in the Agreement of the 10th October, 1898.

and that it was because of the earnestness of the assurances given to this effect that they obtained important modifications of the text, but, as Foord has now signed his Agree- ment under the Provincial Boards, it appears to me that, unless the whole position is challenged, the only thing to do is to wait and see how he will be able to work under the proposed conditions.

Liang is very nervous about the whole business, and called on Saturday evening to a-k that the matter be allowed to rest without official protests, &c. It was then that he promised to let me have the official letter to which the inclosed refers.

I have, &c. (Signed) J. O. P. BLAND.

P.S.-Liang frankly admits the Edict and its effect.

Inclosure 10 in No. 1.

Mr. Bland to Liang Shih-yi,

J. O. P. B.

(Translation.) Sir,

I have, &c. (Signed) J. O. P. BLAND.

Sir,

Inclosure 8 in No. 1.

Liang Shih-yi to Mr. Bland.

Peking, July 3, 1908.

IN my letter to you of a few days ago, I pointed out that the Shanghae-- Hangchow-Ningpo Railway Loan funds being still deposited with the Hong Kong and Shanghae Bank, there was no necessity to put aside the surplus earnings of the Imperial Railways of North China as security for the payment of the interest on that loan.

On the 27th day of the 5th moon (the 25th June) I received your reply, from which I gather that I have not made clear to you the meaning of my first letter.

What I said was that the funds now deposited in London are sufficient security for the payment of the interest on the loan, not that while the railway is in course of construction the interest on the loan should be met from loan funds. The main point of the 9th Article of the Loan Agreement is that the surplus earnings of the Imperial Railways of North China shall be set aside as security for the due payment of interest on the loan, and not that payment of the interest shall necessarily be made from those earnings. The essential stipulation of the Agreement is that security shall be given; so long as funds are available to serve as security the spirit of the Agreement is complied with.

Judging from the remarks in your letter under reply, I am inclined to think that you have not entirely grasped my views on the question, and I therefore write again in order to endeavour to make my meaning clearer.

Dear Sir John,

(Signed)

Inclosure 9 in No. 1.

Mr. Bland to Sir J. Jordan.

LIANG SHIH-YI.

Peking, August 3, 1908.

I INCLOSE copy of my letter of date to Mr. Liang, from which you will observe that he has agreed to settle the question of interest, and has undertaken to give me a forinal assurance that the Yuchuan Pu will be responsible for the affairs of the Shanghae- Hangchow-Ningpo Railway, all agreements and acts by the gentry notwithstanding. If he does this, I cannot see that the Corporation has anything to gain by raising further questions, so long as the Edict of the 15th April remains unrevoked. I have expressed to my Board the opinion that if the British Government considers it impossible or inexpedient to demand the revocation of the Edict (whereby the Loan Agreement is de facto annulled in its essential provisions re control), it would be unwise, as well as futile, for the Corporation to contest questions of detail arising directly from the effect of that Edict. I hope that you will concur in this view. I do not forget that the Wai-wu Pu and the Yuchuan Pu, during the negotiations for the Loan Agreement, laid the greatest stress on the fact that the Yuchuan Pu would be in sole control of the line,

British and Chinese Corporation (Limited), Peking, August 3, 1908.

REFERRING to the subjects discussed with your Excellency at the Yuchuan Pu, and subsequently at my office on the 1st instant, I have the honour to place on record my understanding of the conclusions reached, which I would ask your Excellency to be good enough to confirm.

1. As regards the depositing with the Hong Kong and Shanghae Banking Corporation of the first half-year's interest payable to the bondholders of the Shanghae- Hangchow-Ningpo Railway Loan on the 1st December, your Excellency will give the necessary instructions in accordance with the provisions of Article 9 of the Loan Agreement.

2. As regards the form of Agreement which has been signed by Mr. Foord as Engineer-in-chief of the Shanghae-Hangchow-Ningpo Railway, and by Taotai Shih Chao-tseng as Managing Director (or "General Manager"), and with reference to the question thereanent raised in my letter of the 27th ultimo, I understand that your Excellency will officially inform me (so that I may communicate Shih Taotai's appoint- ment, as requested, to His Majesty's Minister) that the Managing Director holds his authority from the Yuchuan Pu and that the latter is in the last resource responsible for the proper construction and control of the railway. Also that an intimation will be conveyed to the Managing Director that nothing in the arrangements which he makes with the Engineer-in-chief can justify departure from the specific terms of the Loan Agreement and Prospectus.

For your Excellency's information I inclose a copy of the Engineer-in-chief's Agreement, taken from a draft forwarded to me from Shanghae on the 18th ultimo.

I have, &c.

J. O. P. BLAND.

(Extract.)

(Signed)

Inclosure 11 in No. 1.

Mr. Landale to Mr. Bland.

Shanghae, August 1, 1908.

I QUITE appreciate all you write with reference to the action of Foord, but think we should be careful not to take any action which might give the Kiangsu and Foord has Chêkiang Companies the opportunity of postponing the appointment. accepted the draft Agreement and ought to leave Hong Kong to-day. After his Agreement has been signed by the Presidents of the two Companies we will, to my mind, be in a stronger position to make representations to the Board of Communications with regard to the non-fulfilment of the Loan Agreement if it is then thought necessary to do so.

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