File No. 893.811/227
The Secretary of State to Minister Reinsch
Washington , June 20, 1916 .
American International Corporation requests you transmit following to Gatrell:
Corporation approves Shantung agreement and is ready proceed in accordance with terms thereof so soon as points now covered only in general way by agreement and minutes negotiations are clearly specified in order avoid any possible misunderstanding. This should be done by exchanging letters as follows:
Shantung Agreement: Article II. Proceeds loan to be deposited National City Bank New York to be transferred to China through and be held on deposit in China with International Banking Corporation. Amounts in silver sufficient to meet interest and amortization payments in gold in New York to be deposited in International Banking Corporation, Shanghai or Peking, fifteen days before due date cost of transfer to and from China to be borne by Government being included in rates of exchange which to be fixed on date transfer or prior thereto as mutually agreed. All interest and amortization payments to be made by International Banking Corporation at its office New York.
Article III. Drawn bonds to be presented New York and paid in gold. Drawings payments to be made at office trustee appointed under Article XIII.
Article IV. Upon completion canal improvement work, Conservancy Bureau to employ American engineer or Chinese engineer satisfactory to corporation [Page 121] to supervise maintenance canal during life of bonds. All receipts from revenues pledged as security for loan to be deposited by Conservancy Bureau with International Banking Corporation in China pending transfer for payments according to Article II, interest to be paid thereon at 4% per annum and funds to be held subject to the order of Accounting Department as provided Section 3, Article VI.
Article VI. Loan funds to be expended only in accordance with plan prepared and agreed upon as stipulated in Article VII or as modified by mutual agreement. Loan funds to be withdrawn by auditor upon requisitions made by director general or chief engineer acting under his authority upon recommendation of contractor as provided Kiangsu Agreement. Working funds to be held by Accounting Department Conservancy Bureau, auditor being responsible therefor.
Article VIII. Corporation hereby recommends Siems-Carey Construction Company as contractors.
Article XIII. International Banking Corporation New York designated as trustees.
Corporation approves Kiangsu Agreement, provided, by exchange separate letters or amendment agreement itself, loan is made obligation both of Kiangsu Province and Central Government same as Shantung Agreement. (This necessary assure sale bonds as otherwise public might be disturbed difference character two obligations issued for like purpose.) Letters should also be exchanged containing provisions regarding deposits New York, China, costs transfers, fixing exchange, deposit and responsibility for pledged revenues, payment interest, amortization, drawings payment bonds, expenditures in accordance with plans agreed upon, requisitions to be made by auditor, maintenance canal during life loan, administration revenues in case default, same as in Shantung Agreement. (If collection by corporation after default unacceptable usual provision regarding administration by Maritime Customs satisfactory for both agreements.) Pledged revenues to be deposited with International Banking Corporation to be named as fiscal agent accordance Article V. Siems-Carey designated contractors. Letters regarding Kiangsu Agreement should specify appropriate articles as in case Shantung Agreement.
Upon receipt notification from American Minister Peking through State Department that Government approve agreements letters and that Siems-Carey Company designated contractors, corporation will against temporary receipts deposit funds in accordance loan agreements pending issue bonds. Referring Articles VI and VII of Shantung Agreement and Article IV of Kiangsu, the corporation will, as soon as possible after letters exchanged, nominate competent persons as chief engineers and chief accountants. In general, by means these letters endeavor make operation two agreements as nearly alike as possible.
Would greatly facilitate sale bonds if extra redemption provided Article III Shantung and Article II Kiangsu Agreement be made 102½ instead of 101½. This not absolutely necessary but endeavor secure. If necessary might be able arrange 3 per cent interest instead of 2 per cent on deposits here.