This Document is the Property of His Britannic Majesty's Government.
25
0.
CHINA RAILWAYS.
CONFIDENTIAL.
[43327]
No. 1.
1188
December 12.
π JAN 09
SECTION 2,
(No. 483.) Sir,
Sir J. Jordan to Sir Edward Grey.-(Received December 12.)
Peking, October 27, 1908. IN connection with my despatch No. 474 of the 25th instant and previous despatches respecting the redemption of the Peking-Hankow Railway, I have the honour to inclose a translation of a Memorial of the Board of Communications, which was sanctioned by Imperial Decree at the same time as the Anglo-French loan was approved, on the subject of an internal loan for 10,000,000 dollars which the Board proposes to float for the purpose of completing the sum required to redeem the Luhan Railway bonds. The total amount required is 5,000,0007, and it is needed by the 10th December of this year. By the Anglo-French loan contract 80 per cent, of the 5,000,000%. borrowed under that instrument is to be devoted to railway redemption, and this, at the issue price to the Chinese Government of 94 will yield 3,700,000Z., leaving a deficit of 1,240,0007.
It will be recalled that the Chinese negotiator, Mr. Liang Shib-yi, consistently maintained to Mr. Hillier, of the Hong Kong and Shanghae Bank, that China had this balance ready. The Board of Finance was to supply part of it, the Szechuan Railway Company another portion, the Board of Communications itself had moneys lying ille in Paris and Brussels, &c. I felt considerable scepticism as to these statements at the time, but they appeared to Mr. Hillier to be borne out by collateral evidence, and be accepted them for what they were worth. As it turns out, they only possessed a small substratum of truth, and the deficit of 1,240,000l., equivalent roughly to 10,500,000 tacls, is to be met in the following manner: the Board of Finance will advance on loan to the Board of Communications 5,000,000 taels; the Board of Communications will itself furnish 2,500,000, including a loan from the Szechuan Railway Company of 1,000,000, and the remaining 3,000,000 are to be borrowed from the Hong Kong and Shanghae Bauk in silver, at Shanghae, at 7 per cent. interest.
This transaction, which has been arranged between the Chiao T'ung Government Bank and Mr. Elillier, is secured by the balance of the Anglo-French loan due in February next; that is to say, the Chiao Tung Bank have undertaken, under seal of the Board of Communications, to repay the loan by February next, failing which the Hong Kong and Shanghae Bank is authorized to deduct the amount from the Anglo- French loan proceeds due in that month.
The rôle to be played by the internal loan of 10,000,000 dollars can now be discerned. It is intended to supply the funds required to repay the loan of 5,000,000 taels from the Board of Finance, the 1,000,000 from the Szechuan Railway Company, and a portion of the 3,000,000 just borrowed by the Chiao Tung Bank from the Ilong Kong and Shanghae Bank.
Such, briefly, is the maze into which the Board of Communications has led itself in this matter of redeeming the Peking-Hankow Railway in their own way.
As regards the internal loan, it appears to be generally felt that, although the conditions are liberal, insufficient confidence is placed by the Chinese public in the Board of Communicatious to render it attractive to investors. The Memorial states that the precedent of an internal loan floated by Yuan Shih-k'ai some three or four years ago is being followed. The facts respecting that venture do not warrant sanguine expectations in the present instance. Its terms were attractive, interest beginning at 7 per cent. and increasing to 9 per cent, after three years, yet, as far as could be ascertained, no individual investors would touch it, and the Viceroy was obliged to ask the Nippon Yusen Kaisha and the Hong Kong and Shanghae Bank to take up big blocks of bonds. The conditions of the present loan are, however, interesting as an indication of a change of policy. The 100 dollar bonds at 7 per cent. are to be bearer scrip, open to subscription by foreigners equally with Chinese, on the understanding that all holders of scrip will be treated as Chiuese. A pro rata share in the net profits of the Peking-Hankow Railway is held out as an inducement, but in the same breath
* Not printed.
[2065 m--2]
J
No comments yet.
Private notes are available after approval.