CO129-360 - Public Offices - 1909 — Page 514

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Inclosure 2 in No. 1.

Acting Consul-General Willis to Sir J Jordan.

(No. 80. Confidential.) Sir,

Mukden, December 7, 1908. IN continuance of my despatch No. 75 of the 23rd ultimo, I have the honour to inclose translation of a draft Agreement for the joint working of the Pen-hsi-hu coal mines by Chinese and Japanese merchants, which is to come into operation as soon as the approval of the Board of Agriculture and Commerce is obtained.

The translation has been made by myself from the Chinese version of the Agree- ment, which I obtained from a confidential source.

The Agreement appears to me extremely favourable to the Chinese Government, and I am unable to understand how the firm of Messrs. Okura and Co. have been able to accept such conditions, I allude particularly to clause 11 of the Agreement, by which the Company binds itself to observe not only the present mining Regulations of the Chinese Government, but in the event of any future Regulations being issued to alter the terms of their Agreement, so as to bring it into uniformity with such new Regulations

I have, &c.

(Signed)

Inclosure 3 in No. 1.

ROBERT WILLIS.

Proposed Agreement for the Joint Working of Coal Mines in Pen-chi District by Japanese and Chinese Merchants. (Translation.)

WHEREAS there are coal mines situated at Penchihu, lying to the west of the river in the Pen-chi district, in the Province of Fengtien, which have been worked for many years by Chinese merchants, and whereas at the time of the Russo-Japanese war, inasmuch as the mining area was within the sphere of military operations, the Japanese firm of Messrs. Okura and Co. assisted in the working of the mine for military uses without the approval of the Chinese authorities having first been obtained, and whereas it is now proposed that the wine should be worked jointly by Chinese and Japanese in accordance with the Chinese mining Regulations, the present contract is entered into by the Chinese merchants and the Japanese merchants

with the approval

of the Mining Bureau established at Mukden by the Viceroy of the three Eastern provinces and the Governor of Fengtien Province.

The following are the Regulations under which the joint working of the mine shall be conducted :-

1. The Company shall be called "The Chino-Japanese Penchihu Coal Mining Company (Limited).'

2. The capital of the Company shall be provided in equal shares by Chinese and Japanese merchants, the Chinese capital to be procured by Messrs.

and

the Japanese capital by Messrs. Okura and Co. Only Chinese and Japanese subjects may hold shares, and the Company will not recognize the holding or transfer of shares by subjects of any other nationality.

3. The accounts of the Company are to be kept in the Chinese currency circulating in the Province of Fengtien.

4. The capital of the Company for the present is to be fixed at 1,000,000 dollars Chinese currency; the Japanese share may be contributed in gold at the proper rate of exchange. Should the proposed capital prove insufficient it may hereafter be increased, but not beyond 5,000,000 dollars.

5. The cost of the machinery, buildings, and other permanent works provided by Messrs. Okura and Co. shall be fairly valued and treated as part of the capital of the Company. As regards miscellaneous expenses contributed by Messrs.

e.g., wages, a fair assessment of the total cost must be made and compensation paid to Messrs.

from the capital funds of the Company, but Messrs.

shall act liberally in this matter, and consider any request by the Chinese merchants for a reduction.

6. In accordance with the new Regulations, the land occupied by the Company,

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whether Government or private owned, shall be considered as entitled to a share in the profits of the Company, that is to say, 25 per cent. of the net profits of the Company shall be distributed pro rutá among the landowners, who shall, however, not be held responsible for losses incurred by the Company. If private owners are unwilling to accept this arrangement, they will be bought out by the Government.

and

7. The Company will commence operations as soon as Messrs. Messrs. Okura and Co. have decided on the amount of capital, and the extent of the area has been delimited by the Mining Bureau, and the approval of the Board (of Agriculture and Commerce) has been received. Meantime, as the cessation of work is inconvenient it will go on as usual, but no coal is to be sold by Messrs. Okura and Co.

8. There will be two General Managers, one Chinese and one Japanese. The Chief Engineer shall be Japanese, the Assistant Engineer Chinese, the Chief Accountant Chinese, and the Sub-Accountant Japanese. Clerks and other employés shall be appointed by the two General Managers jointly, but in the event of Japanese or foreign engineers, the contracts must be submitted before signature to the Wai-wu Pu and to the Board of Agriculture and Commerce.

9. In the event of machinery or other material being required for the mines, Chinese products are to have the preference. If the articles are not produced in China, they may be purchased in Japan. If Japan cannot provide them, then they may be purchased elsewhere.

10. The term of the Agreement is fixed at thirty years, but if on the expiration of this period the coal is not exhausted a further extension may be granted; the time of such extension, however, is not to exceed the time of the original Concession, ¿e., thirty years.

In the event of an extension being required, six months' notice must be given by the Company.

11. All the business of the Company must be transacted in accordance with the Mercantile Law of China, and with the mining Regulations promulgated by the Board of Agriculture and Commerce. Should hereafter the said Board, or other Chinese Department of a similar nature, issue Regulations not in accordance with the terms of the present Agreement, then the Agreement shall be altered so as to be brought into uniformity with such new Regulations.

12. The number of shares in the Company is for the present fixed at 20,000, of the value of 50 dollars cach, payable in three instalments. Receipts will be given for the first and second instalments of 15 dollars each, to be exchanged for scrip on payment of the third instalment of 20 dollars. Particulars of these arrangements will be published later.

13. If after payment of the two preliminary instalments the payment of the final instalment is not made within one month of the date fixed, the preliminary instalments will be forfeited.

14. The bankers of the Company are the Yokohama Specie Bank and the Hu Pu Bank.

15. The rate of interest on the share capital of the Company is fixed at 7 per cent. per annum.

16. The following taxes shall be paid by the Company :---

(1.) A tax on the gross output at the rate of 007 Kuping taels per ton. (2.) A ground tax at the rate of 20 Kuping taels per each mou of land occupied by the Company.

(3.) The ordinary Maritime Customs export duties.

17. The residue of the net profits of the Company, after payment of expenses providing for interest on the capital at the rate of 7 per cent., and payment of taxes, as detailed above, shall be divided as follows:--

Twenty-five per cent. payable to the land-owners, as provided for in clause 6 of this Agreement.

Twenty-five per cent, payable as royalty to the Chinese Government.

The remaining 50 per cent, to be divided amongst the shareholders, but provision should be made for the payment of gratuities to the staff of the Company to encourage them in their work.

18. The accounts of the Company shall be made up and published at the end of each Chinese financial year. Interest and bonuses are to be payable from the com-

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