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work on the unfinished line in the northern region of Kuangtung in order that the railways may be connected in the manner indicated by the group banks in paragraph 5 of their letter of the 28th April last. I still consider, however, that only those lines which are provided for under the terms of the Hakuang Railways Loan Agreement can be regarded as within the scope of the loan. The extension of Chengtu and the connection with Kuangehow do not come within the scope of the Hukuang Railways Loan Agreement, and it is the duty of the Chinese Government to consider proper means for the construction of these two lines. This question, therefore, need not be discussed here.
3. I propose to defer discussion of the remaining points mentioned in the group banks' letter of the 28th April until the question of the issue of a supplementary loan, in accordance with the loan agreement, is brought up by the group banks for consideration.
The various suggestions made by the group banks in the aforementioned letter, viz. (a), that security should be provided from a separate source; (b), that no payments of interest should be made from the loan funds during the construction; and (c), restrictions of expenditure of loan funds, are all matters which have already been settled in the loan agreement and the annexes thereto and must be dealt with accordingly.
I hope that the group banks will give the foregoing points their attention. The Ministry of Communications have instructed Mr. Yen, managing director of the Canton-Hankow railway, to organise a body of surveyors who shall proceed within a certain date to make a careful survey of the Canton-Hankow railway line from Chu- chow to Hsing-Seu-Ling in order that work may be commenced as soon as funds are forthcoming. Since the outbreak of war the loss incurred by this railway owing to snspension of work has been by no means inconsiderable. Money markets are gradually becoming more active, and I most sincerely hope that the group banks' representatives will arrange without delay some method for the supply of funds to this railway until such a time as the loan bouds can be issued, so that losses owing to further delays may be avoided.
I trust that the group banks will give these matters their earnest consideration and favour me with a reply.
In closing I may add that I have instructed Mr. Yen to prepare without delay an estimate of the costs of the Cauton-Hankow railway line from Chu-chow to Hsing-Ssu- Ling, and as soon as I receive this estimate I shall advise you.
I have, &c.
KUAN KENG LIN.
(Seal of Director-General,
Han Yuch Chuan Railways.)
Enclosure 2 in No. 1.
Director-General of Han Yuch Chuan Railways to Hong Kong and Shanghai Bank. October 9, 1920.
Gentlemen,
ON the 5th instant I addressed a letter to you which I trust bas duly reached you.
The plan now proposed by this railway is to postpone construction work on the Szechuan-Hankow railway for the time being and to concentrate the whole of our energies on the Hunan-Hupeh section of the Canton-Hankow railway. Mr. Cox, the engineer-in-chief of this railway, has been instructed to prepare a careful estimate for submission to the group banks, but for the moment he is unable to supply the figures required, and I give below two proposals as to the construction work to be done and the estimated costs involved --
(a.) The amount required for the construction work of the whole line from Chu- chow to Hsing-Ssu-Ling (on the borders of Hunan) is estimated at 29,603,630 dollars. This figure does not include the cost of 6 English miles of line from Hsing-Sau-Ling to the borders of Kwangtung; the point of joining up has not yet been decided upon, and it is therefore impossible to calculate the cost of this particular part of the work at
present
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(3.) The amount required for construction work from Chu-chow to Heng-chow is stimated at 13,880,000 dollars. The work involved in tunuelling and preparing bridge foundations to the south of Heng-chow will necessitate considerable time and expense. This work should be undertaken first, and will involve an additional expenditure of 7,170,000 dollars, making altogether a total of 21,050,000 dollars.
The time required for the completion of the work in the first proposal is estimated As to which procedure is to be at three years, and in the second proposal at two years. adopted, this will depend upon the amount of funds available and the urgency of thé work calling for attention at the time.
I shall be greatly obliged if you will give these two estimates your earnest con- sideration and grant an advance of funds until such a time as the supplementary loan bouds can be issued, so that further losses, owing to suspension of work of this railway, may be avoided. I hope that you will also give my previous letter your attention and that you will favour me with reply to both letters as soon as possible.
I have, &c,
(Seal of Director-General,
Han Yueh Chuan Railways)
Enclosure 3 in No. 1.
KUAN KENG LIN.
Extract from Letter from Banks to Director-General of Han Yueh Chuan Railways, November 1, 1920.
WE are also pleased to note the divergence of your views from those of Mr. Huang Tsan-hsi, inasmuch as you favour the completion of the Canton-Hankow railway to the Kuangtung border before commencing the construction of branch lines. We notice with surprise, however, that you adhere to the view expressed by the late director-general that the linking up of the Hupeb-Hunan section with the Kuangtung provincial railway and the eventual extension of the Hankow-Szechuan line to Chengtu, being matters outside the scope of the original Hukuang Railways Loun Agreement, are not to be discussed with our groups,
We beg to point out that in letters addressed to Mr. Feng Yuun Ting (then director-general of the Hukuang railways and the Minister of Communications on the 22nd January, 1914, the group representatives pointed out the extreme importance of these two matters to the development and completion of the Hukuang railways' system, and in the reply of the Minister of Communications of the 23rd January, 1914, assurances were given that when proceeding with these extensions the various matters in connection therewith would be decided in consultation with the groups. Unfor- tunately, as you are aware, the outbreak of the European war and the resulting conditions precluded the raising of further funds for the completion of the ailways as projected in the loan agreement and the extensions in question, but our groups rely on the assurances above referred to that these extensions will be given due place in any scheme for proceeding with construction.
We also regret to note your adherence to the view that the suggestions of the groups' representatives in their letter of the 28th April regarding the provision of separate security for a further loan, the payment of interest during construction from other sources than the loan proceeds, and the safeguards to be exercised in the expen- We fear that, diture of loan funds, are matters of which the principle has been laid down in the original loan agreement, and must be dealt with on the same lines. while in any case the issue of a loan at the present time would be a matter of difficulty, unless a complete revision of these particulars can be effected, a further issue of bonds would be quite impossible.
We cannot agree with the remarks of the late director-general, which imply the unimportance of the interference with the railway traffic and other arrangements, as well as the damage caused to rolling-stock, buildings, &c., by Chinese troops. The reports of the engineer-in-chief of the Hupeh-Human section, extending over a very considerable period, have seldom been free from complaints of the interference by the military authorities with the running of the railway and of the loss and damage
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