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and German chief engineers are subordinate to the managing director on their respective sections. There is no provision for the appointment of foreign accountants, but the agreement does properly give the loan syndicate the right to examine the accounts. It permits the purchase of materials and equipment on a better basis for China, which succeeded in obtaining these more favorable conditions by taking advantage of the competition for the securing of the loan. One particular feature of this loan is that the railway itself is not mortgaged as collateral security. Another important point is that, in case of default, the collection of the mortgaged revenue is to be administered by the Chinese Maritime Customs.

PAULING & CO. AGREEMENT.

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The last step in the improvement of Chinese railway loan terms was achieved by the signing of the Shasi-Shingyifu agreement, which has become generally known as the Pauling type of agreement. The first section of Appendix 7 (see p. 312) is a copy of the final agreement, and the second section is a copy of a supplemental agreement.

This type of agreement is considered as extending to China the most favorable terms of any that has yet been signed. Some of the important features are as follows: The work is to be constructed at cost plus a percentage for the services and profit of the contracting firm. The decision as to the location of the line, the preparation of plans and specifications, and the supervision of the work of construction are to be under a Chinese managing director appointed by the Chinese Government, who during the period of construction is to be a “Chinese engineer of standing. The latter is to cooperate with a firm of foreign consulting engineers whose representative in China is to be a British engineer, who during the construction period is to be called engineer-in-chief of construction. A firm of foreign accountants is to keep the accounts of the loan, subject to inspection by accountants representing the Chinese managing director. Specifications and estimates of cost must be approved by the Chinese authorities before the work of construction is proceeded with. The managing director calls for and accepts tenders subject to the approval of the engineer-in-chief of construction. The agreement provides for the use of Chinese standards for roadway, track, bridges, and equipment, when such standards may be adopted by the Chinese Government Railways, and also provides for the use of the unified system of Chinese Railway accounts.

The loans are secured on the railway and properties in connection therewith and are also to be guaranteed by the Chinese Government. After completion the property is to continue under the direction of a Chinese managing director and the engineer-in-chief shall be a British subject.

The agreements so far entered into by the Siems-Carey Railway & Canal Co. (American) conform, in general, to the above type of agreement.

The types of agreements already mentioned are intended to show the general classification and the step-by-step development of this situation in China. In addition, the Hukuang agreement will now be referred to on account of the probability of further loans being undertaken in this connection, particularly for the completion of the

Canton-Hankow Railway. The Ssupingkai-Chengchiatun agrecment will also be referred to as illustrating the latest type of Japanese agreement for the building of additional lines in Manchuria. It would have been preferable to show a copy of the last Kirin-Changchun Railway loan agreement, but the writer was unable to obtain a translation of this agreement that he considered sufliciently reliable to print.

HUKUANG RAILWAYS LOAN.

Appendix 8 (see p. 322) contains a copy of the original English text of the Hukuang Railways loan agreement, as well as copies of the several memoranda regarding specifications and the purchase of materials and equipment, which has occasioned considerable controversy between the British and American interests, particularly as to whether British or American practice should prevail for the locomotives purchased. In addition to the revenues pledged for the protection of this loan, it has been agreed that the property and materials of the railways shall be specially given as a provisional guaranty that the likin will be maintained unimpaired.

The agreement divides the construction of these railways as follows: To the British the Yichanghsien section or the Hankow end of the Canton-Hankow Railway, which is much the most important section; to the Germans the Kwangshui-Ichang section, or the Hankow end of the Szechwan-Hankow Railway; to the Americans the IchangKweichowfu section of the Szechwan-Hankow line; to the French the section of the latter railway from Kweichowfu to Chengtu. By agreement all the available British and American funds have been used in completing the construction of the Yichanghsien section of the Canton-Hankow Railway to Changsha.

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SSUPINGKAI-CHENGCHIATUN RAILWAY AGREEMENT.

Appendix 9 is a translation of the Ssupingkai-Chengchiatun agreement, taken from the Far Eastern Review for May, 1917. This is a translation from the Chinese text. It is stated on good authority to be an excellent translation.

It is felt that a short study of the agreements mentioned will afford convincing proof of the need of action (such as is later suggested) to remove the restrictions that impede the progress of China in general and its railways in particular.

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IV. CHINESE GOVERNMENT RAILWAYS.

INTRODUCTION.

The table beginning on page 42 shows the existing railways that constitute the system known as the Chinese Government Railways, with a total of 3,900 miles of line. All these railways are under the control of the Ministry of Communications except the last two, which are only nominally so; the actual control of these two branch lines is now to a great extent in the hands of the Japanese, and they practically come under the administration of the South Manchuria Railway Co., which will be referred to later in connection with the J Japanese activities in Manchuria.

From the standpoint of markets for American railway materials and equipment, the Chinese Government Railways and the new lines, extensions, and additions that will be built in the future under the direction of the Ministry of Communications constitute a more important field than any other in the Far East, and accordingly they will be discussed at greater length than any of the o! e' railways covered by this report. Upon reference to the railway map facing page 42, it will be noticed that the lines included in the first subtotal (in the table on p. 53) radiate from Peking and Tientsin, connection being made at Nanking by ferry across the Yangtze River. It is further apparent that, by the use of a ferry, the Canton-Hankow line can be connected with the other parts of the system. There is one small line about 20 miles long—the Changchow-Amoy Railway—that has no connection with this system of railways; the writer was unable to obtain reliable data regarding this line.

The investment assets, construction costs, operating results, interest charges, and surplus earnings of these railways will first be considered; then the status of the Ministry of Communications as regards its direction of the financing, construction, maintenance, and operation of these railways will be taken up; and, finally, a brief account will be given of the special features of each line. These points, taken together, will form the basis of the suggestions and recommendations beginning on page 243 of this report.

At this point it seems proper to state that, notwithstanding the restrictions of the railway loan agreements, the Chinese Government, through the medium of the Ministry of Communications, has made steady and rather surprising progress in securing control and unifying the operation of these railways. This has particularly been the case since the middle of the year 1911, and the conclusion seems warranted that this control will be gradually extended as the railway loans are amortized in the course of time. This situation should be given thorough study by American manufacturers of railway materials and equipment in their efforts to secure the large amount of business that will be awarded in the building of the new lines and the extensions and additions to the existing lines.

INVESTMENT ASSETS.

The first of the following tables shows the total investment assets of the Chinese Government Railways, with the exception of the two branch lines (already mentioned) in Manchuria and the ChangchowAmoy line in Fukien. The investment assets, according to the Chinese classification on the general balance sheet, include cost of road and equipment, cost of other physical property, and cost of nonphysical assets.

INVESTMENT ASSETS AND INTEREST CHARGES OF THE CHINESE GOVERNMENT

RAILWAYS.

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Mer.
Mex.

Mex. Mer. dollars. dollars. dollars. dollars. 100,779

773,033 8,184, 449 96,067

1,380, 443 147, 202 4,770, 267

385, 369 123,217 2,320, 917 | 10,770,381 156,021 653, 741

174, 396
76, 614

380,000
116, 137
697, 464

22,953
150, 170 1,318,358

491, 444
119, 704
643, 369

261,076
123, 253 11,557, 149 21, 409, 440
79,051

261,076

51, 775
187, 735 701, 747
108, 750

787,009

388,138 124,007 | 12, 258, 896 21, 849,353 1,048, 085

1,048,085 20, 801, 268

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21,307,376 382, 207, 469

4,743, 045 16, 708, 406

3,262, 491 406, 741,411

1915 1915 1915

3,101

60
89
30

Total.....

3,280

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Investment assets:
Cost of road and

equipment
Cost of other assets...

Mex. Mer.

Мех. Mex. Mex. Mer. Mer, dollars. dollars. dollars. dollars. dollars. dollars. dollars. 59, 942, 844 25,557, 601 99,803, 208 97, 807, 196 30, 484, 417 $21,307,376 334,902,642

2, 491, 795

3, 108, 690 60,467,577 25,649, 763 99,803, 208 100, 298, 991 30, 484, 417 21,307, 376 338,011,332

524, 733

92, 162

u

Total....
Working assets:

Cash..
Stores.
Other working assets.

3,930, 186 76, 256
4,431,576 1,268, 825
1,300,630 1,163, 351
9,662,392 2,508, 432

2, 357, 966
1,830, 534

3,953, 081 911, 481 1,565, 937 12,794, 907 4, 437, 467 640, 444 493, 756 13, 102, 602

Total.

856, 036 5,044,536

720, 880 49,752 82, 895 4, 173, 544 9, 111, 428 1,601, 677 2, 142,588 30,071,053

in 3 war ilway uld be mate

aried debit items: emporary advances

to Government.. Other deferred debits

nt of

d the

Total....

1,558, 251

188,172 2, 149, 038 1,437,079

1,746, 423 1, 147, 884 10, 112, 914 1,976,628 1,958, 914 18,782,517 3,707, 349 1,437, 079 1, 147, 884 10,112,914 2,164,800 1,958, 914 20,528, 940 5,793,878

7, 135, 611

1,031, 339 13,960, 828 73,837,318 29,595, 274 111,789, 506 119,523, 333 41,386,505 26, 440, 217 402, 572, 153

Accumulated deficit...

Grand total.

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188, 172 259,647 447,819

Capitalliabilities:

Men.
Mex.
Mer.
Mer.
Mer. Mer

Mer. Permanent Govern- dollars. dollars. dollars. dollars. dollars. dollars. dollars.

mentinvestments.. 23,903,393 23,562, 237 3,589, 350 40,369,381 3,672,671 4,989, 707 100,086, 739 Other capital liabilities..... 19,576,616 95, 249, 974 58, 450, 583 29,955,514 18, 405, 015 221, 637,7

702 Total...

43, 480,009 23,562, 237 98,839, 324 98,819, 964 33,628, 185 23, 394, 722 321, 724, 441 Working liabilities: Loans..

549, 734

1,328, 031 1,400,000 Other liabilities.

3, 465,937
433, 220
1,675, 481

603, 820
1,512, 650

105,031 4,589, 849 Total.. 982,954 1,675, 481

1,931, 851
2,912, 650

105, 031 8,055, 786 Deferred credit items: Temporary advances from Government..

415

8,615, 697 Other deferred credits

5,519, 087 2,006,728 17,862, 927 6,731, 613

921,324 2,372, 631 8, 283, 261 1, 427, 491 933, 736 20, 670, 059 Total........

8, 423, 028

921,321 11,018,331 8, 283, 261 6,946,578 2,940, 464 38,532, 986 Accumulated surplus: Additions to prop

erty through surplus....

11, 166, 657 1,998, 455 Funded debt retired

7,239, 678

20, 404, 790 through surplus

9,784,670 Free sur plus.

363, 923

10, 148, 593 1,437,777 2, 267, 780

3,705, 557 Total.. 20,951,327 3,436, 232

9,507, 458 363, 923

34, 258, 940 Grand total..

73, 837, 318 29, 595, 274 111, 789, 506 119, 523,333 41,386,505 26, 440, 217 402, 572, 153

1,691, 4

AVERAGE CONSTRUCTION COST PER MILE OF LINE, DISTRIBUTED TO ACCOUNTS,

OF SIX TYPICAL CHINESE GOVERNMENT RAILWAYS.

Items.

All Chinese Gov.

ernment Rail

Shanghai- ways.
Peking- Peking- Tientsin- Peking- Shanghai- Hang-
Mukden. Kalgan. Pukow. Hankow. Nanking. chow-

Ningpo. Average

Per cost per

cent. mile.

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Total part I..

96, 406

87,189

125, 790

99,079

133, 656

28, 419

98,575

100.00

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