[This Document is the Property of His Britannic Majesty's Government.]
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34588
[B]
RECS
AFFAIRS OF CHINA.
Pro? - NOV 10
[October 28.]
CONFIDENTIAL.
SECTION 3.
[38205]
(No. 372.) Sir,
No. 1.
Sir Edward Grey to Mr. Max Müller.
Foreign Office, October 28, 1910. I HAVE received your despatch No. 345 of the 4th instant, in regard to the recent issue of the so-called Imperial Chinese Government 7 per cent. Peking- Hankow Railway redemption loan for 450,0007, by the London City and Midland Bank and Messrs. Dunn, Fischer, and Co. I approve the language which you held to Mr. Birchal, and agree with the views wbich you express as to the character of the İnan generally.
I have obtained a copy of the prospectus, which 1 cuclose,* and an analysis of it shows that the loan is not an Imperial Government loan at all in the sense in which this term has hitherto been used, but only a departmental loan without Imperial guarantee. It is sanctioned indeed by an edict, but the edict, which is two years old, has not been communicated to His Majesty's Legation, and does not authorise the emission of bonds on any foreign market.
The point is of importance to foreign subscribers on account of the edict issued in November 1891, by which the Chinese Government expressly disclaimed all responsibility This notification was, as you are for any foreign loans not specially confirmed by them. aware, repeated and emphasised in a further circular which the Wai-wu Pu addressed to the legations some two years ago.
The present contract, such as it is, is between the Board of Posts and Communica- tions and Messrs. Dunn, Fischer, and Co. The nature of the contract has not been disclosed, but as there is no evidence of the contract having received the approval of the Imperial Government it is liable to be repudiated, presumably under the edict of 1891. Sir John Jordan, whom I have consulted, informs me that in reply to an enquiry which he made when the circular to which I have referred was issued two years ago, the Wai-wu Pu stated that it embraced not only provincial loans but loans contracted by Government departments in Peking.
As you have also observed, although the loan is called a redemption loan, it is difficult to understand the term, seeing that the railway in question was redeemed in December 1908. The prospectus is silent as to the object of the loan, the proceeds of which are to be banded over to the uncontrolled expenditure of the mandarins, There is no provision for audit or inspection of accounts, which is indeed expressly withheld.
Having been repeatedly requested to bring to the knowledge of British subjects the edict of 1891, it appears to me that, in view of the doubtful nature of the present transaction, the description of which, together with the general imitation of the prospectus of previous Imperial loans, may be described as misleading, His Majesty's Government are justified in asking whether the loan is a Government one or one of those for which the Government accepts no responsibility. In the latter case, such means as may be possible will be taken to let the public know how they stand wis-à-vis the Chinese Government in the matter.
I should be glad if you will, should you see no objection, address a communication in the above sense to the Wai-wu Fu and inform me of the result by telegraph.
I am, &c.
E. GREY.
* Not printed
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