Papers Relating to the Foreign Relations of the United States, With the Address of the President to Congress December 5, 1916
File No. 893.77/1548
Minister Reinsch to the Secretary of State
Peking, June 14, 1916.
Sir: Supplementing my despatches Nos. 1080 and 1082 of May 17 last, and referring to my telegram of June 13, 8 p.m. I have the honor to enclose herewith the translation of a note, dated the 10th instant, with which the Foreign Office transmitted to the Legation a copy of the English text of an agreement and two supplementary agreements, with respect to the construction of certain railways, between the Ministry of Communications and Mr. W. F. Carey, representing the Siems-Carey Company.
I have [etc.]
The Acting Minister of Foreign Affairs to the American Minister
Peking, June 10, 1916.
Sir: We are in receipt of a despatch from the Ministry of Communications to the effect that the said Ministry has made an agreement with Messrs. Siems and Carey with reference to the construction of railways and stating that the said agreement was duly signed by the Minister of Communications and by the representative of Siems and Carey on the 17th of May (1916).
We now have the honor to transmit a copy of the English text of the agreement and of the two supplementary agreements in order that you may inspect the same and put them on record.
A necessary despatch.
The Minister of Communications to Siems & Carey
Gentlemen: We herewith acknowledge receipt of your letter bearing date of May 15, 1916, by which, for the purpose of carrying out verbal agreements resulting from negotiations had between us respecting the building of steam railroads in the Republic of China, you have submitted your proposition for our acceptance.
We have given the matter full consideration and in behalf of the Republic of China we hereby accept the same and agree as follows:
1. The Republic of China shall locate, build, and work steam railroads in China, the aggregate of which shall be fifteen hundred (1,500) miles in length. We specially pledge to build said lines between the following points and such intermediate points as may mutually be considered advisable, namely:
| From— | Province. | To— | Province. |
| Hengchowfu | Hunan | Nanning | Kwangsi. |
| Fengcheng | Shansi | Ninghsia | Kansuh. |
| Ninghsia | Kansuh | Lauchowfu | Kansuh. |
| Chungchow | Kwangtung | Lu Hwei | Kwangtung. |
| Hangchow | Chekiang | Wenchow | Chekiang. |
2. If after examination it shall be mutually decided between us that any part of said railroad locations shall not be desirable, such undesirable parts may be abandoned; but in that event the Government of China will then locate and construct an equal amount of mileage of railroads upon other locations within said Republic. The locations of the additional lines to complete the total mileage above stipulated to be decided by mutual agreement between us.
3. The said Republic reserves the right at or before the time of the completion of the above-mentioned 1500 miles of railroad, to choose one expert railroad civil engineer, in which event you shall choose one, and the two thus chosen shall choose a third, to be known as the “Board of Engineers”, and said board shall determine whether the work then being done, or theretofore done, is being or has been economically performed, and if the majority of said board shall decide that the work has been and is being done in an economical manner under this agreement as compared with the cost of construction of other Chinese railroads, all things considered, then the said Republic obligates itself to construct an additional 1500 miles of railway within said Republic, to be located by the mutual consent of the parties hereto; and all and singular the provisions of this agreement shall extend and apply to the said additional mileage of railroad in the same manner and to the same effect and purpose as though said additional mileage had been originally made a part of and included in this agreement; with this sole exception,—that the interest rate and discount to be charged upon the bonds to be issued by the said Republic [Page 184] for the construction of said additional 1500 miles of railroad shall not be higher than the prevailing interest rate and discount for other Chinese railway bonds at that time.
If the said Republic shall build any extensions or branches of said first mentioned 1500 miles, the same shall be done under and pursuant to the provisions of this contract as though originally included herein, excepting that the mileage thereof shall be reckoned a part of the aforesaid additional 1500 miles and subject to the above exception respecting the interest rate and discount on bonds to be issued therefor.
4. For the purpose of providing the money with which to construct, equip, and operate said railroads the said Republic shall, and it hereby obligates itself to, issue gold bonds, in usual form, in the sum of one million ($1,000,000.00) Dollars per year in each and every year from the time that this contract shall take effect, as herein provided, until all of said railroads included in or contemplated by this contract shall have been fully completed, equipped and put into practical operation, and you shall obligate yourselves to sell said one million ($1,000,000.00) Dollars of bonds per year for and during said term pursuant to the provisions of Paragraph 5 of this contract. But if in any year of said period said Republic shall be satisfied with the market value of said bonds as fixed by the quotation of the New York Stock Exchange, for the time being, for Chinese railroad bonds, so that it shall appear to be to the advantage of said Republic to issue additional bonds and increase the activity in building said railroads, then and in any such case said Republic shall issue an additional one million ($1,000,000.00) Dollars of said bonds for that year, and by mutual consent of the parties hereto said Republic may issue an aggregate of not to exceed ten million ($10,000,000.00) Dollars of said bonds in any one year of said period and in as many years during the life of this contract as may be mutually agreed upon.
All bonds issued in pursuance hereof shall bear interest at the rate of five (5) per centum per annum, payable semi-annually, and each issue of bonds shall be made payable by their terms fifty (50) years from and after the date thereof.
As to the form of the bonds it is to be agreed upon by the Chinese Government or by the Chinese Minister in Washington and yourselves or your assigns as soon as possible after the signature of this agreement, but if hereafter the money markets in New York or other countries require any modification of the form of the bonds, except in anything that affects the amount of the loan and the liability of the Chinese Government which are not to be touched at all, such slight modifications may be made to meet the views of the markets by you or your assigns in consultation with the Chinese Minister in Washington. Any modifications are to be reported at once by you or your assigns to the Chinese Government.
The bonds are to be engraved entirely in the English language and shall bear a facsimile of the signature of the Minister of Communications and of his seal of office in order to dispense with the necessity of signing them all in person; but the Chinese Minister in Washington shall, previous to the issue of any bonds, put his seal upon each bond with a facsimile of his signature as a proof that the issue and sale of the bonds are duly authorized and binding upon the Chinese Government.
Such bonds are to be numbered consecutively and as many bonds as may be needed are to be properly engraved under the supervision of yourselves or your assigns, and after they are sealed by the Chinese Minister in Washington as heretofore provided they are to be countersigned by you or your assigns.
If any of the bonds herein mentioned are lost or destroyed, a reissue of any thereof is to be made in the amounts respectively called for by such lost or destroyed bonds, but proper proof of the loss or destruction must be given in the usual form to you or your assigns and the Chinese Minister in Washington for examination and record, and the requisite guaranty is to be obtained by you or your assigns from the respective claimants concerned who shall defray all expenses connected with such reissue of bonds lost or destroyed, and who under the said guaranty shall undertake to indemnify the Chinese Government and/or you and your assigns for any loss sustained by reason of the issue of bonds in the place of the bonds lost or destroyed.
No payment of the principal of any such issue of bonds shall be made until after the expiration of twenty-five (25) years from and after the date thereof, and the bonds shall so provide. But payment of principal shall commence on the first day of the twenty-sixth (26th) year from and after the date of issue [Page 185] and shall thence be made and shall continue to the full maturity thereof at the rate of four (4) per centum of the par value thereof per year, and in each and every year of said principal paying period the said Republic shall pay and retire, by lots in the usual manner, four (4) per centum of the face value of such issue, and the right to pay and retire in that manner shall be reserved and expressed upon the face of all bonds of each and every said issue, and the payment of the principal of each and every issue of said bonds shall be made in that manner.
It is the intention that the principal paying period of each issue of bonds shall not begin to run until the beginning of the twenty-sixth (26th) year from and after the date thereof.
5. The above bonds to be sold by you at the New York Stock Exchange market rate for Chinese railroad securities for the time being, from which you shall be allowed and deducted a banker’s or broker’s commission of five (5) per centum of the par value of bonds for selling, which shall represent all expenses in connection with the issue of said bonds, such as underwriting, commission and brokerage, telegraph charges, advertising, postage, engraving and printing of prospectus and bonds, stamp and legal fees.
6. You shall have charge of and direct the work of locating, surveying, erecting water tanks and buildings of all kinds, constructing and equipping all railroads included in or contemplated by this contract, and also of buying the materials, rolling stock, machinery, tools, appliances, and equipment and furnishings therefor and installing the same. And you shall be paid for your services therefor a sum equal to five (5) per centum of the aggregate amount of all purchases made in behalf of said railroad, excepting purchases of land for any purpose, in each and every year from the time that this contract shall take effect, until the last of said bonds have been fully paid. The said railroads, and all construction, surveys, locations, equipment, materials, rolling stock, machinery, tools, appliances, installations, commissions, wages, salaries, and everything whatsoever aforesaid, shall be paid from the proceeds of the sales of all of said bonds and said proceeds shall not be used or applied to any other use or purpose nor shall any part or portion thereof; and it is expressly understood that the moneys derived from the sale of all of said bonds shall be deposited and kept in a responsible bank to be mutually designated and agreed upon by us in advance, and the same shall be drawn and paid out from said bank for the uses and purposes herein expressed, and for no other uses or purposes whatsoever.
In purchasing machinery and materials preference shall be given to those of American manufacture when price and quality are at least equal; but whenever it shall be possible to purchase suitable supplies and materials of Chinese manufacture, price and quality being at least equal, the same shall be given preference over those of American or other manufacture.
It is further agreed that the Ministry of Communications shall secure and purchase any and all lands required for rights of way and/or other purposes in connection with the terms of this agreement; that such land purchased shall be paid for from the proceeds of the loan.
7. To secure payment of all of said bonds, issued or to be issued, said Republic shall at the time that the first issue of said bonds shall be made, execute and deliver to you a first trust mortgage upon said entire railroads, built or to be built, together with all rolling stock, equipment, real estate, machinery, buildings, tools, and all of the physical property connected with or appurtenant thereto on hand or to be added, in accordance with the forms of the American law which are customary and usual in such cases to secure payment of said first issue of bonds and of all issues of bonds subsequently issued. The trustee to be selected and chosen by mutual agreement of the parties.
Until said trust mortgage shall be executed in form, the provisions of this agreement in respect to the mortgage are to be construed and treated as of the same purport and effect as a mortgage customarily executed and delivered in the United States to a trustee, for the purpose of securing loans to and bonds issued upon railway properties. It is further agreed that if the financial markets in the United States or elsewhere require the execution of another deed or deeds or mortgage or mortgages at any time for the better protection of the bonds, or require the appointment of another trustee under the American law, you shall discuss the same with the Minister of Communications, who will arrange the same as the exigencies of the case may require. The expense of the appointment of another trustee in such case to be borne by you.
[Page 186]8. The executive head of the railroads shall be a Chinese director general appointed by the Government, who shall be assisted by a chief engineer, who shall have charge of the engineering department; a traffic manager, who shall have charge of the traffic and operating departments; and an auditor, who shall have charge of all matters usually pertaining to that office, and each shall be qualified by practical experience, shall be of approved ability and integrity, shall be chosen, recommended and vouched for by you, and appointed by the director general if he shall approve of the character and qualifications of the person nominated; but if he shall not approve in any case, he shall call upon you for another recommendation for the office. In event the director general shall consider any head of a department above mentioned unfit to act, he shall upon consultation and mutual agreement with you cause his dismissal. It being understood that all of the above heads of departments shall at all times be men recommended by you. And if you shall subsequently discover that the standard of efficiency may be improved by substituting for any appointee another likewise recommended and vouched for, the incumbent shall be removed by the director general and the other substituted as above provided.
On or before the twenty-fifth (25th) day of each month you shall render a lump sum estimate to the director general showing the funds required to meet the expenditures for the ensuing month, and upon approval of the director general, he shall notify the auditor, who shall prepare and turn over to you a check for said amount in your favor.
It is agreed that requisitions for equipment and material shall be submitted to the director general for his information and approval.
It is agreed that all contracts contemplated to be let by you shall be approved by the director general.
It is agreed that any check of twenty-five thousand ($25,000.00) Dollars or more shall be countersigned by the director general.
It is agreed that any and all emergency expenses which pertain to the work contemplated by this agreement, shall receive the approval of the director general.
It is further agreed that the rules of accounting shall be according to the rules prescribed by the Ministry of Communications.
9. The salaries of all officers shall be fixed by mutual agreement between you and the Minister of Communications of China.
10. Proper and correct books, showing all transactions of income and expenditures in detail and by items, shall always be kept, and both parties shall always have access to and inspection thereof.
11. The time within which work shall commence under this contract, bonds issued and secured, and preliminary organization effected, shall be within six (6) months from and after the date of acceptance hereof unless prevented by extraordinary conditions.
12. The said Republic shall assist you in every way possible in obtaining and acquiring all necessary rights of way, railroad yards, station grounds, sidings, gravel and sand pits, rock quarries, and other necessary concessions.
13. All plans and estimates of construction shall be submitted to the Minister of Communications in advance for his information and approval, and said Republic may employ an inspector or inspectors to inspect all work as it progresses. And when the said railroads shall have been completed, you shall give notice thereof to the Minister of Communications in order that he may send his inspector, or inspectors, to decide whether the work has been done according to specifications.
14. Your said proposal having been executed and submitted in both the Chinese and English languages, each being a true and correct translation of the other and being executed in triplicate in each of said languages, this acceptance thereof shall likewise be executed in the Chinese and English languages, each being a true and correct translation of the other and in triplicate in each language. It is understood and agreed that in the event that difference or dispute shall at any time arise respecting the construction or meaning of either said proposal or this acceptance or any part of either, the English text shall prevail in determining such difference or dispute. One copy of the English and the Chinese text of this agreement shall be held by the Ministry of Communications: one copy of the English and Chinese text by the Ministry of Foreign Affairs and one copy of the English and Chinese text by Siems and Carey.
[Page 187]15. It is understood that your said proposal and this acceptance thereof, shall be construed together and as one instrument, and that all and singular the provisions hereof shall extend and apply not only to you, the signers of said proposition, but to your and each of your heirs, executors, administrators and assignees, who shall be of American nationality.
16. The said proposal and this acceptance thereof are hereby made effective and binding upon the respective parties thereto, and the same shall be and continue in force from now henceforth according to the terms thereof.
17. And it is further agreed that in the event that the parties hereto shall mutually decide that further details are required to more fully and truly express the true intents and purpose hereof, this agreement shall be reformed to include the same.
In witness whereof, the Republic of China has caused this instrument to be signed and executed by its Minister of Communications acting by its authority and in its behalf, this 17th day of the fifth (5th) month of the fifth (5th) year of the Republic of China; being the 17th day of May, 1916.
The Republic of China,
By (sealed
& signed) H. E. Tsao Ju-lin,
Its Minister of Communications
The above proposition is accepted by the undersigned in full and detail.
By
Witness: Roy S. Anderson
The Minister of Communications to Siems & Carey
Gentlemen: I have the honor to acknowledge receipt of your written communication, bearing date on this day, submitted by you as a supplement to be considered and construed to be a part of your proposition to the Republic of China, likewise dated on this day, respecting the building of steam railroads in said Republic, as fully to all intents and purposes as though set forth at length in your said original proposition.
We have given the same full consideration, and in behalf of said Republic of China, I now, in my capacity of Minister of Communications of the Republic of China and by authority and in behalf of said Republic, hereby accept the same and agree as follows:
In addition to the payment to you by said Republic of a sum equal to five (5) per centum of the aggregate amount of all purchases made in behalf of said railroads (excepting purchases of land for any purpose) in said proposition stipulated for your services therein mentioned, said Republic shall also pay to you a sum equal to eight (8) per centum of the aggregate amount of all other moneys expended for the construction of all of said railroads. As soon as any section thereof shall have been fully completed and put into commercial operation, then said eight (8) per centum shall cease upon such completed sections that are being commercially operated. Settlements and payments for both the five (5) per centum and the eight (8) per centum aforesaid, to be made at the end of each six (6) months from the date of the beginning of said work. And further, for handling and selling said bonds as in said proposition provided, as well as for the said services by you to be performed, twenty-five (25) per centum of the net profits derived from operating said railways, after paying all maintenance, operating and bond charges shall be paid yearly to you at the end of each fiscal year up to the time of the payment of the last of said bonds, when all your rights shall cease and this contract shall terminate. By the term “bond charges” as above used, is meant the semi-annual interest on each issue of bonds during the first twenty-five (25) years from and after their date (during which time no payments of principal shall be made) and the semi-annual interest and four (4) per centum of the principal of each said issue to be paid in each and every year of the last twenty-five (25) years of the period for which said bonds are to run.
It is further agreed that before any division of net profits shall be made in any year as herein provided, there shall be reserved and set aside out of the said annual net profits, a sum equal to five (5) per centum of said annual [Page 188] net profits for a replacement fund, and a separate fund shall always be maintained for that purpose; it is understood, however, that if at any time said replacement fund shall have accumulated a sum in excess of the actual and reasonable requirements of said fund, such excess, by our mutual consent, shall be divided between us, you to receive twenty-five (25) per centum thereof as above provided.
It is further agreed that no commission whatsoever shall be paid to you upon the salaries of any officer mentioned in this agreement.
Respectively yours,
Republic of China,
By (sealed and
signed) Tsao Ju-lin,
Its Minister of Communications.
The above proposition is accepted in full and in detail by the undersigned.
By
Witness: Roy S. Anderson
Supplementary Agreement
This Supplementary Agreement is to be considered and construed to be a part of the proposition agreed to between the authorised representative of the Republic of China in the person of the Minister of Communications and Siems and Carey represented in the person of William Francis Carey, respecting the building of steam railroads in said Republic, bearing date on the day of the date hereof, as fully to all intents and purposes as though set forth at length therein, and is as follows:
It is mutually agreed that all interest charges to be paid during the construction of any specified line shall be paid for from the proceeds of the loan.
It is mutually agreed that there shall be paid no eight (8) per centum or five (5) per centum commissions upon the interest payments paid for out of the proceeds of the loan during the time of construction or at any other time.
It is mutually agreed that there shall be no commission charged upon the money expended for the purchase of land.
It is mutually agreed that inspection fees and incidental expenses connected with purchases which are not made upon the condition that such purchases shall be subject to inspection upon delivery in China shall be borne by Siems and Carey.
It is further agreed that in time of war in China, said railroads and all employees thereof shall be subject to the rules of martial law and that said railroads shall receive half rates from the transportation of troops, munitions of war and all commissaries for war purposes.
It is further agreed that the railroads shall transport Government troops at half rates during times of peace or war.
In witness whereof, the Republic of China has caused this instrument to be signed and executed by its Minister of Communications acting by its authority and in its behalf, this 17th day of the fifth month of the fifth year of the Republic of China, being the 17th day of May, 1916.
By (sealed and signed)
Its Minister of Communications
Siems & Carey.
By (signed)
Witness: