CO129-558-11 Mission of Sir F. Leith-Ross to China- proposals for a Hong Kong - China customs... 29-9-1936 - 30-12-1936 — Page 118

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But a larger

Railway, was issued while I was in China.

schene is justified and would, I believe, prove very

helpful, both in improving internal trade in China and

in promoting exports of railway materials from the

United Kingdon. I think that the Consortium Banks

-

should be induced to examine the possibility of a loan

of, say, £10,000,000 £15,000,000 for financing the

import of railway materials for the new construction

which is now being undertaken by the Chinese Government

on the basis of internal loans supplemented by barter

transactions. The loan should, if possible be of

an international character and it would require to be

secured on the Customs surplus. For this purpose the

Chinese Government would have to arrange with the

domestic bondholders to give the new loan priority over

domestic loan charges: but this could, I believe, be

arranged. It would also be necessary for the Chinese

Government to arrive at an understanding with Japan in

regard to the smuggling situation: but subject to this,

the Japanese Minister of Finance assured me that

such a loan would not be opposed by the Japanese

Government so long as Japan obtained orders for

materials in proportion to her participation in the

loan. A similar proviso would no doubt be insisted

upon by all the other participants in the loan: indeed,

the only possible basis for any such operation at

present would be that each country should obtain orders

in proportion to the capital subscribed. The

Consortium is at present bound by an understanding in

favour of "open tender" and the first step is for the

British members of the Consortium to request a

revision of this understanding. It should not be diffi-

cult to secure agreement on this point but in the

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