CO129-451 - Public Offices - 1918 — Page 202

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34,801. 108. payable on the 5th of each month on account of the 4 per cent. Loan of per 1893, and 40,2891. 108. payable on the 20th of each mouth on account of the 5 cent. Loan of 1896.

From the 14th March to the 14th August, the date of declaration of war against Germany, the equivalent of these sums in silver at the rate of the day was duly handed to the Deutsch-Asiatische Bank at Shanghai from loan service balances in the Lands of the Inspector-General of Customs.

On the outbreak of war the Chinese Government suspended payment of the German share of Anglo-German loan instalments, and the question arose as to what should be done with the sums hitherto payable and paid, pending resumption of loau payments to Germany after peace is declared.

It should be noted here that the Chinese Government's policy in regard to Thus China suspended Anglo-German loans has not been altogether consistent. payment of the German share of the Tien-tsin-Pukow Railway Loan on rupture of diplomatic relations, and almost immediately a question arose with the Hong Kong and Shanghai Bank regarding repayment of advances made by the bank to meet coupons of the above loan presented by British and other non-enemy bond-holders who were in possession of bearer-bonds issued by the German Bank when the loan was first floated.

of

Knowing that a similar question would arise on declaration of war and suspension payment of the German share of customs-secured Anglo-German loans, and with a view to having available funds for resumption in due time of payment to German bond-holders, the Inspector-General of Customs suggested to the Chinese Government that it would be well to take advantage of the high rate of exchange and to settle the German portion of the loans as usual on due dates-settlement of exchange to be made with the Hong Kong and Shanghai Bank simultaneously with the British portions and the German instalments to be remitted to London and held in gold in an account to be opened by the Inspector-General. From funds so remitted arrangements should be made with the Hong Kong and Shanghai Bank to meet coupons and/or drawn bonds presented by British and non-enemy holders, and the balance not so required should be placed on deposit with the bank, drawing interest at 5 per cent. per annum.

After some difficulty the Minister of Finance was prevailed upon to sanction the above proposal, and to forgo the handling in silver of the funds released by the wur declaration, but, with a view to improving China's credit on the London market, and at the same time to obtaining a more remunerative investment, he decided to invest the balance of the monthly sums remitted in certain Chinese Government gold securities, of which a list has been drawn up and communicated to the Inspector-General, Meanwhile, pending settlement of this question, the German loan instalments payable to the 20th August and 5th September, 1917, were held in abeyance. A decision having been reached previous to the payment due on the 20th September, instructions were given to settle the above two instalments when settling the British portion of the 1896 The three loan due on that date, together with the German portion of the same loan. instalments, amounting to 115,3807. 10s., were duly remitted and have been placed to the credit of a German loan instalment account, opened in the Inspector-General's name, with the Hong Kong and Shanghai Bank, London.

In pursuance of the policy laid down by the Minister of Finance, the Inspector- General has instructed the bank to purchase Chinese securities to the face value of 90,000l., leaving a balance in the account which it is considered will be ample to meet the bank's advances on account of coupons and/or drawn bonds already presented by non- enenty holders.

The steady purchase of Chinese Government securities to the full extent of the available balances of the funds remitted each month from Shanghai will be pursued until further orders, and it is probable that this will amount to about 50,0001. a month.

F. AGLEN,

Peking, September 24, 1917.

Inspector-General.

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[This Document is the Property of His Britannic Majesty's Government.]

1 December 29,7

SECTION 4.

CHINESE LOANS AND CONCESSIONS.

CONFIDENTIAL.

[245233]

No. 1.

Sir J. Jordan to Mr. Balfour.-(Received December 29.) (No. 350.) Sir,

Peking, November 3, 1918. THE declaration of war by China against the Central Powers and the consequent suspension of indemnity and loan payments have led to certain financial adjustments which it may be advisable to place on record.

The Boxer indenuity payable to Germany, which amounts to about 732,810. a year, was suspended on the rupture of diplomatic relations on the 14th March last, and I understand, been placed at the disposal of the Inspector-General of Customs to meet the services of certain internal national loans on which the Central Government had defaulted. Mr. Aglen was associated with two of these loans of 24,000,000 dollars each, and as the use of his name had doubtless influenced the subscribers, he felt sume responsibility for seeing that the Government kept faith with these and eventually succeeded in securing the German and Austrian share of the indemnity money for this purpose.

On the rupture of diplomatic relations, China also suspended payment of the with characteristic German share of the Tien-tein-Pukow Railway Loan, but inconsistency continued the payment of the German share of the Hu-kuang Railway Loan and of the Anglo-German loans of 1896 and 1898 until the outbreak of war on the 14th August last, since which date no payments of any kind have been made.

The

From the enclosed memorandum which was forwarded to Mr. Alston by the Inspector-General of Customs, it will be seen that arrangements have been made for remitting the payments due to Germany on account of the 1896 and 1898 loans to the Hong Kong and Shanghai Bank in London, who are instructed to devote the proceeds to the purchase of Chinese securities on behalf of the Chinese Government. amount set free for this purpose is estimated at about 50,000l. a month, after deducting a sum of, say, 100,000 a year which is required to meet coupons or drawn bonds of the two loans presented by British and non-enemy holders. The arrangement, it is significant to note, purports to be made with a view to having available funds for resumption in due time of payment to German bond-holders. In other words, the Chinese Government, in making use of this money, ignores the debts due to the subjects of Allied and friendly Powers in order to provide for the eventual payment of enemy nations, but I presume that during war payment of loans of this kind is only suspended and not actually extinguished. It is remarkable, however, that no similar arrangement has been made for safeguarding the interests of Germun holders of railway loans, and it may be presumed that, if left to themselves, the Chinese would probably have treated all their future obligations to Germany with equal indifference.

As to the Reorganisation Loan, the German share of which amounts to 250,000L a year, Sir R. Dane proposed to remit the money to London and place it in deposit with the Hong Kong and Shanghai Bank. The other bauks, however, demurred to this proposal as being unduly favourable to the British Bank, and no arrangement has, I understand, been so far made for the disposal of the money, which remains for the present in the receiving banks in Shanghai.

I have, &c.

J. N. JORDAN.

Enclosure in No. 1.

Memorandum by Mr. Aglen.

ON rupture of diplomatic relations with Germany on the 14th March last, the Chinese Government suspended payment of the Boxer indemnity payable to Germany, but continued payment of the German share of the Anglo-German loans secured on the Maritime Customs revenue. These instalments are two in number, namely:

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