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893.51 Russian Issue/53: Telegram

The Ambassador in China (Johnson) to the Secretary of State

NANKING, January 14, 1937—3 p. m.

[Received January 14—2:40 p. m.] 20. My despatch November 6 from Peiping 81 concerning Russian issue reorganization loan bonds. In Foreign Office note dated December 30, the Ministry of Finance is quoted as stating in part that the time limit for the exchange of the yellow bonds expired in May, 1930 and that it is now impossible to take any action with regard to the bonds held by American citizens. The Ministry of Finance adds that there is no record in its archives of the reported arrangement with two other nationalities named.

I request the Department's instructions whether the Embassy is to attempt to alter the ruling of the Ministry of Finance and if so to what extent reference may be made to the sources of information concerning the reported arrangements made in favor of other nationalities. Some degree of secrecy seems to have been imposed. By mail to Peiping.


893.51 Russian Issue/56 : Telegram

The Secretary of State to the Ambassador in China (Johnson)

WASHINGTON, January 30, 1937–3 p. m. 18. Your telegram 20, January 14, 3 p. m., in regard to Russian issue of Reorganization Loan. Department has received from J. G. White and Company authorization for the unrestricted use of the material, including citation of the sources of such material, submitted to the Department by the company and in turn transmitted to the Embassy as enclosures to the Department's instruction No. 252 of September 5, 1936.82

Department desires that the Embassy, unless it perceives objection thereto, tactfully and informally inform the appropriate Chinese authorities to the effect that, whereas the archives of the Ministry of Finance may contain no record of settlements with bondholders of British and Japanese nationality, there would appear to exist ample proof that settlements were made with some agency of the Chinese


Continued from Foreign Relations, 1936, vol. IV, pp. 574-600.
81 Ibid., p. 599.
82 Ibid., p. 595; enclosures not attached to file copy of instruction.

Government and that the American Government naturally assumes that the Chinese Government will not wish to discriminate against American holders of the bonds under reference by withholding from them an opportunity to receive payment on terms no less favorable than those granted to bondholders of other nationality.

In your approach to the Chinese Government judicious use may be made of the pertinent portions of the aforementioned material, particularly the letter of July 15 addressed to White, Drummond and Company by Sir Leonard Franklin.82


893.51/6289 : Telegram

The Ambassador in China (Johnson) to the Secretary of State


NANKING, February 5, 1937—noon.

[Received February 5–6:30 a. m.] 62. For Hornbeck.84 My 386, January [December] 31, [1936] 11 a. m.83 In conversation with Kung 85 last evening the latter asked me to ask you to use your influence to persuade interested Americans to accept Chinese proposal for settling Hukuang bond loan. Kung referred to question recently asked in Parliament concerning attitude of the American bondholders and stated that it was true that Germans and British have accepted the Chinese proposal, only the Americans holding out.

Kung also expressed hope that something might be accomplished in regard to Continental Bank loan while he is still in office.



Memorandum by the American Ambassador in China (Johnson) of

a Conversation With the Chinese Minister for Foreign Affairs (Chang Chun) se


NANKING, February 5, 1937. In the course of a call upon the Minister for Foreign Affairs to-day

a I invited his attention to a conversation which I had had with him on March 2, 1936,87 at which time I had expressed the hope that the Chinese Government would give further consideration to a proposal of the United States for the establishment of a Sino-American Claims


Not printed.
* Stanley K. Hornbeck, Chief of the Division of Far Eastern Affairs.
85 H. H. Kung, Chinese Minister of Finance.

Copy transmitted to the Department by the Ambassador in his despatch No. 1080, from Peiping, March 2; received April 6.

See despatch No. 113, March 7, 1936, Foreign Relations, 1936, vol. IV, p. 579.



Commission, and he had promised that the Foreign Office would pursue an inquiry into various claims of which a list had been furnished the Foreign Office.

I stated that we were still interested in this matter, and I wondered what progress had been made. The Minister for Foreign Affairs promised to look into this question.


893.51/6289 : Telegram

The Secretary of State to the Ambassador in China (Johnson)

WASHINGTON, February 8, 1937—5 p. m. 32. Your 62, February 5, noon, in regard to Hukuang Loan.

1. It would appear that representatives in China of the Groups have not yet informed Kung of position arrived at and made known by American interests concerned some 10 days ago. American interests are not “holding out.” It is our understanding that Bennett 89 is in position to inform you of present situation. Please confer with him and thereafter, in your discretion, make appropriate statement to Kung toward accurately dispelling Kung's impression, indicated in your report of conversation of February 4, that settlement is being held up by attitude of American interests.

2. Please say also to Kung that his expression of hope in regard to Continental Bank loan is gratifying to and is shared by the Department. 3. When done, please telegraph report of conversations.


893.51 Russian Issue/59 : Telegram

The Ambassador in China (Johnson) to the Secretary of State

NANKING, February 18, 1937–11 a. m.

[Received February 18—10:20 a. m.] 80. Department's 18, January 30, 3 p. m. concerning Russian issue of reorganization loan. Under my instructions Paxton 90 saw Jabin Hsu, Director of Domestic Affairs of the Ministry of Finance, and with my approval has furnished to him copies of the letters dated June 5, 1936 signed by W. E. Hurry and July 15, 1936 signed by Sir Leonard Franklin, 91 showing that British bondholders have received 30 per


"C. R. Bennett, representative in China of the American Group of the China Consortium.

J. Hall Paxton, Second Secretary of Embassy in China, at Nanking.

Letters not printed; see Department's instruction No. 252, September 5, 1936, Foreign Relations, 1936, vol. iv, p. 595.


cent of face value stating Hsu promised to look into the matter. Further developments will be reported. Copy to Peiping by mail.


893.51 Con-Ob Continental/180 Memorandum by the Chief of the Division of Far Eastern Affairs

(Hornbeck) of a Conversation With the Vice President of the Continental Illinois National Bank and Trust Company of Chicago (Abbott)

[WASHINGTON,] March 11, 1937. Mr. Abbott called me on the telephone from Chicago and, after indicating that he had just returned from a vacation in Florida of several weeks' duration, inquired whether I had seen a copy of the letter of February 15 addressed to him by Mr. Clark of the Foreign Bondholders Protective Council 92 in regard to the proposed settlement of the Chicago Bank Loan. I replied in the affirmative. Mr. Abbott inquired whether I was in agreement with the view expressed in Mr. Clark's letter under reference that the terms offered by the Chinese Government are the “utmost” that can be obtained and that ac. ceptance thereof should therefore be recommended to the concerned noteholders. Again I replied in the affirmative. Mr. Abbott said that he had received from the Council a telegram of recent date to the effect that further progress in the matter now awaited decision by the Continental Illinois Bank and that, in the opinion of the Council, any undue delay in replying to the offer of the Chinese Government would render less likely the attainment of a satisfactory settlement. Mr. Abbott inquired whether I concurred in such opinion. I replied by saying that for some time past I had felt that the offer of the Chinese Government should be accepted promptly, as a quibbling over details with attendant delay might cause the Chinese Government to drop the matter entirely.

Mr. Abbott then referred to the offer of the Chinese Government to provide as security for the payment of the loan either the Consolidated Taxes or the Salt Revenue and inquired which of the two would be preferable. I said that in my opinion the two revenues were, for the purpose indicated, of equal value; that there were those who might argue in favor of the Salt Revenue on the basis of the fact that its administration is in part foreign directed; that however that might be the success or failure of any settlement which might be reached would, in my opinion, depend not on the particular se

» Not printed.

curity offered but rather on the ability and the preparedness of the Chinese Government to live up to its agreement.

Mr. Abbott inquired whether, in the event that the Continental Illinois Bank should concur in the view of the Council, the Department would associate itself with the settlement under consideration. I replied to the effect that the entire matter was private in character and that the American Government would not become a party thereto. I added, however, that the Department would, as in the past, be prepared to endeavor to protect and to assist the concerned American interests in such manner as, in the light of the then existing circumstances, might be deemed appropriate and practicable.

In concluding my remarks I said that the views I had expressed were of course personal. Mr. Abbott said that he realized that such was the case; that our frank discussion of the subject was helpful to him; and that he would communicate promptly-probably today, with the Foreign Bondholders Protective Council.


893.51/6332: Telegram

The Counselor of Embassy in China (Peck) to the Secretary of State

NANKING, March 16, 1937–11 a. m.

[Received 2:10 p. m.] 118. My 100, March 3, 9 a. m.9 The following letter dated March 13 and addressed to the Ambassador was received March 15 from Dr. H. H. Kung

“With reference to my letter of March 1 concerning the proposed Hukuang loan settlement, I enclose a copy of a telegram received on March 11 from Mr. J. Reuben Clark, Junior, of the Foreign Bondholders Protective Council Incorporated, New York.

The draft announcement, as sent to you on March 1 for communication to representatives in the United States of the American creditors, was also then communicated to the representatives in China of the four national groups. Previously it had been fully discussed with the latter representatives who found it acceptable for transmittal to their principals, and I understand it was so transmitted by the British, French and German representatives.

I feel that the best procedure would be for the creditor representatives in the different countries fully to communicate with each other so that they may express collectively to the Government their views concerning the draft announcement. Communication among all the creditor representatives in the United States and Europe in order to ascertain their common views obviously is much simpler than to have the Chinese Government in effect act as an intermediary. Considerable further delay would now result were I to discuss particular points

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