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inspired, undoubtedly voices the opinions of an influential party in the Government, welcomes the new loan as a step towards eliminating "the foreign financial groups resident in China" who by encumbering China's loans with "securities and other unfavourable conditions have hitherto prevented the establishment of direct and cordial relations with the financiers of Europe and America. I have, &c.
Sirs,
31
Enclosure 1 in No. 1.
W. G. MAX MÜLLER.
Messrs. Mayers and Cordes to Directors-General of the Tien-tsin-Pukom Railway.
September 19, 1910. WE are in receipt of a telegram from our Berlin and London offices stating that an issue has been announced to take place during the present week, on behalf of the Yuchuanpu, of 7 per cent, Chinese Government gold bonds at 108 for an amount of 450,0001, by the London City and Midland Bank in London.
We are desired by our boards to draw the attention of your Excellencies to the prejudicial effect which this unprecedented issue at 7 per cent. of 450,0001. of gold bonds is likely to have on the pending issue of the Tien-tsin-Pukow Railway supplementary loan of 4,800,000 at 5 per cent., and to disclaim all responsibility if the price realised for the latter bonds affords proof of the inexpediency of raising money at 7 per cent. when it has hitherto been available to the Imperial Government at 5 per cent.
We have, &c.
Enclosure 2 in No. 1.
S. F. MAYERS.
H. CORDES.
Directors-General of the Tien-tsin-Pukow Railway to Messrs. Cordes and Mayers.
September 23, 1910, WE bave the honour to acknowledge receipt of your letter, which has received our careful attention.
Sirs,
The loan by the Board of Communications from the London City and Midland Bank for 450,0001, is a transaction quite distinct from the Tien-tsin-Pukow Railway supplementary loan, respecting which Taotai Feng has reported to us that the draft agreement has been settled and initialled by him and his associate negotiators in conjunction with yourselves, and that if the Government has no alterations to make it can be concluded on that basis. We observe that this draft agreement for the supple- mentary loan, like the original loan agreement, is for an issue at 3 per cent., and it will be our duty without delay to memorialise its terms to the throne.
As regards the question of the claim in the London prospectus for a rate of 7 per cent. interest, we do not consider that the Board of Communications will recognise it, or that it can have any prejudicial effect on the supplementary loan.
We have, &c.
HSU SHIH CHANG. SHEN YUN PEI.
3
Midland Bank, a strong London banking institution, at the instance of the Chiao- Tung Bank of the Ministry of Posts and Communications. Hitherto China's foreign loans are invariably encumbered with securities and other conditions securing to the It is extraordinarily significant to note, financing country preferential treatment. therefore, that the issuance of the present loan in the London market has only the national credit of the empire as its security, and carries no preferential clause to the loaning nation.
We are authoritatively informed that the loan has been several times over- subscribed. Such a sudden change of China's position in the foreign financial circles should be a matter of satisfaction to all well-wishers of the Chinese empire, and is quite an eloquent testimony in favour of our national credit.
Of course, should one be in a pessimistic mood, it is just possible for him to advance the argument that the issuance of the present loan does not so much depend upon the improved condition of the national credit of China as upon the general conviction of the British public that the loan has for its purpose the procuring of funds for public investment. There is certainly much truth in this argument, but, as the borrowing party is a political sovereign and cannot be approached by any of the ordinary legal processes, the British public must have confidence in the willingness and ability of the Chinese Government to discharge its indebtedness before they would entrust it with their surplus capital.
Much, it is understood, will depend upon the success of the first issuance of this Joan in the London market. This instalment consists of 500,000 bonds of 100 dollars (97.) each, which, as our London telegram reports, boars interest at 7 per cent, per annum, to be payable once in every half-year. The privilege given to these bonds is that they shall be free from all Government charges, dues, taxes, &c., as is usually the case with other Government bonded indebtedness. There is negotiation on foot, it is reported, to send this kind of Government bonds to London from time to time, provided a ready market can be found for them. It is also understood that this step may in the near future serve as an opening wedge to the successful floating of a big loan to be employed in the extensive development of our national industry and resources. People are, nowadays beginning to realise the expediency in maintaining The removal of a direct transaction in business as well as in diplomatic matters. possible misunderstandings is one advantage, and a much more economical and satis- factory result to be realised is another.
Hitherto it has been almost impossible for the Chinese Government to obtain foreign financial groups residing in this country and without being subjected to very unfavourable conditions. Since a beginning has now been made in paving the way to a direct transaction in business matters of this nature, it is to be sincerely hoped that in the near future we may establish the most intimate and cordial relations with foreign financiers with a view to the mutual benefit of both parties concerned. In passing, it may be interesting to note that the loan, as we are informed by the same That the said criticism was made London telegram, is subjected to some criticism.
by some one interested goes without saying.
Enclosure 3 in No. 1.
Extract from Leading Article in " Peking Daily News" of September 29, 1910, entitled, "China's National Credit.”
QUITE a departure from the restrictions characterising our foreign loan agreements, however, it is gratifying to note, has begun to fall on China's lot. A late telegram from Lonion reports that part of the Peking-Hankow railway redemption loan amounting to 450,0007, and carrying interest at 7 per cent., was issued in London at 108. It is to be noted that the loan is financed by the City and
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