CO129-470 - Public Offices - 1921 — Page 88

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they folishly think would ruin their city by transferring its trade to Hongkong might perhaps wreck the whole of our scheme. We do not consider that once we have some control over the Canton- Hankow Line there would be any great difficulty in constructing the loop line, while na I attempt to show below, we do not con- sider the building of this loop line to be of vital importance.

The terms of the agreement we have been negotiating are but for one importent clause, more favourable than those obtained under either the Huuang Loan Agreement or the Tientsin-Pukow Lon Agreement. The rate of interest is higher, the control i. greater, the British material is stipulated.

The import nt exception above referred to is in regard

to extra security, there being no provision for the hypothecation of specific securities as is contained in Artcle 9 of the Hukuang

Loan Agreement.

Mr. Tsen says that besides the security of the line and its revenues, he can only give the general security of the Miltiary Government, Kwangtung having no supplus revenues to charg He maintains that if, inised, he were able to pledge other securi- ties he would be able to phtain the money ha-heada for building the line from America or France upon easier terms than those con- ceded to us. While there may be a certain amount of truth in his assertion, we are not greatly influenced by it, but we consider he may be quite honest in saying that he has no other securities to pledge. Unless, therefore, His Majesty's Minister at Peking

or the British Consul General at Canton can indicate any sources

of revenue that might be charged, such as, say, the Military Govorn= ment's Kuangtung share of the Maritime Custome, I far that extra security may be im, ossible to obtain.

Without added security I do not think that the loan could be raised in London, and in view of the gre t importance to Bongong of constructing as early as possible and under British influence the Canton-Hankow line, I beg to inquire whether the Imperial/