to compete successfully if railway loans as simple banking transactions are forthcoming, a consideration which evidently deserves the careful attention of your Board.
For these reasons it is evidently desirable that a united line of action should be laid down and maintained, and that everything possible should be done to dissuade the Chinese Government from the impression, now freely prevailing, that railway loans are at its disposal unfettered by any question of supervision or control.
Dear Sir,
I have, &c.
(Signed)
Inclosure 2 in No. 1.
Chinese Central Railways to M. Bland.
J. O. P. BLAND.
110, Cannon Street, London, June 10, 1908,
I AM instructed by my Directors to acknowledge receipt of your letter No. 56 of the 7th May, in which you bring to their notice that Mr. Hillier, acting under instructions from London, was negotiating on behalf of the Hong Kong and Shanghae Bank for a redemption loan for the Peking-Hankow Railway on terms which made it impossible for you to secure this business for the Chinese Central Railways, and contrary, as you consider, to the Agreement come to between the British and French groups, as conveyed to you in the British and Chinese Corporation's letter of the 25th February last.
In reply, I am to state as follows:---
1. The Agreement come to between the British and French groups, represented by you by Mr. Addis and M. Simon, on the 28th February last, remains unmodified, but will observe that the clause regarding the redemption loan was a proposal only, and was left open. Mr. Addis now informs my Directors that the French group are willing to fall in with any new international combination which the force of circumstances may require.
2. In regard to the intervention of the Hong Kong and Shanghae Bank, my Directors understand that the bank had been in communication with Mr. Hillier for some considerable time prior to March last, as to the possibility of a Lu-han redemption loan. Learning about that time negotiations were on foot between the Chinese and the Belgian Company, the bank suggested that this would be a fitting subject-matter for the Chinese Central Railways to take up, and it was on this suggestion that the bank, however, apparently our cable to you of the 4th March last was sent. came to the conclusion from your reply of the 5th March that there was no prospect or probability of the Chinese Central Railways obtaining this loan, and At the same time my that, unless they intervened, the business would be lost. Directors are given to understand that, in instructing Mr. Hillier, they stated plainly that they would prefer that the business should go to the Chinese Central Railways. To this extent, therefore, it would seem that Mr. Hillier had discretionary power to co-operate with you and M. Casenave to endeavour to strengthen your hands; and if he acted otherwise, though my Directors may regret it, they are bound to assume it was not without good reason.
3. My Directors concur in your observations that, for the continued existence of Companies like the British and Chinese Corporation and the Chinese Central Railways, apart from the other considerations you mention, it is a sine qua non that railway loans should be something more than simple banking transactions, and that if the Hong Kong and Shanghae Bank or any other British institution were to tender railway loans to the Chinese Government unfettered by any conditions the raison d'être of these Companies would disappear. My Directors are assured that nothing of the sort is intended. The Lu-han Redemption Loan stands in a peculiar position. At present the Belgian Company holds the Agreement, and it is understood they are prepared to largely modify it. It may be assumed the Chinese will not transfer the loan to any other Company, except on terms more advantageous to themselves than the Belgians are willing to give, and these terms may be cut down to so fine a point as not to be worth having from the Company's point of view; in other words, it may become a mere banking transaction. This apparently is the view which the Hong Kong and Shanghae Bank take of the position.
5
C.
0.595
35745
Nevertheless, if the Belgians are to be bought out, the Chinese Central Railways are peculiarly fitted to take their place, having regard to the association of our co-partners, and, as you remark, to the peculiar political conditions under which the Lu-han Loan was originally floated, and the position of the French Government in that transaction. My Directors can only hope, if it is not too late, that this may be brought about, even with the minimum of control, and they desire you and M. Casenave to continue your efforts in that direction.
I am, &c. (Signed)
Inclosure 3 in No. 1.
THOS. GILBERT, Secretary.
Abstract Translation of Yu-ch'uan Pu Memorandum.
Security.
Hupei.-Li-kin and miscellaneous duties, 1,000,000 taels.
Honan.--Additional collection of salt tax and extra impost upon price of salt per catty, 1,000,000 taels. (Note-The extra impost is a levy of so many cash per catty added by the salt merchant to the price fixed by Government and accounted for by him, in lieu of increased duty.)
Chihli-Additional tax on tobacco and wine, and miscellaneous duties, 800,000 taels. Also extra impost upon price of salt per catty collected by Salt Commissioner's Treasury, 200,000 taels.
Total, 3,000,000 taels, at an average exchange of 2s. 6d., or 7:50 taels = £1. 400,000l.)A loan of 7,000,000l., with interest at 4 per cent. per annum, would be extinguished in forty years by an annuity of £380,402, including interest and sinking fund.
Memorandum of Terms.
1. The Agreement will be signed by the Yu-ch'uan Pu with the lenders of the money.
2. The amount of the loan to be 7,000,000l.
3. Price of the loan to be 97.
4. Interest to be at the rate of 4 per cent. or 4 per cent. per annum.
5. The loan to be guaranteed by the Imperial Chinese Government, and secured upon provincial li-kin and miscellaneous duties indicated.
6. The lenders are not to concern themselves with the application of the loan funds.
7. The payment of loan proceeds to be made in Europe, either in one amount or in instalments, as required by the Yu-ch'uan Pu.
8. The loan to be repaid by China in forty years.
9. After signature of the Agreement, the Board will request the Wai-wu Pu to communicate it to the Diplomatic Representatives in Peking of the lenders, so that it may be given effect to.
Inclosure 4 in No. 1.
Memorandum handed in by Mr. Hillier.
General Headings of proposed Agreement for Loan of 7,000,000l.
1. The Agreement to be signed by the Yu-ch'uan Pu with the lenders of the money.
2. The amount of the loan to be 7,000,000l.
3. As the price which the loan will command on the market must depend upon the general conditions of the Loan Agreement, it will be necessary to defer its settlement until these have been finally arranged.
4. Interest to be at the rate of 4¼ per cent. per annum.
[1897 aa-3]
C
to compete successfully if railway loans as simple banking transactions are forth- coming, a consideration which evidently deserves the careful attention of your Board.
For these reasons it is evidently desirable that a united line of action should be laid down and maintained, and that everything possible should be done to dissuade the Chinese Government from the impression, now freely prevailing, that railway loans are at its disposal unfettered by any question of supervision or control.
Dear Sir,
I have, &c.
(Signed)
Inclosure 2 in No. 1.
Chinese Central Railways to M. Bland.
J. O. P. BLAND.
110, Cannon Street, London, June 10, 1908,
I AM instructed by my Directors to acknowledge receipt of your letter No. 56 of the 7th May, in which you bring to their notice that Mr. Hillier, acting under instructions from London, was negotiating on behalf of the Hong Kong and Shanghae Bank for a redemption loan for the Peking-Hankow Railway on terms which made it impossible for you to secure this business for the Chinese Central Railways, and contrary, as you consider, to the Agreement come to between the British and French groups, as conveyed to you in the British and Chinese Corporation's letter of the 25th February last.
In reply, I am to state as follows:---
1. The Agreement come to between the British and French groups, represented you by Mr. Addis and M. Simon, on the 28th February last, remains unmodified, but will observe that the clause regarding the redemption loan was a proposal only, and was left open. Mr. Addis now informs my Directors that the French group are willing to fall in with any new international combination which the force of circumstances may require.
2. In regard to the intervention of the Hong Kong and Shanghae Bank, my Directors understand that the bank had been in communication with Mr. Hillier for some considerable time prior to March last, as to the possibility of a Lu-han redemp- tion loan. Learning about that time negotiations were on foot between the Chinese and the Belgian Company, the bank suggested that this would be a fitting subject-matter for the Chinese Central Railways to take up, and it was on this suggestion that The bank, however, apparently our cable to you of the 4th March last was sent. came to the conclusion from your reply of the 5th March that there was no prospect or probability of the Chinese Central Railways obtaining this loan, and At the same time my that, unless they intervened, the business would be lost. Directors are given to understand that, in instructing Mr. Hillier, they stated plainly that they would prefer that the business should go to the Chinese Central Railways. To this extent, therefore, it would seem that Mr. Hillier had discretionary power to co-operate with you and M. Casenave to endeavour to strengthen your hands; and if he acted otherwise, though my Directors may regret it, they are bound to assume it was not without good reason.
3. My Directors concur in your observations that, for the continued existence of Companies like the British and Chinese Corporation and the Chinese Central Railways, apart from the other considerations you mention, it is a sine quá non that railway loans should be something more than simple banking transactions, and that if the Hong Kong and Shanghae Bank or any other British institution were to tender railway loans to the Chinese Government unfettered by any conditions the raison d'être of these Companies would disappear. My Directors are assured that nothing of the sort is intended. The Lu-han Redemption Loan stands in a peculiar position. At present the Belgian Company holds the Agreement, and it is understood they are prepared to largely modify it. It may be assumed the Chinese will not transfer the loan to any other Company, except on terms more advantageous to themselves than the Belgians are willing to give, and these terms may be cut down to so fine a point as not to be worth having from the Company's point of view; in other words, it may become a mere banking transaction. This apparently is the view which the Hong Kong and Shanghae Bank take of the position.
5
C.
0.595
35745
Nevertheless, if the Belgians are to be bought out, the Chinese Central Railways are peculiarly fitted to take their place, having regard to the association of our reach 08 co-partners, and, as you remark, to the peculiar political conditions under which the Lu-ban Loan was originally floated, and the position of the French Government in that transaction. My Directors can only hope, if it is not too late, that this may be brought about, even with the minimum of control, and they desire you and M. Casenave to continue your efforts in that direction.
I am, &c. (Signed)
Inclosure 3 in No. 1.
THOS. GILBERT, Secretary.
Abstract Translation of Yu-ch'uan Pu Memorandum.
Security.
Hupei.-Li-kin and miscellaneous duties, 1,000,000 taels.
Honan.--Additional collection of salt tax and extra impost upon price of salt per catty, 1,000,000 taels. (Note-The extra impost is a levy of so many cash per catty added by the salt merchant to the price fixed by Government and accounted for by him, in lieu of increased duty.)
Chihli-Additional tax on tobacco and wine, and miscellaneous duties, 800,000 taels. Also extra impost upon price of salt per catty collected by Salt Commissioner's Treasury, 200,000 taels.
per
(Total, 3,000,000 taels, at an average exchange of 2s. Sd., or 7:50 taels 11. 400,000Z.)
=
A loan of 7,000,000, with interest at 4 per cent. per annum, would be extinguished in forty years by an annuity of 380,4021, including interest and sinking fund.
Memorandum of Terms.
1. The Agreement will be signed by the Yu-ch'uan Pu with the lenders of the
money.
2. The amount of the loan to be 7,000,0007,
3. Price of the loan to be 97.
4. Interest to be at the rate of 4 per cent. or 4 per cent. per annura.
5. The loan to be guaranteed by the Imperial Chinese Government, and secured upon provincial li-kin and miscellaneous duties indicated.
6. The lenders are not to concern themselves with the application of the loan funds.
7. The payment of loan proceeds to be made in Europe, either in one amount or in instalments, as required by the Yu-ch'uan Pu.
8. The loan to be repaid by China in forty years.
9. After signature of the Agreement, the Board will request the Wai-wu Pu to communicate it to the Diplomatic Representatives in Peking of the lenders, so that it may be given effect to.
Inclosure 4 in No. 1.
Memorandum handed in by Mr. Hillier.
General Headings of proposed Agreement for Loan of 7,000,0007.
THE Agreement to be signed by the Yu-ch'uan Pu with the lenders of the money.
2. The amount of the loan to be 7,000,000%.
3. As the price which the loan will command on the market must depend upon
the general conditions of the Loan Agreement, it will be necessary to defer its settlement until these have been finally arranged.
4. Interest to be at the rate of 44 per cent. per annum.
[1897 aa-3]
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