HUKUANG RAILWAY LOAN (BRITISH SHAREHOLDERS).

HC Deb 25 June 1925 vol 185 cc1731-4W

Sir V. BOWATER

asked the Secretary of State for Foreign Affairs whether the British coupons of the Hukuang Railway issue of 1911 have recently been paid; whether any distinction has been drawn between the British issue and the German issue in respect of such payment, especially in view of the large numbers of British shareholders of the latter issue; what security there is for the whole of this Hukuang loan; and whether he can make any further statement as to the position of the British shareholders of the different German issues of this and other similar loans?

Mr. SAMUEL

The answer to the first part of the question is in the affirmative. The position in regard to this loan is that after continued pressure from His Majesty's Legation at Peking and the representatives of the banks concerned, the Chinese Government arranged at the beginning of this year to pay the coupons then due on both the German and the other issues. They stipulated, however, that the German group of banks, which had originally participated in the loan, should be replaced by two Chinese banks and that these Chinese banks should become the paying agents for the German issue. This was agreed to by the other banks, and the money to pay the British holders of the German issue was remitted by the Chinese banks to the Hong Kong and Shanghai Bank. When the next coupon fell due, however, the Chinese banks failed to remit any money to meet it, owing, no doubt, to the lack of funds in the Chinese Ministry of Communications due to maladministration of, and military interference with, the railways, as in the case of the Tientsin-Pukow Loan. The service of the loan should be met, in the first place, out of the revenues of the railway. Specific security is assigned in Article 9 of the Hukuang Loan Agreement of the 20th May, 1911, which runs as followsThe present loan of Six Million Pounds (£6,000,000) Sterling together with the second series thereof, provision for the issue of which is made under the terms of Article XV hereinafter is hereby secured, in respect to both principal and interest, as a first charge upon:

1. (1) Hupei General Lekin amounting to two million (2,000,000) Haikwan taels a year.
2. (2) Hupei Additional Salt Tax for River Defence amounting to four hundred thousand (400,000) Haikwan taels a year.
3. (3) Hupei New Additional Two Cash Salt Tax of September, 1908, amounting to three hundred thousand (300,000) Haikwan taels a year.
4. (4) Hupei collection of Hukuang Inter-provincial Tax on imported rice, to the amount of two hundred and fifty thousand (250,000) Haikwan taels a year.
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5. (5) Hunan General Lekin amounting to two million (2,000,000) Haikwan taels a year.
6. (6) Hunan Salt Commissioner's Treasury Regular Salt Lekin to the amount of two hundred and fifty thousand (250.000) Haikwan taels a year.

The above Provincial Revenues amounting to a total of five million two hundred thousand (5,200,000) Haikwan taels a year are hereby declared to be free from all other Loans, Charges or Mortgages. So long as principal and interest of this loan are regularly paid, there shall be no interference with these Provincial Revenues; but if principal or interest of the Loan be in default at due date, then, after a reasonable period of grace, lekin and other suitable internal revenues of the provinces of Hupei and Hunan sufficient to provide the amounts above stated shall forthwith be transferred to, and administered by, the Imperial Maritime Customs in the interests of the bondholders. And so long as this loan or any part thereof shall remain unredeemed, it shall have priority, both as regards principal and interest, over all future loans, charges and mortgages charged on the aforesaid provincial revenues. No loan, charge or mortgage shall be raised or created which shall take precedence of, or be on an equality with, this loan, or shall in any manner lessen or impair its security over the aforesaid Provincial Revenues, and any future loan, charge or mortgage charged on the said Provincial Revenues other than the second series of the present loan provided for in Article XV aforementioned shall be made subject to this loan, and it shall be so expressed in every agreement for every such future loan, charge or mortgage. After redemption of the existing gold Bonds referred to in Article II of this Agreement it is understood and agreed that, so long as this loan is unredeemed, the railways shall, under no circumstances, be mortgaged nor their receipts given as security to any other party. In the event of the Chinese Government, during the currency of this loan entering upon definite arrangements for the revision of the Customs tariff, accompanied by stipulations for the decrease or abolition of lekin, it is hereby agreed on the one hand that such revision shall not be barred by the fact that this loan is secured by lekin and provincial revenues and, on the other hand, that whatever lekin is required to provide the security of this loan shall neither be decreased nor abolished except by previous arrangement with the banks and then only in so far as an equivalent is substituted for it in the shape of a first charge upon the increase of Customs revenue consequent upon such revision. It will be realised, however, that under present conditions in China all these revenues are not actually available as security.

As regards the last part of the question, I am not, under present circumstances in a position to make any further statement as to the position of the British holders of bonds of the German issues of this and other similar loans, beyond assuring the hon. Member that His Majesty's representative at Peking will continue to take every opportunity to press the Chinese Government to remedy the defaults.