CO129-383 - Public Offices - 1911 — Page 228

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statement satisfactory to them regarding nature and amount of expenditures proposed. When currency reform programme with statement of expenditures thereunder and statement of Manchurian expenditures has been accepted, and prior to issue of loan, banks agreed, if necessary, make further advances up to 3,000,000l. for preliminary

All above advances with accrued interest 6 per cent. per ) expenses currency reform. annum to be deducted from first proceeds of loan.

Proceeds of loan after deduction advances to be deposited with banks in currency reform and Manchurian development accounts in proportions fixed respectively by statement of expenditures above referred to. Payments to these accounts to be made in instalments and on dates conforming to conditions allowed subscribers to loan. Transfer of loan funds to China to be made through banks conformably to require- ments specified in statement expenditures but in amounts not exceeding maximum of

in any one week.

Note.---China desires fix maximum 1,000,000Z.; we have suggested 200,0007. Requirements governing transfer will in any case be fixed by statement of expendi- tures which must be accepted by you before loan issued. Please instruct as to maximum weekly transfer.

Transfer to Shanghai will be made in equal amounts from four banks, and will be withdrawn in equal amounts from banks in Shanghai by Chinese Government orders. Such orders to be accompanied by certificates, form of which shall be stipulated respectively in the statement of expenditures for currency reform and statement of expenditures for Manchurian industries. Funds withdrawn to be deposited with Chinese Bank designated by Board of Finance. Bureau of Currency Reform and/or native bank designated will hand banks' quarterly published statement prepared for information Imperial Chinese Parliament, showing disbursements of loan funds for currency reform.

Note. Funds required for Manchuria will probably be withdrawn in large amount under certificates, form of which will be fixed in statement which will be subject to your approval, but it will not be possible supervise their actual application. We

propose insist upon as condition of our acceptance statement of expenditure for currency reform that same shall specify that certificates for withdrawal of funds from four banks must be signed by financial adviser, and that adviser shall certify to banks that quarterly statement agree with accounts kept by designated Chinese bank. Loan agreement will be so worded that banks may withhold loan funds if certificates and/or quarterly statement are not in order. We consider provisions stipulating that quarterly statements are to be submitted to Parliament constitutes safeguard against misappropriation.

Five per cent. per annum payable semi-annually from date on which loan issued to public.

Term of loan forty-five years, repayment principal commencing with 11th year to be made by yearly amortisation in half-yearly instalments. Silver payments in Shanghai or payments in gold bond fide in America Europe to be made ten days before due date. Banks to receive 4 per cent. commission on loan service. China agree to pay 24 per cent, premium on extra redemption from 15th to 20th years inclusive.

Note.-We can obtain possibly premium up to 25th year if you suggest that you make concession.

insist upon,

but

China agree to give banks preference for supplementary loan and for participa- tion in any Manchurian business to be undertaken under this loan or in connection with.

If after group has accepted currency reform programme and statement Man- churian and currency reform expenditures political crisis &c. should occur before publication prospectus, banks shall be given six months within which to issue. If at the expiration of this time loan shall not have been issued Government shall repay all advances with accrued interest at 6 per cent. and reimburse banks for expenses engraving and/or printing bonds, but, shall be liable for no other compensation and on such repayment agreement shall become null and void.

All necessary details of final agreement not specified about follow precedent of Hukuang and previous loan agreements.

We have suggested to China that since we derive no commission on sale of materials, proceeds of loan to be deposited with banks in Europe or held by banks in

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China shall bear no interest, and that China allow banks rebate of 1 per cent, on amount of loan in partial reimbursement of flotation and other expenses. China refuse rebate and demand interest. We can probably insist upon no interest but doubt if we can obtain rebate. Would you authorise us compromise by offering small interest (and mixed loan 5 per cent. 41 per cent. at 94. We suggest 3 per cent. per annum in Europe and America currency account rate China. Please send definite instructions on this point,

We believe by signature foregoing agreement and by hold obtained through proposed advances immediate and contingent you will be able oblige China grant adequate control provisions under statement of expenditure and force them in consultation with adviser to to be appointed accept such alterations in currency reform programme handed to you as you after consultation with your expert at home may deem to be necessary.

We believe agreement now proposed is best that can be obtained, and in view of probable competition strongly urge you authorise us conclude negotiations upon the basis of above and sign agreement immediately.

Cable from Messrs. Straight, Hillier, Cordes and Casenave to Messrs. J. P. Morga and Co.-(Received London March 15, 1911.)

Following is procedure suggested in view of assuming that four Governments We recommend adviser approve nomination neutral adviser by bankers' conference.

be so nominated as soon as possible after signature loan agreement, and immediately proceed China assist Chinese Government elaborate plan for inauguration and operation currency reform programme. On receipt of currency reform programme and two statement of expenditure we will send to you. You will then consider these in consultation with your experts, and inform us of the modifications you consider necessary. Will submit your modifications to the Chinese for consideration in consultation with their adviser and negotiate with them for final currency reform programme and statement acceptable to you.

Cable from W. D. Straight to Messrs. Morgan, Grenfell and Co.-(Received London March 16, 1911.)

Communicate this to other groups following which has been wired New York direct from Hillier, Cordes, Casenave, Straight. Chinese earnestly hope that beside the 1,000,0007. for immediate Manchuria requirements banks will agree to advance the 1,000,000l. required for preliminary expenses currency reform prior to instead of after banks' acceptance programme of currency reform and two statement of expenditure. Banks to make such Manchuria and currency advance only on receipt of special statement satisfactory to themselves showing nature of and amounts of such preliminary expenditure.

All advances to be repaid with 6 per cent. accrued interest out of first proceeds of loan or by Board of Finance if contract becomes null and void by banks non- acceptance of

reform and two statement of expenditure or by of currency programme operation force majeure clause.

Chinese will find it difficult to repay advance except out of proceeds of loan, and by increasing their indebtedness to you you will place yourselves in much stronger position to press upon them acceptance such modification as you may wish to make in their programme of currency reform or in the form of their two statement of expenditure. By consenting make advance as requested you will greatly facilitate negotiations and in view of all of the circumstances we recommend you to do so,

The banks agreed to the contents of the three telegrams with the following modifications and observations:

1. Advances agreed to, 1,000,000l. Manchuria, 1,000,0001. currency, on terms of Cable No. 144, making currency advance dependent on previous acceptance currency programme, provided all advances and interest are made a first charge on loan security.

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... ''ཨནྟསམྨ ཏཾརཎཾ '