This Document is the Property of His Britannic Majesty's Government
CHINA RAILWAYS.
CONFIDENTIAL.
No. 1.
SECTION 72 001 08
Sir J. Jordan to Sir Edward Grey.-(Received September 7.)
(No. 341. Confidential.) Sir,
Peking, July 22, 1908.
WITH reference to my despatch No. 310 of the 7th July, I have the honour to report that on the 10th July Mr. E. G. Hillier received notice from his principals in London that the German Syndicate did not wish to participate in the Luhan (i.e., Peking-Hankow) Railway Redemption Loan, and that the Banque de l'Indo-Chine and the Hong Kong and Shanghae Bank agreed to the terms proposed by Mr. Hillier as a basis for negotiation in his telegram of the 1st July. A copy of this telegram was inclosed in my previous despatch, and the proposals therein contained were submitted to the Board of Communications by Mr. Hillier on the 15th July in the form of a Memorandum, copy of which I have the honour to inclose.
In regard to the object of the loan being defined as for the redemption of the Luhan Railway, it was pointed out by the Chinese negotiator, Mr. Liang Shih-yi, that only a small portion of the loan would be required for that purpose, as the Chinese Government already had 80,000,000 taels (nearly 4,000,000l.) in readiness for that purpose. The bulk of the loan would be devoted to other railway construction, though he was not prepared to indicate what lines these would be. Further, as regards the pledge to employ a European engineer as General Superintendent of the Luhan Railway during the currency of the loan (forty years), he observed that, although China had not yet any men of sufficient ability and experience for such a post, they could not reasonably be expected to bind themselves for so long a period. They were not blind to their own interests, and could be relied on to employ Europeans as long as there was any necessity or advantage in so doing.
With regard to repayment, he said they wished to repay interest only for the first ten years, and, in answer to Mr. Hillier's observation that this would involve subsequent payments of over 500,000l. per annum, he explained that they hoped by that time to be in a position to meet such charges without difficulty from the revenues of the lines which would be constructed under this loan.
With the exception of these points, Mr. Hillier's proposals appear to have been generally acceptable, and further discussion was postponed till the 18th July.
In the meanwhile I had the honour to inform you, in my telegram No. 136 of the 17th July, that the French Minister had stated in conversation with me that day that his Government desired the settlement of the Yunnan incident before they could approve of any Chinese loan being placed on the Paris market.
If this policy is insisted on it is to be feared that considerable delay will arise, and this is the more unfortunate since Mr. Hillier has satisfied himself that Chinese funds might really be forthcoming for the redemption of the line, should the present negotiations fall to the ground.
Owing to pressure of other business the Chinese negotiator was obliged to put off the meeting arranged for the 18th July until the 21st, when he presented counter-proposals of which I have the honour to inclose a translation.
From these it will be seen that the Chinese are seeking to divest themselves of all conditions except repayment in due course. The object of the loan is not to be more clearly defined than by the phrase "productive purposes," which are not to be designated. The Chinese negotiator tells Mr. Hillier that the Board of Communications cannot indicate the railways they propose to build out of these funds, on account of the popular prejudice in the provinces against borrowing foreign capital for railway development, and also doubtless on account of the options held by foreign Syndicates for certain lines, in the event of foreign capital being employed. The Board wishes, therefore, to have a free hand with these funds for the purpose of telegraph, railway, and shipping expansion generally, with no questions asked.
Under these circumstances it seems improbable that an agreement will be reached,
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[This Document is the Property of His Britannic Majesty's Government 600
CHINA RAILWAYS.
35745 [September 7.]
CONFIDENTIAL.
[31049]
No. 1.
SECTION 72 001 08
Sir J. Jordan to Sir Edward Grey.-(Received September 7.)
(No. 341. Confidential.) Sir,
Peking, July 22, 1908. WITH reference to my despatch No. 310 of the 7th July, I have the honour to report that on the 10th July Mr. E. G. Hillier received notice from his principals in London that the German Syndicate did not wish to participate in the Luhan (ie., Peking-Hankow) Railway Redemption Loan, and that the Banque de l'Indo-Chine and the Hong Kong and Shanghae Bank agreed to the terms proposed by Mr. Hillier as a basis for negotiation in his telegram of the 1st July. A copy of this telegram was inclosed in my previous despatch, and the proposals therein contained were submitted to the Board of Communications by Mr. Hillier on the 15th July in the form of a Memorandum, copy of which I have the honour to inclose.
In regard to the object of the loan being defined as for the redemption of the Luhan Railway, it was pointed out by the Chinese negotiator, Mr. Liang Shih-yi, that only a small portion of the loan would be required for that purpose, as the Chinese Government already had 80,000,000 taels (nearly 4,000,0001.) in readiness for that purpose. The bulk of the loan would be devoted to other railway construction, though he was not prepared to indicate what lines these would be. Further, as regards the pledge to employ a European engineer as General Superintendent of the Lulian Railway during the currency of the loan (forty years), he observed that, although China had not yet any men of sufficient ability and experience for such a post, they could not reasonably be expected to bind themselves for so long a period. They were not blind to their own interests, and could be relied on to employ Europeans as long as there was any necessity or advantage in so doing.
With regard to repayment, he said they wished to repay interest only for the first ten years, and, in answer to Mr. Hillier's observation that this would involve subse- quent payments of over 500,000l. per annum, he explained that they hoped by that time to be in a position to meet such charges without difficulty from the revenues of the lines which would be constructed under this loan.
With the exception of these points, Mr. Hillier's proposals appear to have been generally acceptable, and further discussion was postponed till the 18th July.
In the meanwhile I had the honour to inform you, in my telegram No. 136 of the 17th July, that the French Minister had stated in conversation with me that day that his Government desired the settlement of the Yunnan incident before they could approve of any Chinese loan being placed on the Paris market.
If this policy is insisted in it is to be feared that considerable delay will arise, and this is the more unfortunate since Mr. Hillier has satisfied himself that Chinese funds might really be forthcoming for the redemption of the line, should the present negotia- tions fall to the ground.
Owing to pressure of other business the Chinese negotiator was obliged to put off the meeting arranged for the 18th July until the 21st, when be presented counter- proposals of which I have the honour to inclose a translation.
From these it will be seen that the Chinese are seeking to divest themselves of all conditions except repayment in due course. The object of the loan is not to be more clearly defined than by the phrase productive purposes," which are not to be designated. The Chinese negotiator tells Mr. Hillier that the Board of Communica. tions cannot indicate the railways they propose to build out of these funds, on account of the popular prejudice in the provinces against borrowing foreign capital for railway development, and also doubtless on account of the options held by foreign Syndicates for certain lines, in the event of foreign capital being employed. The Board wishes, therefore, to have a free hand with these funds for the purpose of telegraph, railway, and shipping expansion generally, with no questions asked.
Under these circumstances it seems improbable that an agreement will be reached,
[1940 g-7]
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