File No. 893.51/1757

Minister Reinsch to the Secretary of State

No. 1383

Sir: I have the honor to transmit for your information copies of a report submitted to the Cabinet by the managing director of the Bank of Communications, advising the former of the conclusion of the Japanese loan, as published in the Peking Gazette of February 6, 1917. A translation of the loan agreement itself (as corrected herewith by the Chinese Secretariat of the Legation) is included in the report.

I have [etc.]

Paul S. Reinsch
[Page 123]

the loan agreement

The Bank of Communications of the Republic of China (hereinafter described as A) with the object of reorganizing its business hereby concludes with the Japanese Banking Group (hereinafter described as B) of three banks, viz: the Industrial Development Bank, the Taiwan Bank and the Chosen Bank a loan of five million yen (Y. 5,000,000). The articles constituting the agreement for this loan are as follows:

Art. 1: The proceeds of this loan shall be 5,000,000 yen (Y. 5,000,000) of Japanese currency.

Art. 2: The term of this loan shall run from the date of the signature of this agreement for fully three years; that is, it shall expire on the 19th day of the 1st month of the 9th year of the Republic.

Art. 3: The rate of interest on the loan shall be 7.5 per cent per annum; that is, for every 100 yen 7 yen and 50 sen shall be paid each year.

Art. 4: The first payment of interest on the loan shall be reckoned per diem from the date on which the whole amount of the loan proceeds is paid (to the Bank) up to the 19th of the 7th month of the 6th year of the Republic and the same shall be paid in advance. Thereafter on the 20th of the 7th month and the 20th of the 1st month of each year the interest for each half year shall be paid in advance.

Art. 5: On receipt of the securities mentioned in Article 10 of this agreement, B shall pay over the whole amount of the loan proceeds in full (with the exception of the deduction of interest for the first period). The proceeds shall be paid at Tokyo to the representative of A.

Art. 6: On receipt of the full amount of loan proceeds mentioned above, the representative of A may deposit the funds with the banks of B as deposit and may draw on them for use at any time.

Respecting the terms of deposit and remittance of the loan proceeds, the representative of A may discuss and arrange with B at Tokyo.

Art. 7: The proceeds of the loan shall be paid in full without discount or commission.

Art. 8: The repayment of the principal and payment of the interest of the loan shall take place at Tokyo.

Art. 9: A shall be permitted to repay the whole amount of the loan before the term stipulated for redemption, but in so doing A must notify B three months beforehand.

Art. 10: To safeguard the payment of interest and the repayment of the principal A shall submit the following collateral to B as security of the loan: (1) The loan bonds of the Lung-Hai Railway to the face value of $1,300,000. (2) Treasury bonds issued by the Chinese Government to the face value of $4,000,000. (3) Loan bonds issued by the Chinese Government to the Bank of Communications to the face value of $2,425,687.68.

Art. 11: In handing over the securities as mentioned above, A shall issue a certificate to B transferring the same to B as security. The same shall be handed over to B in Peking.

On receipt of the collateral mentioned above as security for the loan, B should issue a receipt for the same to A.

Art. 12: In the event of failure of the redemption of the principal or the payment of interest by A when the time becomes due, B shall have power to dispose at will of the securities mentioned in Article 10 for the redemption of the loan and the payment of interest.

Art. 13: In case during the currency of the present agreement A needs another loan, necessitating it to negotiate for the same from foreign bankers, it should first negotiate with B for the same on reasonable terms.

Art. 14: This agreement shall be submitted to the Chinese Government for official registration by A.

This agreement shall be made out in two copies in the Chinese and Japanese language each duly signed and sealed by the parties concerned. A and B shall each have a copy of the agreement in both languages.

[Page 124]

Tsao Ju-lin,
Managing Director of the Bank of Communications

Jen Feng-Pao,
Assistant Manager of the Bank of Communications

Managing Director of the Industrial Development Bank

Acting Representative