Imperial Chinese Hukuang Railway Gold Bonds

There is strong evidence that the controversial financing of the Hukuang Railway was the tipping point that sparked China’s revolution of 1911, which overthrew three millennia of dynastic rule and led to formation of the Chinese Republic the following year. No less qualified an observer than Sir John Newell Jordan, British Minister to Peking from 1906 until 1920, wrote with the benefit of hindsight at the end of his tenure that “the Hukuang Railway Agreement ... was the proximate cause of the downfall of the Dynasty.” (Woodhouse, 2004). The reader can be excused for finding it improbable that the terms of a railroad loan could trigger a revolution. The explanation is a tale worth telling.

By 1911, nationalists had long protested the extent of foreign control of China’s railroads. As summarized by Goetzmann and Ukhov (2005),

• By most accounts the competition among the great powers to secure railway concessions during this period through a combination of political diplomacy and the financial might of their capital markets was, in some ways, the high point of the age of Imperialism. At least it was characterized as such by contemporary commentators such as Lenin, who used the division of China into spheres of influence by foreign capitalists as the example of Capitalist Imperialism par excellence.

• ... Virtually of China’s railways constructed after 1895 were financed by foreign debt issues underwritten by European-led investment banking syndicates which obtained right of way, property concessions and promises of repayment from the Chinese Imperial government. Under the control of the bankers who financed the loans, Chinese railways were constructed, owned and operated by managers designated by the financial consortium. Certainly the most contentious feature of these loans was their provision for extra-territorial rights [by which foreigners enjoyed jurisdiction over portions of Chinese territory].

• The Chinese Eastern Railway was a prime example of extra-territoriality. The Russo-Chinese bank issued a 5 million tael loan[ ] in Russia in 1896 to finance the construction of a railway across Manchuria linking the Trans-Siberian Railway to Vladivostok. The railway and its right of way were entirely administered and policed by Russian officials, who controlled the receipts and disbursements. The line was, in effect, a little bit of Russian territory within China’s borders, and issued its own currency. [Author’s note: To this it may be added that a contingent of Russian troops travelled on each train, housed at defense posts erected along the line; that the Chinese Eastern Railway had over 20,000 Russian employees; and that until the 1920s over 120,000 Russians lived in Manchuria, accounting for a quarter of its population, most dependent upon the C.E.R. for their livelihood.]

The Hukuang Railways £6 million loan was the last in a long succession of foreign loans to the Imperial Chinese Government for railroad construction. No fewer than 27 such loans appear in the extensive list of Chinese external debt issues after 1861 compiled by Goetzmann and Ukhov (2005); the Hukuang loan was the largest, but three others were for amounts between $19.6 million and $22.5 million, and six more ranged from $6.5 million to $14.8 million. Just as numerous if somewhat less costly were 22 loans for war or defense, notably including a $6.5 million bond issue in 1885 to finance China’s defense against France during the 1880s. By far the largest obligations, though, were bonds to cover war indemnities imposed after China’s defeats in the 1894-5 Sino-Japanese War and the 1898-1901 Boxer Rebellion, amounting to some $100 million and $300 million, respectively.

For more information visit our web site, http://www.glabarre.com, or call George LaBarre at 1-800-717-9529.

George H. LaBarre Galleries - Collectible Old Stocks and Bonds and Old Stocks and Bonds
http://www.glabarre.com A foreign antique stock and bond company.
From: "The Bonds That Sparked the Chinese Revolution" by Michael Mahler.

Collectible Chinese Bonds

Looking for collectible Chinese bonds? We have a wonderful collection available, including Chinese Government - Reorganization Gold Loan of 1913 in blue, brown and green.

We also have China-Lung-Tsing-U-Hai Railway and Imperial Chinese Government bonds.

For more information visit our web site, http://www.glabarre.com, or call George LaBarre at 1-800-717-9529.

George H. LaBarre Galleries - Collectible Old Stocks and Bonds and Old Stocks and Bonds
http://www.glabarre.com A foreign antique stock and bond company.

Collectible Chinese Bonds

Imperial Chinese Government Hukuang Railways bonds were issued in 1911 by banks in London, Berlin, Paris and New York, with serial numbers running into the six digits, of which hundreds if not thousands appear to have survived. A few bear New York State adhesive revenue stamps; shown here is a New York issue £100 bond with Secured Debt $1 and Investments $1 stamps paying New York’s Investments tax in 1917 and 1918; this secured for the bondholder exemption from that state’s onerous personal property tax.

Coupon bonds of this era are generally large and spectacular—American bonds typically measure about 10 by 15 inches—but this one sets new standards on both scores. It is huge, some 16 by 22 inches as shown. Its design and execution by security printers Waterlow & Sons of London are equally impressive, featuring the facsimile seals and signatures of China’s Minister of Posts and Communications and its Minister in Washington.


Bond: China, 1912 £20 5% Bond printed by J. Verschueren, Anvers. Large format. Condition: Excellent! Price upon request.

George H. LaBarre Galleries - Collectible Old Stocks and Bonds and Old Stocks and Bonds
http://www.glabarre.com/ A foreign antique stock and bond company.

From: "The Bonds That Sparked the Chinese Revolution" by Michael Mahler.

The Bonds That Sparked the Chinese Revolution - Part Three

Loans to the Imperial Chinese Government would not have been attractive to investors without strong guarantees. As security for its many foreign loans, the Manchu government pledged the proceeds of a vast array of revenues and taxes, so that by the time of its collapse nearly its entire revenue stream had been diverted to foreign banks. The most lucrative and dependable source of security was China’s considerable maritime customs revenue. This began to be attached beginning in 1866, and remained the preferred security for decades; it was the sole source of the massive war indemnities of 1895–1901, by which time virtually all maritime customs revenue was pledged to service foreign debt. New sources of security now had to be found, and subsequent foreign loans tapped the proceeds of various domestic taxes, most often salt and rice taxes and the “lekin,” a tax on internal transit of goods. With each loan the government incrementally lost control of its own finances.

Construction of the Hukuang railway was expected to break this mold. Hukuang (“lake plain”) is a region in south-central China including the provinces of Hunan, Hupei, and portions of Szechuan. The Hukuang Railway was to have two branches: one from Hankow south to the port of Canton, the other from Hankow west to Chengtu in Szechwan. Construction rights for the Canton-Hankow branch had been awarded to J. P. Morgan’s American China Development Company, but beginning in 1903 events took a radically different turn. The “Railway Regulations” of the Qing Government enacted that year granted domestic companies the right to operate railroads, and in 1904 the Ministry of Commerce promulgated reforms designed to facilitate development of domestic corporations. In 1905, with the active encouragement of the provincial governor of Hunan and Hupei, a consortium of Hukuang gentry, officials and businessmen first lobbied successfully for compensated cancellation of the construction rights of the American China Development Co., then obtained contracts to build the road. The Kwangtung Company of the Canton-Hankow Railway had an auspicious beginning; its entire capitalization of 44 million taels (some $60 million) was subscribed by Chinese investors rich and poor, making it the most successfully capitalized of all Chinese companies, by a very large margin. Most of the funds came from wealthy Chinese living abroad, but there was enthusiastic support from the populace as well. Shares were initially priced at only a single tael, and the North China Herald reported that

• Not only are the monied classes rushing to buy shares, but the poorest of the poor and even those who are supposed of no cash to spare and hardly enough to keep body and soul together are buying up one or more shares (Lee, 1977).

The contract for the Hankow-Chengtu branch was entrusted to the Hupeh Company of the Szechuan-Hankow Railway.

The Kwangtung Company, though, was plagued by mismanagement and massive embezzlement. Its sister company, the Hupeh Company, raised only about 3% of its projected capitalization of 20 million taels. Years passed with no tracks laid or rolling stock purchased, and on May 9, 1911, the Qing government, bowing to diplomatic and political pressure, summarily nationalized all domestic railway development, and on May 20 re-awarded the contract to the aforementioned consortium of banks in London, Berlin, Paris and New York, which sponsored a £6 million bond issue to finance construction. The Imperial Government pledged as security the revenues of the railroad and the proceeds from six different taxes on salt, rice, and lekin, all of which are enumerated on the bonds themselves.

Item# 5055b: China 1913, Brown £20 5%, German Bank Issue or French Indochina Issue. 42-43 Coupons. Price upon request.

For more information visit our web site, http://www.glabarre.com, or call George LaBarre at 1-800-717-9529.

George H. LaBarre Galleries - Collectible Stocks and Bonds

From: "The Bonds That Sparked the Chinese Revolution" by Michael Mahler.

The Bonds That Sparked the Chinese Revolution - Part Two

There is strong evidence that the controversial financing of the Hukuang Railway was the tipping point that sparked China’s revolution of 1911, which overthrew three millennia of dynastic rule and led to formation of the Chinese Republic the following year. No less qualified an observer than Sir John Newell Jordan, British Minister to Peking from 1906 until 1920, wrote with the benefit of hindsight at the end of his tenure that “the Hukuang Railway Agreement ... was the proximate cause of the downfall of the Dynasty.” (Woodhouse, 2004). The reader can be excused for finding it improbable that the terms of a railroad loan could trigger a revolution. The explanation is a tale worth telling.

By 1911, nationalists had long protested the extent of foreign control of China’s railroads. As summarized by Goetzmann and Ukhov (2005),

• By most accounts the competition among the great powers to secure railway concessions during this period through a combination of political diplomacy and the financial might of their capital markets was, in some ways, the high point of the age of Imperialism. At least it was characterized as such by contemporary commentators such as Lenin, who used the division of China into spheres of influence by foreign capitalists as the example of Capitalist Imperialism par excellence.

• ... Virtually of China’s railways constructed after 1895 were financed by foreign debt issues underwritten by European-led investment banking syndicates which obtained right of way, property concessions and promises of repayment from the Chinese Imperial government. Under the control of the bankers who financed the loans, Chinese railways were constructed, owned and operated by managers designated by the financial consortium. Certainly the most contentious feature of these loans was their provision for extra-territorial rights [by which foreigners enjoyed jurisdiction over portions of Chinese territory].

• The Chinese Eastern Railway was a prime example of extra-territoriality. The Russo-Chinese bank issued a 5 million tael loan[ ] in Russia in 1896 to finance the construction of a railway across Manchuria linking the Trans-Siberian Railway to Vladivostok. The railway and its right of way were entirely administered and policed by Russian officials, who controlled the receipts and disbursements. The line was, in effect, a little bit of Russian territory within China’s borders, and issued its own currency. [Author’s note: To this it may be added that a contingent of Russian troops travelled on each train, housed at defense posts erected along the line; that the Chinese Eastern Railway had over 20,000 Russian employees; and that until the 1920s over 120,000 Russians lived in Manchuria, accounting for a quarter of its population, most dependent upon the C.E.R. for their livelihood.]

The Hukuang Railways £6 million loan was the last in a long succession of foreign loans to the Imperial Chinese Government for railroad construction. No fewer than 27 such loans appear in the extensive list of Chinese external debt issues after 1861 compiled by Goetzmann and Ukhov (2005); the Hukuang loan was the largest, but three others were for amounts between $19.6 million and $22.5 million, and six more ranged from $6.5 million to $14.8 million. Just as numerous if somewhat less costly were 22 loans for war or defense, notably including a $6.5 million bond issue in 1885 to finance China’s defense against France during the 1880s. By far the largest obligations, though, were bonds to cover war indemnities imposed after China’s defeats in the 1894-5 Sino-Japanese War and the 1898-1901 Boxer Rebellion, amounting to some $100 million and $300 million, respectively.

For more information visit our web site, http://www.glabarre.com, or call George LaBarre at 1-800-717-9529.

George H. LaBarre Galleries - Collectible Stocks and Bonds

From: "The Bonds That Sparked the Chinese Revolution" by Michael Mahler.

The Bonds That Sparked the Chinese Revolution - Part One

Imperial Chinese Government Hukuang Railways bonds are well-nigh ubiquitous in the marketplace. They were issued in 1911 by a consortium of banks in London, Berlin, Paris and New York, with serial numbers running into the six digits, of which hundreds if not thousands appear to have survived. A few bear New York State adhesive revenue stamps; shown here is a New York issue £100 bond with Secured Debt $1 and Investments $1 stamps paying New York’s Investments tax in 1917 and 1918; this secured for the bondholder exemption from that state’s onerous personal property tax.

Coupon bonds of this era are generally large and spectacular—American bonds typically measure about 10 by 15 inches—but this one sets new standards on both scores. It is huge, some 16 by 22 inches as shown. Its design and execution by security printers Waterlow & Sons of London are equally impressive, featuring the facsimile seals and signatures of China’s Minister of Posts and Communications and its Minister in Washington.

Hukuang Railways bonds are among the most attractive pieces ever to bear stamps. Similar bonds issued in London, Berlin and Paris by the Hong Kong and Shanghai Banking Corporation, Deutsch-Asiatische Bank, and Banque de L’Indo-Chine, respectively, show the signatures of their representatives and of the Chinese Ministers to Great Britain, Germany and France. Only the relatively few stamped bonds are philatelically interesting, but all are historically important.

In the days following I will be sharing excerpts from Michael Mahler's article "The Bonds That Sparked the Chinese Revolution."


Image 1: Item#: FB 5128.China, 1912 £20 5% Bond printed by J. Verschueren, Anvers. Large format. Condition: Excellent

Image 2: Item # 5055. China, 1913, Blue-Red. £100 5% Reorganization Gold Loan Bond, German Bank Issued. Uncancelled. 42-43 Coupons. Many coupons. Important to stress that these bonds have been bought up in recent years and pretty much taken off the market. As a result prices have risen rather dramatically. Excellent Condition! Price upon request.

For more information visit our web site, http://www.glabarre.com, or call George LaBarre at 1-800-717-9529.

George H. LaBarre Galleries - Collectible Stocks and Bonds

From: "The Bonds That Sparked the Chinese Revolution" by Michael Mahler.