the friendly relations which have long existed between the Contracting Parties. 5. No further loan shall be charged upon the security named above, except through the Corporation, until this loan is redeemed, and the Tsung-li Yamên will hand to the British Minister in Peking a written undertaking on behalf of the Imperial Government of China that the railway lines named in this Agreement shall never be alienated or parted with.

6. During the currency of this loan the Chief Engineer of the railways shall be a British subject. The principal members of the railway staff shall be capable and experienced Europeans, who shall be, as at present, appointed by the Administrator-General of the Railways, and may be, in the event of their misconduct or incompetency, dismissed after consultation with the Chief Engineer.

If there are Chinese with sufficient engineering or traffic experience they may be appointed as well as Europeans.

Should it be necessary to appoint a new Chief Engineer, such appointment shall be made in consultation with the Corporation.

In addition to the above, a capable and efficient European Railway Accountant shall be appointed, with full powers to organize and direct the keeping of the railway accounts, and to act with the Administrator-General and the Chief Engineer of the railway in the supervision of receipts and expenditure.

7. The railway lines named in this Agreement being Imperial Chinese Government lines, in the event of war or famine, Chinese Government troops and grain may be transported over the lines free.

8. All receipts and earnings of the lines herein specified shall be paid into the credit of the Railway Administration with the Hong Kong and Shanghae Banking Corporation, Tien-tsin, together with 50,000 taels annually, payable under the Board of Revenue's arrangement approved by the Throne, by each of the Provinces of Shansi, Shensi, Honan, and Anhui, for railway purposes for ten years.

All expenses of working and maintaining the lines will be paid from their receipts and earnings, the remainder of which, together with the provincial funds above named, shall then be charged with the service of this loan. Payments of interest and repayments of principal shall be made in equal monthly instalments, and in accordance with amounts and dates of a yearly Schedule, which will be furnished to the Administrator-General by the Bank. These payments shall be made by the Administrator-General to the Hong Kong and Shanghae Banking Corporation, Tien-tsin, in Kungp'ing sycee sufficient to provide the sterling amount due to the bondholders in terms of the prospectus of the loan, the rate of exchange for these payments being fixed by that Bank as each such payment becomes due. In reimbursement of expenses incurred in connection with the distribution of the service to the bondholders of the principal and interest of the loan, the Hong Kong and Shanghae Banking Corporation, Tien-tsin, shall receive from the Railway Administration a commission of 4 per cent. on the annual loan service, which will be included in the yearly Schedule for the same.

9. The term of the loan shall be forty-five years, and, subject to the modification mentioned hereinafter, repayment of principal shall be made, so far as

regards the bondholders, in forty equal annual instalments, commencing with the sixth year.

10. Interest on the loan shall be charged at the rate of 5 per cent. per annum on the nominal principal, and shall be calculated on the balance of such principal at any time outstanding, payments of interest being made by the Administrator-General in accordance with the amounts and dates specified in the yearly Schedule to be provided.

11. The loan will be redeemed by annual drawings in London as provided for in the prospectus. Besides the drawings as provided for, the AdministratorGeneral may, on giving three months' notice to the Corporation, call for extra drawings to be held, for any amount. Bonds so drawn to be redeemed by the Railway Administration at 20 per cent. premium on their par value. Any such extra drawings must take place on the date of the ordinary drawing provided by the prospectus.

In the event of such extra drawings taking place, subsequent payments of interest will be adjusted in the yearly Schedule to be provided, but repayments of principal shall continue unaltered in terms of clause 9 of this Agreement until the loan is redeemed.

The Imperial Government of China hereby engages that this loan shall not be redeemed or converted otherwise than as herein provided.

12. The price agreed upon for this loan is 90 per cent. net of the nominal principal, but should an unfavourable state of the market prevail at the time of issuing the prospectus, the Corporation is hereby authorized to reduce the price of the loan, at its own discretion, to not less than 88 per cent. net to the Railway Administration.

13. The Corporation are hereby authorized to issue to subscribers to the loan bonds for the total amount of the loan in pounds sterling, in such form and for such amounts as shall appear desirable to the Corporation, and the Minister for China in London will seal all such bonds with his official seal, as evidence that the Imperial Government of China is bound thereby. Each such bond shall bear the following clause:—

"The Imperial Government of China, pursuant to an Imperial Edict, dated unconditionally guarantees and declares itself responsible for the payment of the principal moneys and interest hereby secured, and in faith thereof it has specially authorized the Chinese Minister in London to seal this bond with his official seal."

14. All bonds and coupons and payments made and received in connection with this loan shall be exempt from Chinese taxes and imposts for ever. 15. All details necessary for the prospectus and connected with the service. to the bondholders of the interest and repayment of principal of this loan, not herein explicitly provided for, shall be left to the arrangement of the Corporation, who are hereby authorized to issue a prospectus of the loan as soon as possible after the signing of this Agreement.

The Tsung-li Yamên will instruct the Chinese Minister in London to cooperate with the Corporation in any matters requiring conjoint action.

16. The loan shall be issued to the public as soon as possible after the

signing of this Agreement, and shall date from the first day of the month of its issue. Payment of the entire proceeds will be made in London to the order of the Administrator-General not later than the 31st day of March, 1899; of the above proceeds, the Corporation will advance to the order of the AdministratorGeneral in London, on or before the 31st day of October next, the sum of 250,000l.; this advance will bear interest at the rate of 51⁄2 per cent. per annum until such time as the first instalment of the loan proceeds shall be available, when it shall be deducted from those proceeds by the Corporation.

17. In the event of an unfavourable state of the market rendering the issue of this loan, and the payment of its proceeds to the Railway Administration impossible on the terms named without loss to the Corporation, the Corporation shall be granted such extension of time for the performance of its contract with the Administrator-General as the circumstances demand, any advances or instalments of proceeds already made to the Railway Administration being in that case treated as regards payment of interest, repayment of principal, security, and Imperial Chinese Government guarantee in terms of this present Agreement, and as forming part of the principal amount of this loan. Similar extension of time for the issue of this loan and payment of its proceeds shall also be granted in the event of the Deutsch-Asiatische Bank, Berlin, objecting to its issue before the month of April next, in accordance with the terms of clause 9 of the Agreement for the Chinese Imperial Government 41⁄2 per Cent. Sterling Loan of 1898. ||

18.-Immediately after the signature of this Agreement, and before the issue of the prospectus of the loan to the public, the Administrator-General will memorialize the Throne and obtain an Imperial Edict confirming and sanctioning the provisions of this Agreement, the Imperial Edict so received. being then communicated officially and without delay by the Tsung-li Yamên to the British Minister in Peking.

19.—The Corporation may, subject to all its obligations, transfer or delegate all or any of its rights, powers, and discretions, to any British Company, Directors, or Agents, in consultation with the Administrator-General, with or without power of further transfer and sub-delegation.

20. This Agreement is executed in quadruplicate in English and Chinese, one copy to be retained by the Administrator-General, one by the Tsung-li Yamén, one by the British Minister in Peking, and one by the Corporation. Should any doubt arise as to the interpretation of the contract, the English text shall be accepted as the standard.

SIGNED AT PEKING by the Contracting parties this twenty fifth day of the eighth month of the twenty fourth year of the Emperor Kuang-hsu, being the tenth day of October eighteen hundred and ninety eight Western Calendar. For the HONG KONG AND SHANGHAE BANKING CORPORATION

(sgd.) E. G. HILLIER,

Agent,

Attorney for the British and
Chinese Corporation Limited.

(Chinese Signatures.)

Il No. 1898/3, ante.

The text of this preliminary agreement is reprinted in Rockhill, p. 317, from China, 1899, No. 2, p. 4, as follows:

Preliminary Loan Agreement for Peking-Newchwang Railway, June 7, 1898. "This is a preliminary Agreement made between His Excellency Hu, Governor of Peking and Administrator-General of the Imperial Railways of North China within and without the Great Wall, hereinafter called the Administrator-General, of the one part; and the Hong Kong and Shanghae Banking Corporation representing a British Syndicate hereinafter called the Syndicate, of the other part.

"1.-The Syndicate is hereby authorized by the Administrator-General to make arrangements to float and issue, on behalf of the Railway administration on the best terms obtainable on the market, a sterling loan for the equivalent of about (16,000,000 taels), for the construction of a railway-line from Chung-hou-sou to Hsin-ming-ting, and a branch line to Ying-tzu, and for the redemption of existing loans to the Tien-tsin-Shan-hai-kuan and Tien-tsin-Lu-kou-chiao lines.

"2.-The security for the loan shall be the permanent way, rolling-stock, and entire property, together with the freight and earnings of the existing lines between Peking, Tientsin, Tang-ku, and Chung-hou-sou, and also of the proposed new lines when constructed, in