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No. 59 (12/805/48)
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Foreign office No. 87
Financial Counsellor No. 11 (Ref. F.0. Tel.14 Camer of 26.1.48) Minister (Commercial) No. 41 (Ref. Canton's No. 3 to Embassy of
12.1.48)
Canton No. 24 (Ref Canton's No. 3 to Embassy of 12.1.48) Hong Kong No. 29 (Ref. Canton's No. 4 of 12.1.48) Mr. Whitehouse unnumbered
His Britannic Majesty's Embassy present their compliments to the Ministry of Foreign Affaire and have the honour to bring the following matter to the ministry's notice.
For some time the British and Chinese Corporation Limited, as trustees for the bondholders of the Canton-nowloon Railway Loan, have been negotiating with the competent Department of the Chinese Government for a resumtion of payments under the 1907 Agreement. These railway bonds have been in continuous default since 1939. The monthly interest now due in respect of the Loan, i.e. interest on the total out- standing at 2% per annum plus banks comission, on 1st December, for instance, amounts to £27,606.10.0. It is urged that this monthly instalment be honoured and the service of the Loan be hencefortĥ resumed and maintained.
In this connection His Britannic majesty's Babassy would observe that the original loan Agreement of 1907 provided for inbe-eat at 5, with substantial security in the form of a mortgage of the entire property and revenue of the railway. However, when the service of the loan fell into arrears in 1936, the bondholders accepted, at heavy sacrifice, a proposal by the Chinese Government to resume service of the loan on certain modified terma, the text of which will no doubt be readily available to the Ministry.
As the Ministry is no doubt aware no less than Hong Ko $5,950,000 have been paid by the British section of the railway to the Chinese section in resect of the first eleven months of, 1947 on account of that portion of furcs and freight collected at Kowloon which was warned by the Chinese section (Shunchun- Canton). Ample funds should therefore be available to pay : relatively small amount of interest due to the bondholders i return for their investment as the result of which these earnings are at the disposal of the Chinese authorities. The competent authorities of the Chinese Government will readily appreciate the beneficial effect which resumption of payment these railway obligations can not but have upon the national credit. Such payment moreover, is likely to be regarded as tangible confirmation of the assurance given by the_xecutive Yuan in August last, to the effect that service of re-war lo. would be resumed when circumstances permit. The Ministry is accordingly invited to move the competent authorities to give favourable consideration to the proposal for ayment of inter put forward by the representative in China of the British an Chinese Corporation Limited, in the interest of China's credi no less than of the bondholders.
BRITISH BASSY,
NANKING,
6th February, 1948.
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