This Document is the Property of His Britannic Majesty's Government 593
CHINA RAILWAYS.
35745 [August 24.]
CONFIDENTIAL.
[29339]
No. 1.
SECTION 3. 001 08
Sir J. Jordan to Sir Edward Grey.-(Received August 24.)
(No. 310. Confidential.) Sir,
Peking, July 7, 1908. I HAVE the honour to inclose, for your information, copies of documents relating to the negotiations which are now proceeding in respect of a loan to redeem the obligations of the Chinese Government under the Belgian Loan Contract of the 26th June, 1898, for the construction of the Lu-han Railway.
According to Article 5 of that Contract, the Imperial Chinese Government are at liberty, after the 1st September, 1907, to pay off the loan at any time within the stated period of amortization and, for some time previous to the negotiations above referred to, the Chinese Government were availing themselves of the provisions of this Article as a lever to induce the Belgian "Société d'Etudes” to modify the terms of their contract. But early in this year it was evident that the Belgian Company and the Chinese Government were unable to come to an agreement; and both Mr. Bland, representing the Chinese Central Railways, and Mr. Hillier, representing the Hong Kong and Shanghae Banking Corporation, felt that the time had come for approaching the Chinese authorities concerned with a view to making proposals for a redemption Joan.
The steps taken by these two gentlemen are stated in Mr. Bland's letter of the 7th May to the Chinese Central Railways and in the private Memorandum of the 6th July by Mr. Hillier. Mr. Bland took exception to Mr. Hillier's independent action as soon as he heard of it, and placed the difficulties of the situation before the Board of the Chinese Central Railways. He pointed out that the interests of the British and Chinese Corporation or Chinese Central Railways and those of the Hong Kong and Shanghae Bank, in the matter of railway loans, were not necessarily identical, and that it was impossible for the Companies to compete if the bank was prepared to treat such loans on the basis of purely financial transactions, freed from conditions for the supervision of railway receipts and expenditure which have been considered necessary safeguards in the past.
In their reply of the 10th June to Mr. Bland's letter the Chinese Central Railways explained that Mr. Hillier's negotiations were meant to be parallel and not competitive, and that the peculiar position of the Lu-han Redemption Loan seemed to justify the bank's independent action. Mr. Hillier first approached the Board of Communications on the 14th May, and was informed by the President that he was prepared to consider the best offer for the proposed redemption loan, the amount of which he would communicate as soon as it was decided, and on the 9th June Mr. Hillier attended at the Board by request, and was told that the amount would be 7,000,000/. secured upon provincial revenues. The money, it was said, was to be applied to general productive purposes connected with the Board of Communications, including the redemption of the Belgian Ln-han Railway Loan, but the Board were anxious that the latter object should not be brought into prominence, apparently to avoid wounding Belgian susceptibilities, and there was no objection to French and German participation. Mr. Hillier was promised a Memorandum in writing, and, not receiving it, he called at the Board on the 27th June, when he was handed a This he took into con- statement of the proposed security and main conditions. sideration, and drew up a paper of general headings of a proposed Agreement, a summary of which he submitted by telegram to the Hong Kong and Shanghae Bank in London on the 1st July, having first shown it to M. Casenave, the representative in Peking of the Banque de l'Indo-Chine. The remarks of M. Cascnave upon these heads of proposals are contained in the telegram of the 2nd July to the Banque de l'Indo Chine, and the telegraphic reply of the Banque on the 3rd July approves the objections made by M. Casenave against German participation, the want of any stipulation preserving the French character of the line, and the use for new railways of the 2,500,0007. of surplus remaining over from the 7,000,0001. after the redemption of the Belgian loan. Mr. Bland supports the last of M. Casenave's objections, and
[1897 aa-3]
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