NUMBER 1898/13.

BELGIUM (La Société d'Etudes des Chemins de Fer en Chine) AND CHINA. Loan contract, and operating contract, for the Peking-Hankow Railway.*— June 26, 1898.

LOAN CONTRACT.

BETWEEN THE UNDERSIGNED:

1o. Their Excellencies the Viceroys of Chihli and of Hupeh, acting in virtue of full powers from the Imperial Chinese Government, duly authorized by decree of H. M. the Emperor of China, under date the 20 October 1896, of which communication has been officially made to the Representatives of Belgium at Peking, by despatch of the Tsung-li Yamên, under date of

2o. The Imperial Government of China, represented by H. E. Sheng Hsüanhuai; Director General of the Chinese Railway Company;

3o. The Chinese Railway Company, represented by H. E. Sheng Hsüan-huai, its Director General,

And the Société d'Etudes des Chemins de fer en Chine, represented by M. Eugène Hubert, engineer,

Has been agreed the following:

Article 1.—The Imperial Chinese Government has, in compliance with a decree dated the 20 October 1896, of which copy is annexed to the present contract, granted the concession of the line from Lu-kou-chiao (Peking) to Hankow (about 1,300 kilometers) to the Chinese Railway Company, which has assets amounting to thirteen million taels.

An edict of H. M. the Emperor of China has authorized Their Excellencies the Viceroys of Chihli and of Hupeh and H. E. Sheng Hsüan-huai, Director General of Chinese Railways, to contract, in the name and on account of the Imperial Chinese Government, a loan the product of which is destined exclusively to the building of the above mentioned line.

This edict, bearing date the 20 October 1896 and of which a copy is annexed to the present contract, is worded as follows:

66

"Edict of His Majesty the Emperor of China:

"In response to a request of Their Excellencies the Viceroys of Chihli and "of Hukwang, presented to His Majesty the Emperor of China, an Imperial “edict, bearing date of this day, authorizes the organizing of a Railway Company and grants it the concession of the line from Lu-kou-chiao (Peking) to "Hankow. His Majesty the Emperor authorizes the Railway Company to con"tract abroad a loan the product of which shall be devoted in full to the building "of said line.

“H. E. Sheng Hsüan-huai, under-secretary of State, is appointed Director "General of this new Company.

* Translations from the French texts, as given in Rockhill, p. 232. French texts printed in Wang, pp. 41, 65. See Note to this document, post, p. 145.

In compliance with the terms of this edict, the Imperial Chinese Government, represented by Their Excellencies the Viceroys of Chihli and of Hupeh and the Director General of Chinese Railways, has decided to contract a State 5 p. c. foreign gold loan, of a nominal value of 112,500,000 francs (or 4,500,000 pounds sterling).

gold.

This loan shall be known as the Chinese 5 p. c. 1898 Loan.

ARTICLE 2.-This loan will be represented by 225,000 bonds of 500 francs

These bonds, the text of which is annexed to the present Contract, shall be signed in the name of the Imperial Chinese Government by the Viceroys of Chihli and of Hupeh and by the Director General of the Chinese Railway Company. They shall be issued in blocks of 1 to 5 bonds, in the proportion to be indicated by the Société d'Etudes des Chemins de fer en Chine and are to be manufactured at its expense.

They shall bear 5 p. c. interest annually on the par value payable in gold. Interest shall accrue from the date of the payments and shall be payable the 1st September and the 1st March of each year.

ARTICLE 3. The loan shall be extinguished in twenty years, from the year 1909, by yearly drawings by lot (tirages au sort), which will take place at Brussels, in the offices of the Société Générale pour favoriser l'Industrie Nationale, in conformity with the table annexed to the present.

The drawings shall take place the second Tuesday of January each year: the first drawing shall take place on that date in 1909.

The numbers of the bonds drawn shall be published in four newspapers at the expense of the Société d'Etudes des Chemins de fer en Chine.

ARTICLE 4.—The bonds drawn shall be refunded in gold at their par value on the date on which falls due the next coupon.

The bonds presented for reimbursement must have attached to them all the coupons remaining unpaid, and the amount of missing coupons will be deducted from the capital to be refunded.

Interest on bonds ceases to accrue from the date set for reimbursement.

ARTICLE 5.-The Imperial Chinese Government denies itself the right before the 1st September 1907 to increase the amortization, to pay off the whole loan or to make a conversion of it. After that date it shall be at liberty to pay off the loan at any time before the terms of payment, and once the refunding made, the contract shall be declared annulled.†

ARTICLE 6.-The coupons and the bonds (titres) redeemed (amortis) shall be payable in francs, in Europe in the office or offices designated by the Société d'Etudes and entrusted by it with the management of the loan.

ARTICLE 7.-Payment of interest and refunding of bonds of the present loan. are guaranteed by the gross revenues of the Imperial Chinese Government.

Furthermore, in virtue of an authorization already granted by the Chinese Government and in agreement with it, the Chinese Railway Company declares

See loan agreement of Oct. 8. 1908 (No. 1908/12, post), and the imperial edict of Oct. 8, 1908 (No. 1908/13, post). The Chinese Government took control of the PekingHankow Railway from January 1, 1909.

that it specially assigns, preferentially for the payment of interest and capital of the present loan, and consequently cedes and delegates in favor of said bonds all the net revenue of the line from Lu-kou-chiao (Peking) to Hankow,— after the regular payment of all expenses of administration and operation, the whole, as is furthermore set forth in a treaty for operating (the line) concluded between the Chinese Railway Company and the Société d'Etudes des Chemins de fer en Chine, treaty hereto annexed and forming an integral part of this

contract.

This assignment (affectation) is made exclusively and irrevocably until complete refunding of the bonds of the present loan.

ARTICLE 8.-The Chinese Railway Company directs the Société d'Etudes to deposit the funds from the net revenue of the traffic with the Société Générale pour favoriser l'Industrie Nationale, established at Brussels, or with the company designated by it.

This latter shall convert into gold, and to the best interest of the Imperial Chinese Government and the Chinese Railway Company, and up to the full amount of the sum necessary to insure the service of the loan at the following semi-annual payment, the deposits made with it by the Société d'Etudes empowered by the Chinese Railway Company to make them.

These deposits by the Société d'Etudes with the Société Générale Belge or the company designated by it shall continue to be made until the sum necessary for the full service of the loan at the date of the next semi-annual payment has been completed in gold, and in such manner that said service is insured three months at least before said semi-annual payment falls due. The depositories shall utilize these sums in the manner the most advantageous for the Chinese Company.

The account on which these sums are borne shall be charged twenty days before date of semi-annual payment with the sum necessary for the service of the loan, interest, amortization, expenses and commissions.

ARTICLE 9.-The bank having received in deposit the funds shall have the right to take, without new authorization, from such funds on deposit, the amount of the coupons to be paid during the period of construction.

Article 10.-So as to insure the guarantee just mentioned for the bonds of the present contract, the Chinese Railway Company recognizes for these bonds a prior special lien on the railway from Lu-kou-chiao (Peking) to Hankow: line, stationary and rolling stock and receipts.

This special assignment is accepted in the name of the bondholders by the Société d'Etudes. In case of non-execution of the obligations assumed by the Chinese Railway Company in the present contract, the Société d'Etudes or the Belgian Company designated by it, shall have full power to enjoy as to said property all the rights and powers resulting from said special assignment.

ARTICLE 11.-The preceding provisions do not relieve the Imperial Chinese Government from personal responsibility relative to the present loan, as this responsibility is specified in Article 7.

Consequently, the Imperial Chinese Government agrees to make up the necessary amount for the service, in gold, of the loan, in case the sums accruing

from the net proceeds of the line from Lu-kou-chiao (Peking) to Hankow, and paid by the Société d'Etudes, entrusted with this service by the Chinese Railway Company, to the Société Générale Belge, or to the Company which it may designate, should not have reached, after their conversion in gold, and at least three months before the following semi-annual payment, the amount sufficient to cover said service.

In this case, and upon the request made it, the Imperial Chinese Government must hold at the disposal of the Société Générale Belge or of the Company designated by it 60 days before the next semi-annual payment, gold or securities deemed sufficient to realize the amount in gold, which the Company shall have notitfied the Government is necessary to complete the payment.

ARTICLE 12-Out of the sums coming from the payments made by the Société d'Etudes or the payments made by the Imperial Chinese Government, the Société Générale Belge or the Company designated by it, shall in due time place at the disposal of the Firms entrusted with the service of the loan, the necessary amounts, according to the needs as ascertained during the preceding half

year.

ARTICLE 13.-The Imperial Chinese Government will pay to the Firms entrusted with the service of the loan a commission of 14 per cent on the amount of paid coupons and a commission of 14 per cent on the amount of the bonds drawn or redeemed by anticipated reimbursement. The amount of this allowance shall be deducted every six months from the surplus of the available exploitation receipts, and, in case of insufficiency, it shall be immediately paid by the Imperial Chinese Government.

ARTICLE 14.-The Imperial Chinese Government binds itself by the present conventions to observe and cause to be observed the privilege stipulated in favor of the bonds in Article 9, and to maintain, free and exempt from all tax whatsoever, the bonds and coupons, as well as all transactions of whatsoever nature connected with the service of the loan.

ARTICLE 15.-Coupons which shall not have been presented for cashing within five years following their falling due, shall revert to the Imperial Chinese Government; thirty years shall be the limit for redeemed bonds.

On the death of any bondholder of the present loan, the bonds shall be transferred and shall belong to his heirs, according to the inheritance laws in force in the country of which the deceased bondholder was citizen.

Payments of coupons and the redemption of bonds shall be made in time of war, as in time of peace, to the bearers whether they be subjects of friendly or hostile States.

In case of loss, of theft or destruction of bonds of the present loan, the Chinese Government shall replace them, after having been furnished satisfactory proof of their loss or of the destruction of the title deeds and of the rights of the claimants.

ARTICLE 16.-The Imperial Chinese Government through its representatives in Europe shall immediately take the necessary steps and furnish the necessary documents for the official listing of the present loan in the Bourses of Brussels and Paris.

ARTICLE 17.-Out of the total amount of the present loan, representing as nominal capital a sum of 112,500,000 francs, the Société d'Etudes des Chemins de fer en Chine purchases outright (achète ferme) 39,000,000 francs of nominal capital, or 78,000 bonds of 500 francs, at 90%, for the total sum of 35 million 100,000 francs, delivery to date from the payment to the banks designated in the following article.

ARTICLE 18.-The Société d'Etudes des Chemins de fer en Chine shall deposit the amount of this purchase, as follows: 8,600,000 francs in the RussoChinese Bank at Shanghai, and the remainder in a bank designated by common accord by the Director General of the Chinese Railway Company and the Société d'Etudes and against receipt by the Russo-Chinese Bank in Paris of definitive bonds for 78,000 bonds bought outright (achetés ferme) and deposit in the same bank of the definitive bonds for 147,000 bonds forming the surplus of the loan.

The Russo-Chinese Bank and the Bank designated by common accord by the Chinese Railway Company and the Société d'Etudes shall credit the Chinese Railway Company with the sums deposited with them, it being understood that these depository establishments shall not be obliged to deliver these sums, except under the conditions and under the reservations indicated in undermentioned Article 20.

The depository banks shall use these sums to the best advantage of the Chinese Railway Company.

ARTICLE 19.—The Chinese Railway Company declares that it has resources amounting to thirteen million taels.

The construction of the railroad from Lu-kou-chiao (Peking) to Hankow being limited provisionally to the section from Lu-kou-chiao (Peking) to Paoting (145 kilometers) and to the Hankow-Sinyang section (247 kilometers) which must be constructed first; it is understood that the thirteen million taels above mentioned shall in the first place be applied to the construction and to putting in complete working order of the Lu-kou-chiao-Paoting section.

The construction of the entire line (not including the Peking-Paoting section) shall be done under the direction of the Société d'Etudes des Chemins de fer en Chine or its representatives, but for the account of the Chinese Railway Company.

The Société d'Etudes shall make the studies, plans, surveys, estimates for the whole line, direct the execution of all the work and order the materials, machinery and furniture necessary to insure the regular operation of the line. However, the Director General of the Chinese Railway Company reserves to himself the right to approve the building plans and contracts for supplies.

Except for supplies of materials and expenses of all kinds paid in Europe, the Chinese Railway Company must place at the disposal of the Société d'Etudes the necessary sums for settling all payments without exception necessitated in the carrying out of the work, as well as the payment of the staff under the orders of the Société d'Etudes and, in general, all expenses whatsoever.

Consequently the Société (d'Etudes) shall not be obliged to pay any expenses from its own funds.