EFFORTS FOR THE CONSIDERATION OF AMERICAN CLAIMS 893.48/1037 Memorandum by the Chief of the Division of Far Eastern Affairs (Hornbeck) of a Conversation With the Chinese Ambassador (Sze) [WASHINGTON,] January 21, 1936. The Chinese Ambassador called, and the conversation began with discussion of miscellaneous phases of the current situation in China. There was then brought up the subject of the conversation held on January 364 and the views exchanged at that time. The Ambassador said that since then he had exchanged a number of communications with the Chinese Minister of Finance, H. H. Kung, urging upon Kung adoption of the suggestions which the Ambassador had made with regard to procedure in relation to the Chicago Bank Loan.65 He said that as recently as yesterday he had received a telegram from Kung in which Kung advanced certain views and asked for the Ambassador's opinion, and that he (the Ambassador) had telegraphed back again urging adoption of his (the Ambassador's) suggestions. He said that he was convinced that the thing to do was to begin the making of payments and that the Chicago Bank Loan was the obligation with regard to which the beginning should be made. He said that he could not understand the failure of his Government not to see the matter in the light in which he saw it. He said that he would keep on the line which he was pursuing. I asked the Ambassador whether he had any information with regard to a rumor to the effect that H. H. Kung is likely to retire from the Ministry of Finance and that there are divergencies of view between Kung and T. V. Soong.66 The Ambassador said that he had not had quite that information, but that he had had in a personal letter information to the effect that Kung was becoming very tired of his "job" and would like to go abroad as an Ambassador. The Ambassador asked me whether I had heard anything about the Hukuang Loan.67 I told him that I had, and I gave him the substance of the information which we have in Peiping's mail despatch No. 117, December 4, 1935,68 on the Hukuang Loan. I made the comment that 63 Continued from Foreign Relations, 1935, vol. III, pp. 753-767. 64 See Memorandum by Mr. Raymond C. Mackay of the Division of Far Eastern Affairs, p. 459. 65 See Foreign Relations, 1919, vol. 1, pp. 505 ff. 66 Former Chinese Minister of Finance, Executive Member, National Economic Council of China. 67 Final agreement for a railway loan from a four-power banking group (American, British, French, German), signed at Peking, May 20, 1911; John V. A. MacMurray (ed.), Treaties and Agreements With and Concerning China, 1894-1919 (New York, 1921), vol. 1, p. 866. 68 'Not printed; for enclosure, see memorandum from the Chinese Ministry for Foreign Affairs to the American Embassy, Foreign Relations, 1935, vol. III, p. 765. the Chinese Government's reply to the joint memorandum of the British, the French and the American Ambassadors of August last was unsatisfactory and was regarded as another evidence of the disinclination of the Chinese Government to deal effectively with such matters. The Ambassador shook his head with a gesture of despair. I deliberately avoided inquiring expressly whether the Ambassador had been taking any further steps toward obtaining readjustment of the R. F. C.70 and the F. C. A."1 obligations, as regards schedule of payments; but I gained the impression both from what the Ambassador said and from what he omitted saying that he has not recently been active in that connection. I took occasion to throw out the suggestion that if in the future officials of other departments choose to make statements to the Ambassador affirming or implying that the American Government will pursue a particular course of action with regard to those obligations or other obligations, it might be well for the Ambassador to let this Department know of the such assurances or intimations upon which, when conferring with this Department, he relies. The Ambassador indicated that he welcomed the suggestion and regarded it as one which might prove helpful. The Ambassador then reverted to the efforts which he is making in connection with the Chicago Bank Loan. He said that he was pressing the matter so hard that perhaps some of his own people might suspect that he himself had a personal interest, which, he said emphatically, he had not. He said that he nevertheless would keep right on urging the soundness of his view and his plan. I expressed gratification that he was thus being active in the matter. 893.51/6087 The Ambassador in China (Johnson) to the Secretary of State No. 73 NANKING, January 21, 1936. [Received February 25.] SIR: I have the honor to refer to a despatch addressed to the Department by the American Consul General at Shanghai, No. 107 of January 20, 1936,72 on the subject "Slump in Chinese Government Bonds Causes Alarm". On January 15, in the course of a conversation I held with Dr. H. H. Kung, Minister of Finance, in reference to another subject, he told me that he had been trying to do something in the direction of liquidating British and American loans now in default. He said that he had proposed to the British and Ger 69 For joint memorandum see Foreign Relations, 1935, vol. III, p. 763; for Chinese reply see ibid., p. 765. 70 Reconstruction Finance Corporation. 71 Farm Credit Administration. 72 Not printed. mans the replacement of Tientsin-Pukow Railway bonds in default with new bonds redeemable in thirty years and at a lower rate of interest than the present bonds. The plan would provide for the payment of interest only for the first five years and thereafter for payment of interest and gradually increasing payments on capital. Dr. Kung said to me that the object of his plan was to protect the interests of holders of bonds now in default and that he had proposed a similar plan for adoption in the case of the Hukuang Railway bonds, one semi-annual payment of interest on which bonds has been in default for a long time. This proposal, he said, had been handed to Mr. Charles R. Bennett of the National City Bank in Peiping, who had just landed in Shanghai after a journey to the United States and intended to remain in Shanghai for a few days. The Minister of Finance said, also, that he had directed the Chinese Ambassador at Washington to discuss with the Chief of the Division of Far Eastern Affairs of the State Department and with Mr. John Jay Abbott of the Continental-Illinois National Bank and Trust Company, a similar plan to take care of the "Chicago Bank Loan" of 1916. Dr. Kung made it appear that these schemes were praiseworthy efforts to make good existing deficiencies in the handling of its foreign obligations by the Chinese Government, but apparently these efforts are at the bottom of the rumors of tampering with Chinese bonds and have occasioned the public uneasiness which is described in the despatch of January 20, 1936, from the American Consul General at Shanghai. My conversation with Dr. Kung has been reported elsewhere, but it seems desirable to invite special attention to his remarks concerning the bond situation, as is done in the present despatch. Respectfully yours, 893.48/1040 For the Ambassador: WILLYS R. PECK, Counselor of Embassy Memorandum by the Chief of the Division of Far Eastern [WASHINGTON,] January 30, 1936. The Chinese Ambassador called and stated that he regretted having to say that the Chinese Minister of Finance, H. H. Kung, after much effort on the Ambassador's part, had decided that the Chinese Government could not adopt the plan which the Ambassador had been urging for the handling of the payment of the Chicago Bank Loan. I said that I received this news with great regret. The Ambassador said that Kung takes the position that he must handle this obligation in the same manner in which he is dealing with "the others". I made the observation that, with regard to most of "the others", this meant "doing nothing about them", whereas, with regard to some of "the others" the Chinese Ministry of Finance has been making special arrangements of particular character. I said that Kung's reported position amounted to a refusal to be responsive to the request which the Department had communicated in the form of the suggestion which I had made to the Ambassador in conversations held in December, our request having been occasioned by and having been made in response to the Chinese Government's request made to this Government in relation to the FCA and the RFC obligations of the Chinese Government. I said that it amounted to a "no" by the Chinese Government. The Ambassador said that he felt that I was putting it a little too strongly. The Ambassador said that he had informed Mr. Abbott, of the Chicago Bank, of Kung's position and that Mr. Abbott would be passing through Washington tomorrow and would confer with the Ambassador about the situation. It was assumed that Mr. Abbott while here would call on me. I said that if the Ambassador would explain to Mr. Abbott what the method was by which Kung was contemplating dealing with "all" of the obligations in some one manner, Mr. Abbott might be able to explain the matter to me. I said that, so long as it remained Kung's position that he would not be responsive to the suggestions which we had made, I hoped "that the Chinese Ambassador would make no further move toward requesting concessions in connection with the FCA and the RFC payments". The Ambassador said that this would put him in a difficult position. I said that I realized that he himself had been doing everything possible to move his Government in the right direction and that the last thing that I would wish to do would be to put him in an embarrassing position, but that nevertheless the hope which I had expressed was a hope which I entertained. It was agreed that the Ambassador would try to make clear to Mr. Abbott points which thus far I had been unable to understand. S[TANLEY] K. H[ORNBECK] 893.51 Con. Ob. Ault and Wiborg/13 The Ambassador in China (Johnson) to the Secretary of State No. 110 NANKING, March 5, 1936. [Received April 6.] SIR: In reference to the debt owed by the Bureau of Engraving and Printing at Peiping to the Ault and Wiborg Company, I have the honor to state that the Embassy, under date of January 6, 1936, received a letter from the Ault and Wiborg Company (Far East) enclosing a copy of its letter of January 5, 1936 to the Bureau of Engraving and Printing, which contained a statement of the outstanding indebtedness. The Company desired that the Embassy continue its efforts to bring about a settlement of this account. There is enclosed herewith a copy of the Company's letter of January 6, 1936.73 I took this matter up on March 2, 1936 with Mr. Chang Ch'un, Minister for Foreign Affairs, having given him advance notice of my intention to do so. A memorandum of my conversation with the Minister for Foreign Affairs is enclosed. There is enclosed, also, a copy of a letter on this subject, written by the Counselor of Embassy at Nanking, to Dr. Hsu Mo, Vice Minister for Foreign Affairs, on January 27, 1936.74 It will be noted from the memorandum of conversation that the Minister for Foreign Affairs had written to the Ministry of Finance, urging that the debt be settled, but had not received a reply. The Minister for Foreign Affairs stated, erroneously, that the Bureau of Engraving and Printing had been closed. He also stated that the Bureau had a great number of debts, and that he did not know what plans had been undertaken in regard to these debts. In this connection, I have the honor to refer to the Embassy's despatch No. 84, of November 13, 1935, from Peiping, on the subject "Nishihara Loans",75 in which I had the honor to report that the Bureau of Engraving and Printing was reorganized and had recently resumed operations after a stoppage lasting through the summer months, and that the Ministry of Finance had authorized the Bureau to make an arrangement for the repayment of a loan of Yen 2,000,000.00 negotiated with the Peking Government in 1918 by Mr. Nishihara 76 on behalf of Japanese banks; the amount to be repaid, including interest, was Yen $4,500,000.00 payable in three hundred equal monthly instalments. In his conversation with me the Minister for Foreign Affairs did not mention these facts and, I assume, was ignorant of them. The Embassy will continue to press this matter with the Ministry of Foreign Affairs, in the hope of bringing about the payment of the debt to the Ault and Wiborg Company." Respectfully yours, NELSON TRUSLER JOHNSON 78 Not printed. The indebtedness amounted to a total of U. S. $48,556.27. 74 Not printed. 75 76 See Foreign Relations, 1918, pp. 122-123, 130–133, 147-148, and 155-159. Kamezo Nishihara, Japanese banking group representative at Peking for 1918 loan negotiations with the Chinese Government. 77 The Ambassador in China in his despatch No. 1421, October 5, 1937, reported as follows: "A reply dated July 5 was received from the Director of the Bureau of Printing and Engraving that as the amount owed to Messrs. Ault and Wiborg and various other concerns by the Bureau was extremely large the Bureau at the moment was unable to take any action with a view to liquidating the indebtedness." (893.51 Con. Ob. Ault and Wiborg Co/15) |