Bureau and the Syndicate shall offer a reasonable price for it, but no compulsion shall be used.

17. Whenever it may be necessary for any mine to make roads, build bridges, open or deepen rivers or canals, or construct branch railways to connect with main lines or with water navigation to facilitate transport of Shansi coal, iron, and all other mineral products from the province, the Syndicate on reporting to the Governor of Shansi is authorized to proceed with the works, using its own capital, without asking for Government funds. Regulations for branch railways are to be made in due time. With reference to the Chengting to Taiyuan Railway, for the construction of which the Bureau has borrowed capital from others, the Peking Syndicate, to avoid disputes, shall not construct any railway within 100 li on each side of it. Private land required for the works authorized as above shall be leased or bought according to the Rules already in force with other public Companies. No encroachment of private property shall be allowed, and the local authorities must be applied to for protection.

18. At the end of every year a printed account of profit and loss shall be rendered by each mine to the Bureau, and each mine shall appoint one Chinese and one foreign auditor to examine the accounts and certify that they are correct; and a general account of profit and loss for all the mines shall be jointly prepared and submitted to the Governor, who will send copies to the Tsung-li Yamên and Board of Revenue for audit. Payments due to the Government shall be reported at same time.

19. These mines being under the sovereignty of China, should China ever be at war with another country, the Syndicate will obey the orders of the Chinese Government prohibiting any aid to the enemy. 20. These Regulations shall be made out both in Chinese and foreign text; each party to have a copy for reference.

Signed in Peking on this 21st day of May, 1898, being the second day of the fourth month of the twenty-fourth year of the Emperor Kuang Hsu.

Seals of Mr. A. Luzzatti, General Agent of the Peking Syndicate (Limited), and of the Shansi Bureau of Trade.

No. 41.

RUSSIA.

PRELIMINARY AGREEMENT AND CONTRACTS CONCERNING THE CHENGTING-TAI-YUAN (CHENG-TAI) RAILWAY.

1898-1903.

(1) Draft of AGREEMENT BETWEEN FANG, SUPERINTENDENT OF THE LIU-LIN-TAIYUAN RAILWAY Co. (UNDERSTOOD TO BE ACTING UNDER AUTHORITY FROM THE GOVERNOR OF SHANSI) AND POKOTILOW, DIRECTOR OF THE RUSSO-CHINESE BANK, FOR THE PROVISION OF A LOAN TO CONSTRUCT A RAILWAY FROM LIU-LIN (I. E., CHENGTING, A POINT ON THE PEKING-HANKOW LINE TO THE SOUTH OF THE HU-TO RIVER) TO TAI-YUAN-FU IN SHANSI.

The line is to run from Chengting to the coal mines on the Wei-shui river to the north of Pingting, and thence to Taiyuan. The costincluding "official profits" (kuan-li)—is estimated at Tls. 6,800,000. As it is impossible to raise this amount in China, Fang agrees to accept a temporary advance from the Russo-Chinese Bank on the following terms:

1. A Company will be formed to construct the railway, and the Company will borrow Tls. 6,800,000 necessary from the Bank. Interest 6 per cent. from the date of advance.

2. The exact amount required will be determined after the completion of the surveys and estimates.

Until the railway is opened to traffic the interest will accrue, and be added to the principal of the loan. Should the traffic receipts during the two years following the opening be insufficient to pay the interest the deficiency will also be added to the loan capital. At the close of these two years, all the moneys owing to the bank by the Company on principal and interest must be reckoned up and interest paid on the full amount at 6 per cent. per annum. All surplus profits, excluding "official profits” (kuan-li) made within five years from the opening of the railway to be deposited in the Bank, the amount to go to the redemption of the loan at the end of the five years. The Bank to pay 4 per cent. on the amounts so deposited.

Dating from the sixth year after the opening of the line the Company agree to pay off the interest and principal due to the Bank by

quarterly instalments, extending over 25 years: such instalments to be paid in gold at current rates.

3. The Company may at will redeem the loan before the limit of the time specified.

The Company may issue share certificates to the amount of the loan, which are to be deposited with the Bank as security. Within the 25 years' limit certificates to the amounts redeemed from year to year will be handed over to the Company by the Bank. If, before the loan is redeemed, the Chinese public consider these shares a good investment, the Company may purchase them from the Bank and issue them at a premium of 20 per cent.

Should the Company redeem the debt due to the Bank in either of the two ways stated above, the Bank will have no further concern with the railway.

4. The Bank will decide in consultation with the Company all questions of route gauge, position of stations, amount of rolling stock, etc. All the construction and works will be executed under the supervision of the Company.

The Bank engages to use local materials and labour as far as possible, and in any case to spend the greater part of the loan on the spot. As little material as possible is to be procured from abroad, but whatever is thus obtained must come from Russian or French territory. All such materials are to be purchased by the Bank at the most reasonable prices, and questions as to the reasonableness of the prices are to be settled by reference by the Company to the Chinese Ministers in Russia and France.

or

5. During the whole 30 years while the loan is unredeemed, the high authorities of Shansi shall, at the request of the Company, interdict the construction of another railway or other mechanical means of transport between Liu-lin and Taiyuan-fu, as such would be detrimental to the interests of this railway.

6. The Company will see to the acquisition of the land required for the railway in accordance with the provisions of Chinese law. The regulations for the purchase of the land will be drawn up by the Company and approved by the Governor of Shansi who will be requested to instruct the local authorities to surrender or let whatever Government land is required for the railway line. As to private ground, graves, bridges, rivers, and roads, the regulations of the Tientsin railways will be followed, and reasonable compensation will be awarded. The local officials are to lend every assistance and to check disorder. In other matters the established precedents ruling in the railways already opened to traffic in Chihli are to be followed.

The price of the ground will be arranged by the Company with the owner, and the money handed over in the presence of a representative at the Bank specially appointed for that purpose. This will prevent irregularities.

The Bank will prepare detailed plans of the railway and send them. to the Company, and the Company are given six months from the date of receipt of the plans within which to secure the land required for the track.

7. The Governor of Shansi will be moved to exempt from likin charges all railway material. Import and transit dues paid to the Imperial Maritime Customs are not included in this exemption.

8. The administration of the railway will rest with the Company. Mr. Fang will procure the assistance he needs, and from the date of the approval of this agreement Tls 10,000 a year will be advanced to him to cover the salaries of himself and assistants.

Before the opening of the railway and traffic these salaries will be advanced by the Bank and the amounts will be added to the loan accounts. After the opening they will be paid out of receipts by the Company. If there is a surplus after the payment of all expenses out of the receipts, it will rest with the Company to decide whether the remuneration above mentioned shall be increased. The Foreign Agent of the Bank will be present at all meetings of the Managing Officers, and will exercise supervision over all matters of accounts, machinery, etc.

9. The Foreign Agent will be specially appointed by the Bank after the completion of the railway to inspect the accounts, receipts, and expenditure. The accounts will be kept after foreign methods. He will also inspect the permanent way, machinery, stations, etc., and see that they are kept in good working order, and free from dilapidations. He will have foreign assistants, but their number will be kept as low as possible. The salaries of the Agent and his staff, which are not to exceed 100,000 francs or say Tls 30,000 a year will be paid by the Company. With these exceptions the personnel will be Chinese. As a temporary arrangement, however, China not possessing capable machinists, foreign artificers will be engaged by the Bank to work the machinery, but as soon as Chinese are available for this purpose the foreigners will be sent home. It is fully expected that Chinese will be employed as machinists before many years are over, and to attain this end the Superintendent is at liberty to establish engineering and mining schools near at hand, and to engage foreign instructors to teach 10 to 20 selected Chinese youths of capacity who may also be sent abroad to complete their knowledge.

The Board will assist the Company as far as possible in its efforts to dispense with foreign assistance and to secure capable Chinese machinists without delay.

10. After the completion of the railway the yearly surplus, if any, left after payment of working expenses and "official profits," is to be dealt with as follows:

5-10ths to the Company. Should this 5-10ths amount to 30,000 taels or over, the Superintendent's salary will be paid out of it; if the

5-10ths do not amount to Tls. 30,000 the salary will form part of the working expenses.

2-10ths to the State.

1-10th to the Trade Bureau to be used for public purposes, and

2-10ths to the Bank-this payment to cease at the end of 30 years from the opening of the line. Should the Company be able to redeem the loan before this limit of time as provided for under Article 3, the Bank's 2-10ths will cease with such redemption.

11. The Bank will first undertake the construction of the first section to the coal mines of Ping-ting; this to be completed within 3 years from the acquisition of the ground required, according to the plans. This section finished, the Bank engages to begin work on the 2nd section from the coal mines to Taiyuan Fu within two years. If it fails to do so the Company is free to discharge the Bank from the contract and hand the work over to others to undertake. The Bank, in this case, is to hand over the surveys, estimates, and other documents relating to the 2nd section to the Company without payment therefor and without objection to the Company's action.

12. In case of default in the payment of principal and interest, the administration of the railway will pass temporarily into the hands of the Bank, but the Company will continue its supervision. The Superintendent, etc., will continue to meet and consult as before and the salaries will continue to be advanced in the manner stated in Article 8. The Bank will not under these circumstances be considered as entering into possession of the railway; it will simply administer on behalf of the Company until the loan and interest are paid in full, when the administration will be returned to the Company.

13. Superintendent Fang will move the local authorities to permit the Company, through the Trade Bureau, to select a few coal and iron mines in the country adjoining the railways; places granted to other persons being excluded from the selection.

Within a year from the approval of this agreement the Bank will indicate a few coal and iron mines which it will be able to work as soon as the necessary authorisation is received from the Governor of Shansi through the Trade Bureau. But the number of mines thus selected must not exceed four or five.

Superintendent Fang will also be authorised to choose a convenient site for glass works, the funds for the establishment of which will be provided by the Bank.

The financial terms relating to the mines and glass works will follow the same lines as those relating to the railway; 2-10ths of the surplus after payment of working expenses and "official profits" will go to the Bank in payment of principal and interest. In case of default the management of all the mines and the glassworks will revert to the Bank who will retain it until the loans and interest are redeemed.