fall of interest during 1937-38. This scrip is to be paid beginning 1942 over approximately 20 years, the yearly installments to be substantially equal except that the Government reserves the right of transferring to the last three of the aforementioned approximately 20 years not over 50% of payments due in the first three years. 4. Suitable instructions are to be given to the Chinese Maritime Customs, the Chief Inspectorate of Salt Revenue, the Central Bank of China, and the Railway Administration to give effect to the understanding reached. Announcement also was made that the railway authorities are taking steps to improve the condition of the railway and its administration on the general lines contemplated in the loan agreements with a view to benefiting both the interest of the Government and of the bondholders. 893.51 Con-Ob American Group/40: Telegram The Secretary of State to the Ambassador in China (Johnson) WASHINGTON, April 28, 1937-7 p. m. 77. Reference, your 147, April 2, 5 p. m.1 Discussion of Minister Kung's proposal for settlement of Pacific Development Corporation Loan will be initiated by Mr. Lamont with Kung in London. Meanwhile, Mr. Arthur Anderson of J. P. Morgan and Company has informed Department informally that majority of representatives of the American interests concerned, having conferred in New York, incline to the view that a satisfactory and reliable agreement formulated on the basis of a capital sum of $4,300,000 would be better than an unsatisfactory agreement of doubtful reliability based on a capital sum of $5,500,000. They and officers of the Foreign Bondholders Protective Council, informally consulted, feel that the agreement should approximate in terms the agreement made on the Chicago Bank Loan. Their contentions will be advanced by Mr. Lamont in due course, but they wished that the Department and the Ambassador to China be informed, in the hope that we will endeavor as may be appropriate to foster and support the idea of reasonable terms on the basis of a reasonable amount. Department assumes that Bennett will be in position to keep you informed. If and as this subject arises in any conversations which you may have with Chinese officials or with Arthur Young, you should, without going into details as to terms or amount, urge that the Chinese 'Not printed; see letter of March 31 from the Chinese Minister of Finance to the American Ambassador in China, p. 670. 2 American Adviser to the Chinese Ministry of Finance. Government should endeavor to make an equitable agreement rather than drive a hard bargain for settlement of this loan. HULL 893.51 Con-Ob Continental/196 The Ambassador in China (Johnson) to the Secretary of State No. 1233 PEIPING, May 17, 1937. [Received June 15.] SIR: I have the honor to refer to previous correspondence regarding the settlement of the Chicago Bank loan, and to transmit herewith a copy in translation of a note from the Minister for Foreign Affairs of April 29, 1937, which encloses a copy of the announcement of this settlement made in the press of April 12, 1937.3 This announcement is identical with the draft announcement quoted in the Embassy's (Nanking) telegram No. 131 of March 23, 12 noon, except that it contains the additional final paragraph, which reads as follows: "All provisions of the original contract remain unchanged except insofar as the carrying out of this offer gives effect to other specific provisions." Respectfully yours, For the Ambassador: FRANK P. LOCKHART Counselor of Embassy 893.51 Con-Ob American Group/50: Telegram The Ambassador in China (Johnson) to the Secretary of State NANKING, May 21, 1937-11 a. m. [Received May 21-7:30 a. m.] 212. Department's 77, April 28, 7 p. m., paragraph 1, regarding Pacific Development Corporation loan. I have received the following letter dated May 20 from Arthur N. Young: "You will, I am sure, be pleased to learn that according to a cablegram from London which I received this morning, the Pacific Development loan has been settled between Minister Kung and Mr. Lamont, subject to confirmation by Nanking and New York. The cablegram summarizes the terms as follows: (1) Amount United States dollars 4,900,000; (2) Overdue interest canceled; (3) Interest 2 per cent this year, one-half per cent annual increase until 4 per cent maximum; and (4) amortization provisions security the same as for the Chicago loan". JOHNSON 'Neither printed. 493.11 American Metal Co. Inc./95 The Ambassador in China (Johnson) to the Secretary of State No. 540 NANKING, July 23, 1937. [Received August 23.] SIR: I have the honor to refer to the Department's telegraphic instruction, No. 100 of July 8, 12 noon, suggesting that the Embassy again bring to the attention of the Chinese authorities the matter of the claim of the American Metal Company, Limited, against the Kwangtung Government for payment of the purchase price of silver sold to a Department of that Government in 1919. The Department has already been informed in a telegram from this office, No. 266 of July 12, 4 p. m.,7 regarding a reply made to a telegram received from Mr. Chester Fritz, at Hong Kong. On July 13, acting under my instruction, Mr. Atcheson took up the matter with Mr. Jabin Hsu, Director of the Department of General Affairs of the Ministry of Finance. This seemed to be an advantageous way of handling the matter, since the relations of Mr. Hsu with the Embassy, and with Mr. Atcheson in particular, have for a long time been very friendly. I felt that if any official would be likely to exercise the personal influence which seems called for in this matter, it would be Mr. Hsu. 7 There is enclosed a memorandum of the conversation which took place between Mr. Hsu and Mr. Atcheson. Barring a few of the more vigorous American phrases which Mr. Hsu has retained from his newspaper experience of several years in the United States, and used on this occasion, the memorandum is a faithful account of the remarks made by Mr. Hsu. Its frank statement that the Chinese Minister of Finance acts, in money matters, from purely utilitarian motives is unusual in diplomatic intercourse, but Mr. Atcheson feels that a disclosure of what experience shows must be a conceded fact was more useful in the circumstances than would have been an empty, though polite and soothing, gesture. Mr. Hsu told Mr. Atcheson, in effect, that the American Metal Company, Limited, would be very well advised to accept any payment on principal offered by the Kwangtung Government and waive accrued interest, this being in accordance with the general rule of the National Government itself in settling up old claims. I have been connected with the handling of this claim for a matter of twelve years, commencing in the Legation in Peiping, subsequently in the Department, and now in Nanking, and bearing in mind all the 8 9 7 Not printed. Representative of the American Metal Company, Ltd., in China. George Atcheson, Jr., Second Secretary of Embassy in China. fruitless efforts which have been expended, I regretfully express the opinion that the American Metal Company would be well advised to accept what cash it can obtain from the present Kwangtung Provincial Government and write off its losses as the price of injudicious extension of credit in the beginning. On July 13 I again telegraphed to Mr. Fritz at Hong Kong saying that an official of the Ministry of Finance had stated that the Ministry was not likely to intervene in the negotiations. From the standpoint of the National Government the origin of this transaction is obscure; the Chinese provincial officials who negotiated the purchase have long since vanished from the scene; the aggregate sum of indebtedness handed down to the present National Government by various provincial and national regimes is, from its standpoint, so huge that it has had to adopt a policy of minimum payments just sufficient in amount to retain a reputable cloak of reliability. At the risk of appearing frivolous, the writer cannot but recall a remark made by an official of the Ministry of Finance in Peiping some twelve years ago when the Ministry was being pressed to pay a debt owing to American interests. The Chinese official admitted that the Ministry had just received some cash, but he advanced as a statement whose truth must be apparent that the Ministry of Finance was obliged to keep this money "to spend", and could not afford to use it in paying off debts. In present day China the needs of the moment appear to the authorities exigent and, as intimated by Mr. Hsu, if anything is to be paid on inherited obligations, such payments must meet some present need. The authorities have been confirmed in the wisdom of this course by the fact that they unaccountably seem able to get credit, in spite of defaults of former administrations. In this connection, I venture to refer to suggestions advanced by the office of the Commercial Attaché in Shanghai in sundry reports that the American Government utilize appropriate opportunities for demanding some compensating benefit for assistance extended to China in connection with currency stabilization and other projects. Although entertaining little hope that the communication will produce any results of value, I have sent a note to the Ministry of Foreign Affairs, pressing for action in accordance with the Embassy's earlier note of May 10, 1937 and the Department's present instruction.10 A copy of the note of July 15 is enclosed. There are enclosed, also, a copy and a translation of the Ministry's purely formal reply of July 17, 1937.11 10 Department's telegram No. 109, July 20, 4 p. m., stated that Dr. Kung, then in Washington, indicated that he would give the American Metal Co. claim his attention upon his return to China (493.11 American Metal Co./90). 11 Enclosures not printed. It is to be hoped that the Department will not attribute to a defeatist frame of mind the opinions set forth in this despatch. It is possible that the American Ambassador would not share those opinions, but from conversations which took place while he was in Nanking, I am inclined to think that he views somewhat in the way I have depicted the futility of attempting to collect long outstanding obligations owed to American organizations by the Chinese authorities, together with accrued interest in full amounts. Respectfully yours, For the Ambassador: Counselor of Embassy 493.11/2063: Telegram The Ambassador in China (Johnson) to the Secretary of State NANKING, September 21, 1937-4 p. m. [Received September 21-12:29 p. m.] 698. Bennett 15 informs me informally that pressure is being applied on Chinese members of the China Foundation 16 to invest $5,000,000 in Chinese Government Liberty Loan bonds from the endowment funds of both indemnity remissions. [J. A.] Mackay and [S. T. Bitting?] as members of the Finance Committee insist that Foundation must first approve and in anticipation of the application wish to learn unofficially whether the American Government believes it has the right and wishes to object to investments of this sort. My own feeling is that our Government having either explicitly or tacitly assented to the authority of the Foundation trustees in such matters should express no opinion but I respectfully request that the Department indicate what reply I should make to this question. Repeated to Peiping. JOHNSON 493.11/2063: Telegram The Secretary of State to the Ambassador in China (Johnson) WASHINGTON, September 24, 1937-2 p. m. 262. Your 698, September 21, 4 p. m. The meaning of your second sentence is not clear. However, Department believes that the Foundation possesses the right to approve or disapprove proposals for in "C. R. Bennett, representative in China of the American Group, China Consortium. 16 China Foundation for the Promotion of Education and Culture, of which Mr. Bennett was a trustee. |