To the Editor of the "Nosru-Cuma Dany News"
Sm—It was not my intention to revert to this subject, but in view of the fact that you have published an article supporting the Companies action, I feel T cannot allow certain, criticisms in the article to pose unchallenged. First and foremost 1 wish to make it quite clear that the Trustees of the Shanghai Municipal Council Pension and Superannuation Fund (of which I'am one) have no personal Interest whatever in the matter, and that their objections to the resolution were aetusled sorely by what they believed to be their duty towards the numerous employees of the Cotnell who enjoy the benefits the Fund. Tt is not pomible for the employees to express their views, and the only protection they have got ts through the intervention' of" the Trustees, and tu my opinion a Truster who did not take steps to preserve the rights of the persons whose Interests the wes appointed to represent, which Fights according to the terms of the Fescluton wore tobe the subject dereliction of duty.
Todification would be gully of grave
Further wish to make it quite clear that I am expressing my own personal views, and am not in any way purporting to write on behalf of As pointed out, the object ofthe resolution was. to. modify" certain Fights of the debenture holders with regard to the Interest payment due on the 3tst December next, by effecting payment ina manner diferent to that Promised inthe silver clause, This must be 30, otherwise the question of modification of rights would not arise fud in face of such a resolution the duty of a Trustee Is In my opinion perfectly clear.
"That the Trustees should take "heir duties seriously seems to surprise the writer of the article, who. describes heir action as curious, and strange. 1 would appear also from this article as "if the only" opposition to. the Fesolution came. from the "Trustees, Which is far from being the case:
The four Trustees as such had only tone vote which was exercised by M.. Henchman as the senior Trustee.
It is true, T as one of the Trustees Addressed the meeting, but I have yet io learn that there is any difference in the result between a voter who, articulates, and one who does not.
Eleven voted for the resolution, and six against, and of the latter number as T have said the Trustees had only tone vote; I had one under a proxy. What about the remaining four votes all cast by responsible members of the Community who it must be supposed agreed with the view taken by the Trustees?
The same comment applies to the frst amendment when eight voted for, ind eleven against.
According to this article there are two main factors in favour of the Fesolution, equity and expediency.
Equity in its primary sense means fairness, but how exactly does this principle apply to this resolution? Why is it unfair that "a debenture holder should require the Company implement a promise which it made and on the strength of which it was enabled to float its debentures?
If by expedient is meant advantageous'then I agree it was expedient the Company's interest to pass the resolution but certainly not the de-venture holders, also said that the recent Order in Council and meeting at the British Consulate have been completely overlooked.
T suppose by Order in Council meant the recent King's Regulation which is quite a different thing, but I entirely fail to see what bearing either the King's Regulation or the informa! meeting at the British Consulate has on this particular resolution. Certainly no one at the meeting. suggested that the Company. should meet its interest by a payment in silver. The whole trouble is the failure to realize that this debenture Joan is a commodity, and not a currency loan, and that the debenture holders are not demanding to be paid {in silver, but in such a number o! Chinese local currency notes as will buy the amount of the commodity contracted for in the world's silver markets. This is the essential difference between the currency loan floated by the Council last year, and most other debenture issues which are commodity loans. I must join issue with the following statement in the article referred to.
"The impression prevails that the ]Municipal Tressurer has never atta-Jched any great importance to the feticacy of silver clauses."
Judging by.what appeared ino communique which was issued to the [Press at the tine the loan was made ithe Municipal Treasurer's reason for the Council's action in making the ican a currency loan, and not a com-Imodity loan, is clearly stated, and rather tende to shew that he attached [great importance to the silver clause.
May I quote from the Municipal
the Municipal Treasurer says "In recommending that no further d nition of the weight and fineness of the dollar be given than Chinese Standard Silver Dollsrs, the Treasurer [stated that it wou'd in his opinion be improper to impose a potential burden on the ratepayers in respect to the new lean in having to provide funds for the equivalent of the silver content of the dollar at any time. The Couneit's credit stood "higher than fever before and he considered that it should not adopt a dangerous prin-tiple and potential risk." You, Sir, Jas well as the Treasurer were live the burdens imposed on a borrower by a commodity loan for in a leader about the same time in refer~ ring to the Council loan you said. to. inno ft involve a recognition The terms on which It is
the change which has occurred fu the matier of Chinese currency, and, me deed seems to go farther than China hhas.yet gone for Int really means the Taising of a Joan in terms of currency, 2 against a commodity. loan, A Silver "loan "nowadays. would" have about st all the apparent dangers that would be attendant-upon a Municipal Joan for Shanghai raised ins foreign currency. From year to year it wou hot be certain how much money would have to be found to pay Interest ace truing on the loan: while the ultimate Fedemption of the Issue in terma, Gollars might. prove a heavy burden Indeed upon the Municipal revenue. This. would of course depend. upon whether or" not the present Chinese Behar went through a process of Basing, by any" one of the. several methods by which auch a change could be brought about. The burden thus Teia'on. posterity might very" well tua sliver loan. might be to.
Nestor, Ht has about It every quality Unlikely' to commend it to the. bore Tower who is In fact asked 10 aerume ilvthe risks attendant upon raising Such a foun. There te therefore some Fish attached to. all anueain' token currency and" that ie. what the Munietpet oan amounts to, for Gisregards the silver content of the Gotta, but it isa risk. which ex perience "has. mage familar to all Tivestors by now."
Do not these words of yours "there therefore some risk attached Jel issues In token currency" explain origin of the silver clause, for it was to eliminate this very risk that Jdebenture issues were floated as Jcommedity and not currency. loans In my opinion Central Propertie Ltd, without the silver clause which made the loan virtually a commodity loan, would have experienced Jdimeulty' in Moating their debenture issue, for the public would certainly not have supported an issue on a currency basis, or at any rate purchased the debentures at the price they aid you rightly pointed out in a Jtootnoie to a letter published in your paper at the time of the Shanghai [Municipal Council toan "loans. in which the lenders took all the risks currency yreement with this view. fand if T may say so the local investor was not prepared to take all the risks Jand it was for this reason that' the silver clause was devised so as to [make the loan a commodity loan.
well put by one of your correspond-his aspect of the matter was very ents a8 follows:
"One very good reason for all loan transactions in China being on a metal fand not a currency basis Is that China {Is consistently a borrowing and not ena 'America "there is. always a certain nation? in Europe and mount' of reciprocity these matters, 0. that. the. devaluation Currencies do" mot. have. such. serian effects. 'Does ihe publte understand that their" predecessors hada very {Hood epsom' for calculating indebted hess me weight of silver (the Toe) Instead of coin which has no credit behind ft. And does the public under: stand that even the Nanking Govern {nent when substituting the dollar for {for the tod defined the silver content that areaing for loans and other Contracts could continue to be made On the basis of a weight of sliver?"
Again another correspondent says: have to thank you for so kindly underlining. as you did in your lead relic. of ths, morning, the point Gesired "to make, viz, that the new Src. wen is a currency and not a
Jnany of my acquaintances have missed fiver nan. Tain omaned tind how This very essential difference between this foam and other dollar debentures Which have been floated since the For myself I appreciate the value C! of a currency loan from the borrowers' point of view, as it has the import lent quality of limiting the indebted-Jness of the debtor to definite terms, Jout on the other hand a commodity joan must appeal to those who desire to keep themselves wholly in silver.
The matter consequently lies in nutshell. The Company floated Jcommodity loan with all its attendant ticks #0 far ast was concerned, and the Trustees view was that no valid rea ison existed why the Company should pot be called upon to implement the promise which it made—namely, to Jpay both principal monies and inter-Jest in accordance with the terms of the silver clause, In conclusion I see no necessity to Jdrag in the relations between the /Mortgagor and the Company which is no concern of the debenture hold-Jers whose only contractual relatlonship is with the Company.
[Shenghai, Dec. 6,
Text read from the printed page and cleaned; old type leaves the occasional error.