of the managing directors of the respective lines, or, in their absence, of their duly authorized representatives, and will carry out all the wishes of the railway administration with regard to the plan and construction of the lines. In their general conduct they shall pay all due respect to the director-general and the managing directors. The terms of their respective agreements will be arranged by the director-general on his sole authority. "Whenever appointments are to be made or functions defined of the technical employees on the railway staff as well as in the case of their dismissal, the managing director, or in his absence his duly authorized representative, will act in consultation with the chief engineer concerned, and in case of disagreement the matter will be referred to the director-general, whose decision shall be final. "After completion of construction, and during the currency of this loan, the Imperial Chinese Government will continue to employ Europeans as chief engineers of the said railway lines, these appointments being made without reference to the Banks. "ARTICLE 18.-For the Hupeh-Hunan section of the Canton-Hankow Railway line, and the Hupeh section of the Szechuen-Hankow Railway line, respectively, (a) a company nominated by the Hongkong and Shanghai Banking Corporation and approved by the director-general and (b) the Deutsch-Asiatische Bank will act as agents of the railway administration during construction for the purchase of all materials, plant, and goods required to be imported from abroad. For all important purchases of such materials tenders shall be called for by the managing director concerned; in the case of all tenders, indents, and orders for the importation of goods and materials from abroad the said agents shall purchase the materials required on the terms most advantageous to the railways, and shall charge the original net cost of same plus a commission of five per cent (5%). It is understood that no orders for materials shall be executed or any expenditure incurred without due authorization of the managing director concerned. "In return for payment of commission as above stated the aforesaid company nominated by the Hongkong and Shanghai Banking Corporation and the Deutsch-Asiatische Bank as agents for the respective railway lines shall be prepared to superintend the purchase of all foreign materials required for their construction and equipment which shall be purchased in the open market at the lowest rate obtainable, it being understood that all such materials shall be of good and satisfactory quality, and that the railway administration shall have the right to reject, on arrival in China, materials which are not in accordance with the original order. At equal rates and qualities goods of British, French, and German manufacture shall be given the preference over other goods of foreign origin. The railway administration reserves the right, while paying the above stipulated commission to the said agents in respect to all purchases of foreign materials, to avail itself of the services of other agents in China or abroad should it see fit to do so. Original invoices and inspectors' certificates are to be submitted to the managing director concerned; all return commissions and rebates of every description shall be credited to the railways, and all purchases made by the agents on behalf of the railway shall be supported by manufacturers' original invoices and inspectors' certificates. No commission shall be paid to the agents except as above provided; but it is understood that the railway administration shall provide out of the railway funds for the remuneration of consulting engineers whenever their services are engaged. "With a view to the encouragement of Chinese industries preference will be given, at equal prices and qualities, over British, French, and German or other foreign goods to Chinese goods and materials manufactured in China, such cases being left to the decision, in consultation with the chief engineer, of an inspector appointed by the Imperial Chinese Government. No commission will be paid on purchases of such Chinese materials and goods. "It is understood and agreed that after the construction of the lines is completed the aforesaid company nominated by the Hongkong and Shanghai Banking Corporation and the Deutsch-Asiatische Bank will be given the preference for agency business for the respective lines, during the currency of the loan, for the supply of foreign materials which the railway administration may require on terms hereinafter mutually agreed upon. "ARTICLE 19.-Branch lines in connection with railway lines named in Article 2 of this agreement that may appear profitable or necessary later on shall be built by the Imperial Chinese Government with funds at its disposal from Chinese sources; but if foreign capital is required, preference will be given to the Banks. 66 ARTICLE 20.-After payment of interest and repayment of principal of this loan for any current year the railway administration will deposit with the Banks in Shanghai or Hankow any surplus of the net revenue of the railway lines for that year up to the amount required to pay the following year's installments of interest on the loan, the rate of interest on the deposit being arranged with the Banks from time to time, with due regard to the conditions of the market. "ARTICLE 21.-All expenses in connection with the flotation and issue of this loan, such as underwriting, commission and brokerage, telegraph charges, advertising, postage, printing of prospectus and bonds, stamp duty, and legal fees shall be borne by the Banks. "The Chinese officials acting in the matter of this loan do not receive any commission whatsoever. "ARTICLE 22.-The Deutsch-Asiatische Bank, the Hongkong and Shanghai Banking Corporation, and the Banque de l'Indo-Chine shall take the loan in equal shares and without responsibility for each other. "ARTICLE 23.-The Deutsch-Asiatische Bank, the Hongkong and Shanghai Banking Corporation, and the Banque de l'Indo-Chine may subject to all their obligations under the agreement, transfer or delegate all or any of their rights, powers, and discretions thereunder to any German, British, or French company, directors, or agents, with power of further transfer and subdelegation, such transfer, subtransfer, delegation, or subdelegation to be subject to the approval of the director-general. "ARTICLE 24.-This agreement is signed under the authority of an imperial edict dated the day of the fourth moon of the first year of the Emperor Hsuan T’ung, corresponding to the June, 1909, western calendar, which has been officially communicated to the ministers of Great Britain, France, and Germany in Peking by the Wai-wu Pu. ARTICLE 25.-Seven sets of this agreement are executed in English and Chinese, four sets to be retained by the Imperial Chinese Government and one set by each bank. In the event of any doubt arising regarding the interpretation of the contract, the English text shall rule. "Signed at Peking by the contracting parties this 19th day of the fourth moon of the first year of the Emperor Hsuan T'ung, corresponding to the 6th day of June, 1909, western calendar." With the support of the American Government, the American group claimed a right of participation in the loan for this purpose, basing its claim upon two notes which the Wai Wu Pu had addressed to the American Minister in 1903 and 1904, of which the translations (as printed in For. Rel. 1909, p. 175) are as follows: "The Chinese Foreign Office to Minister Conger. 66 "FOREIGN Office, "Peking, August 15, 1903. "We have the honor to acknowledge the receipt yesterday of your excellency's note, saying that you had read in a London newspaper a statement to the effect that two British companies had applied to the Chinese Government for a concession to build a railway from Hsin-yang, in Hunan, via Hsiang-yang in Hupeh to Ch'eng-tu, Szechuen; that the said paper also said that there were Chinese who desired to construct the road, and that in the future, if foreign capital should be borrowed, it was proposed to first consult with the aforesaid two companies; that your excellency had to state clearly that your countrymen had long ago asked for a concession to build through the region mentioned, and that you had talked with us about it in a personal interview and had said that if it should be desired to borrow money for this purpose offers ought first to be made to the Americans; that if it should be allowed foreigners to construct the road, the concession ought first to be offered to Americans; that if arrangements should be made with others which would interfere with the just rights of Americans, you must enter your protest against them. "Our board finds on examination that with respect to the building of the HankowSzechuen Railway an English company had applied in the XXV year of Kuanghsu for such a concession, which was not granted; afterwards, in the fourth moon of the present year, the British chargé, Mr. Townley, had several times requested that the concession be given to British companies, and at that time our board replied that it had originally been proposed that the Chinese should themselves construct this road; that if in the future it should appear that the capital was not sufficient or that foreign capital ought to be borrowed, since British and American companies had successively applied for concessions to build the road, when the time came application could be made to the British and American companies. In short, when companies of various nationalities apply to China for railway concessions, it must always remain with China to decide the matter. It is not possible to regard an application not granted as conferring any rights or as being proof that thereafter application must first be made to the persons concerned. 'As in duty bound, we send this reply for your excellency's information. We avail, etc. "I have the honor to acknowledge the receipt of your excellency's letter of recent date, as follows: "I have the honor to inform Your Imperial Highness that I am in receipt of a letter from Mr. A. W. Bash, agent of the China Investment and Construction Company, requesting me to forward to Your Imperial Highness the inclosed letter, in which he makes application for a concession to provide a loan for the construction of a railway line from Ch'eng-tu, Szechuen, to Chungking and Hankow, in case the viceroy of Szechuen should find himself unable to prosecute his reported plan to raise money from native sources for such a line. He begs that your board will place his application on file. I have much pleasure in complying with Mr. Bash's request, and so forward the application inclosed.' In regard to the above I have the honor to state that the viceroy of Szechuen is even now engaged in selling shares and accumulating capital from Chinese sources for the purpose of building the line from Hankow to the Province of Szechuen. It is not intended that foreign capital shall be used, but if in the future the native capital proves to be insufficient, or if a time comes when they wish to borrow funds from foreigners to fill in with, then will the matter be dealt with as proposed in the letter written by my board to your excellency in the sixth moon of last year (August 15, 1903), and companies composed of Englishmen and Americans will be consulted. As for the application of the China Investment and Construction Company, it can not be conveniently granted for the present. "It is my duty in the premises, therefore, to make this reply to your excellency, that you may be informed of the matter, and I trust that your excellency will issue proper instructions to the above-mentioned company. "I take, etc." Consult For. Rel., 1909, pp. 144-215, and 1910, pp. 269-291, in regard to the negotiations for the admission of the American group to equal participation with the other banks. The terms of cooperation among the banking groups of the four nationalities were settled by an agreement reached at a conference of their representatives at Paris, May 23, 1910, of which the text (together with the minutes of a meeting of their committee on the same date) is thus printed in For. Rel., 1910, p. 280: Inter-Bank Railway Agreement among American, British, French and German Banks, May 23, 1910. "Parties: The British and Chinese Corporation, Limited, Chinese Central Railways, Limited, representing the British group. The Deutsch-Asiatische Bank, representing the German group. The Banque de l'Indo-Chine, representing the French group. "1. The British, German, French, and American groups agree to enter into an agreement with the Chinese Government for a loan of £6,000,000 and any supplementary loans to be issued in connection therewith for the above railways on the basis of the two draft agreements approved by the parties hereto and initialed by them, being the draft original loan agreement, with accompanying despatch and a draft supplemental loan agreement. "2. This loan to be divided equally between the four groups, and to be issued simultaneously. "3. All orders for materials to be divided as far as possible equally between the four groups. 3a. The American group shall share equally in the commissions on the purchase of materials, plant, and goods allowed by the terms of article 18 of the original loan agreement. "4. In regard to the appointment of chief engineers and subengineers for the lines contemplated by the original loan agreement it is agreed that the chief engineer for the Hankow-Canton Railway is to be appointed by the British and Chinese Corporation, Limited; that the chief engineer for the Ichang-Hsiangyang-Kuangshui line and the IchangHanyang line, to the length of about 800 kilometers, is to be appointed by the German group, which is to provide for the appointment by the American group of a subengineer for a section of these lines to the length of about 200 kilometers. With regard to the proposed extension of the line from Ichang or Hsiangyang to Ch'eng-tu, which is estimated to be 1,600 kilometers in length, the chief engineer for the first 400 kilometers is to be appointed by the American group; the chief engineer for the next 600 kilometers is to be appointed by the British group, and the chief engineer for the remaining 600 kilometers is to be appointed by the French group. If the extension of the line above referred to should be less than 1,600 kilometers in length, then the above-mentioned lengths of 400, 600, and 600 kilometers shall abate proportionately. If the extension of the line above referred to should exceed in length 1,600 kilometers, then the appointment of chief engineers of the excess between 1.600 kilometers and 2,200 kilometers shall be apportioned equally between the American, British, and French groups. If such extension should exceed in length 2,200 kilometers, then the appointment of chief engineers of the surplus over 2,200 kilometers shall be divided as nearly as possible equally among the four groups. "5. Each of the groups to apply to their respective bourses for the internationalization of the above loans. "6. The stamp duties on the bonds to be pooled and divided equally between the four groups, but this is not to be treated as a precedent for future loans. All other expenses of issue to be borne by the respective groups. "7. The preliminary expenses incurred by the four groups prior to the signing of this agreement shall be shared by the four groups upon an equitable basis. " "For the British group: "For the German group: "For the French group: "For the American group: CARL MEYER. E. C. GRENFELL. 66 'FRENCH, BRITISH, GERMAN, AND AMERICAN GROUPS. 'Minutes of a meeting held at the Banque de l'Indo-Chine on 23d May, 1910, of the committee appointed at the meeting of the four groups held that day. "Present: Mr. F. Urbig, in the chair. Mr. M. Casenave. Mr. G. Jamieson. Mr. W. D. Straight. "The following resolutions were passed: "1. Preliminary expenses.-That to carry out and give effect to clause 7 of the agreement between the four groups drafted at the meeting of the groups held that day, the American group pay to the French, British, and German groups respectively the sum of £1,500, being 1 per 1,000 on the share of the loan allotted to the American group. "2. Purchasing arrangements. That the existing arrangements of article 18 of the original loan agreement be allowed to stand, provided that the two purchasing agents give to the French and American groups a letter in the following terms, and provided moreover that said purchasing agents shall be bound to report as far as possible to any group requesting such information regarding the purchase of materials under the instructions of the director-general in accordance with the provisions of the original loan agreement with accompanying despatch and the supplemental loan agreement: "We beg to inform you that we have been appointed purchasing agents for HankowCanton, Hankow-Szechuen railways, in accordance with article 18 of the Hukuang loan agreement initialed on the 6th June, 1909. "In view of the terms of said loan agreement with accompanying despatch and the agreement supplementary thereto providing for the admission to participation of the American group and securing equal consideration for British, German, French, and American materials and equal facilities for the receipt of tenders in the markets of the four countries, we beg to state that we will take all steps necessary to assure the above-mentioned consideration for French-American materials and make all proper provision for the receipt on an absolute basis of equality of tenders from British, German, French, and American manufacturers.' "3. Commission on materials.-As regards commission on materials it was resolved that one-fifth be retained by purchasing agents to cover expenses; that the balance be divisible; "On Hankow-Canton: One-fourth each to the British and Chinese Corporation, Limited, the French group, the German group, and the American group. "On Hankow-Szechuen: Two-fourths to Chinese Central Railways, Limited, onefourth to the German group, and one-fourth to the American group. "4. Rotation of purchasing agents.-It was also resolved that upon any new loan being negotiated for the purposes of the extension referred to in article 4 of the agreement of the 23d May, 1910, the group which is entitled to the appointment of chief engineer shall be entitled to nominate the purchasing agent. "(Signed) F. URBIG. G. JAMIESON. M. CASENAVE. W. D. STRAIGHT." In connection with the loan agreement of May 20, 1911, consult the following correspondence supplementary thereto : Exchange of Communications between Ministry and Banks, March 1 and 3, 1913. The Minister of Communications to the representatives of the Deutsch-Asiatische Bank, the Hongkong and Shanghai Banking Corporation, the Banque de l'Indo-Chine and the American group. "Gentlemen: [Official translation, as printed in Wang, p. 585.] "Peking, March 1, 1913. "I duly received the letter of the representatives, dated the 11th of July last, in which were submitted four points for discussion. I beg to state that frequent discussions have already taken place and that more than half a year has elapsed since our joint discussion of the 28th of September. A solution has not yet been arrived at. Construction work is in abeyance for lack of funds. Both parties have agreed that no further delay should occur. We have mutually agreed that this ministry shall address a dispatch to you setting forth a method of procedure and I would request that you will assent thereto and favor us with a reply so that funds to meet requirements may be speedily made available. "The method of procedure decided upon, under four headings, is as follows: "1. It has already been arranged that the Ssu-ch'uan Commercial Railway shall be taken over and operated by the Government. The Commercial Railway line of the CantonHankow Railway in Hunan has already been taken over by Director General Huang in Hunan. The survey of the Canton-Hankow Railway in Hupei is nearing completion and arrangements have been made for commencing work at the Wuchang end. The German engineer-in-chief and the American engineer-in-chief have already been appointed and before many days will proceed to make the survey of their respective sections. The above may all be considered as a simultaneous commencement of work on the four railway lines. "2. According to the terms of Article 14 of the loan agreement one-half of the proceeds of the loan funds transferred to China shall be deposited with the Chiao-Tung Bank or with the Ta-Ching Bank. It is now agreed that the funds transferred to China shall be temporarily deposited with the Deutsch-Asiatische Bank, the Hongkong and Shanghai Banking Corporation, the Banque de l'Indo-Chine and the International Banking Corporation, designated by the American group, in readiness to be drawn upon from time to time as required for the work until such time as either the Chiao-Tung Bank or the Ta-Ching Bank has been reorganized as the State Bank of China and has established its credit, and business relations with foreign banks have been mutually resumed. When such time comes the Government may consult with the groups as to a reversion to the method of procedure laid down in Article 14 of the loan agreement by which the deposits_of_the proceeds of the loan funds shall be shared with the Chiao-Tung Bank or the State Bank of China as agents. "3. For the purpose of now removing the bondholders' apprehensions that the amount of the likin specified in the agreement as security may have been decreased, the property and materials of the railway are hereby specially given as a provisional guarantee that the likin is unimpaired. Excepting this all other conditions should be carried out in accordance with the loan agreement. In the future whenever the Chinese Government is able to demonstrate that the likin is not only unimpaired but assignable by the Central Government, or to find some other suitable security then the said guarantee of the security shall be immediately cancelled and annulled and it shall be unnecessary to substitute this with any other guarantee. In the event of the Chinese Government drawing up new regulations consequent upon the abolition of likin the same shall be carried out in accordance with Article 9 of the loan agreement. "4. By Article 14 of the loan agreement auditors are to be engaged by the banks for the inspection of the accounts. Their duty, as a matter of course, will be to investigate, to consult and make enquiries. They should therefore be in constant attendance at the railway accounts office so that they may be closely connected and acquainted with the affairs relative to their office and they shall continue to function during the time of construction and so long afterwards as the mortgage of the railway, referred to in heading No. 3 of this letter, shall remain in force. In case of doubt as to the employment of loan funds or of any railway revenues, then the auditors are empowered to suspend payment of requisitions until satisfactory explanations are received by them from the managing director and/or the director general. It has already been decided that railway accounts shall be kept in Chinese and English in accordance with modern methods. China, actuated by the desire to have accounts kept so that they shall be clear for auditing, will herself forthwith engage experienced foreign accountants whose executive power and appointment to the various railway sections shall be entirely and exclusively controlled by the director general. The director general shall have the sole power of engaging or dismissing the accountants. These |