Enclosure 2.
121
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Copy.
No.2870/1922.
sir.
Colonial Secretary's Office,
Hongkong,
7th March, 1924.
I am directed to acknowledge the receipt of
your letter, Shanghai 5/6 of Jamiary 25th, 1924, with regard to the transfer of the Post Office building at
Shanghai.
2.
As the essence of the proposal which has been accepted in principle by His Majesty's Government is that the transaction should be treated as if the sale had
taken place in 1911 the question of the peppercom rental appears not to be relevant, and the view of this Governmen t is that it may justly claim to be placed in the same position financially as it would now have been in if payment had been made in January 1911.
3.
The adoption of your suggestion that the interest payable on the capital sum should be based on the approximate rate which would have been obtained from an investment in British Goverment securities would give this
obtained Government considerably less than it would have haired if the capital sum had been paid in 1911 as (a) the money would probably not have been invested in British Goverment securities but in Colonial securities paying a higher rate of interest and (b) the interest received from whatever investment was made would have been re-invested so that,
in any case, compound interest might reasonably be claimed.
His Majesty's Divisional Architect,
4.
H. B. H. Office of Works,
SHANGHAI.
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