The Minister in China (Reinsch) to the Acting Secretary of State

No. 2847

Sir: In continuation of my despatch No. 2695 of April 29th relating to the proposal to eliminate the German interest from the Hukuang railway enterprise, I have the honor to enclose copy of a note from the Foreign Office dated April 30th which was written and received after the note of the Foreign Office already communicated to you in which it accepts the proposal for elimination of the German interest. That such a demand should be made seemed to the Ministers concerned as somewhat extraordinary. It was first considered appropriate to return the note to the Foreign Office as the alternatives presented therein could not be entertained. However, as the British Minister remarked that at the time when he had received the assurance that our proposal to eliminate the German interest would be accepted in a note, the Acting Minister for Foreign Affairs had also stated that the Chinese Government might make a counter proposal in this matter, we decided to reply—merely stating that we should defer expressing ourselves upon the counter proposals at this time. Copy of the note in this sense to the Foreign Office, dated May 22nd, is also herewith enclosed. Identical notes were sent by the three Ministers concerned.

I have [etc.]

Paul S. Reinsch
[Enclosure 1—Translation]

The Chinese Acting Minister of Foreign Affairs (Ch’en Lu) to the American Minister (Reinsch)

No. 962

Sir: This Ministry has already sent Your Excellency a communication regarding the elimination of the German interest in the Hukuang Railways. We are now in receipt of a note from the Ministry of Communications saying that certain declarations ought to be made; (1) The German share in the bond issue of the Hukuang Railway System with the privileges attached thereto has been cancelled by the Chinese Government and such rights and privileges revert to the Chinese Government which should enjoy the German share of the rights and privileges. The responsibilities of the Germans in respect to loans and construction work, as defined in the Loan Agreement, should also be assumed by the Chinese Government, which may transfer them to Chinese capitalists who will receive the same treatment as the British, French and Americans. [Page 583] (2) If the British, French and Americans wish to obtain the German rights which have reverted to China, they must pay to China the £1,500,000 already advanced by the Germans, after which they may inherit the rights and attendant privileges attaching to the German loan. This Ministry is requested to convey this declaration to the British, French and American Ministers.

We now ask Your Excellency to choose one of the alternations [alternatives] proposed by the Ministry of Communications. If the second is preferred, the German share amounting to £1,500,000 with accrued interest has been appropriated by the Chinese Government, as security against the war indemnity of China. Therefore anyone wishing to obtain the (German) rights and privileges should pay to the Chinese Government the £1,500,000. We now send this notification and await Your Excellency’s reply.

Ch’en Lu
[Enclosure 2]

The American Minister (Reinsch) to the Chinese Acting Minister of Foreign Affairs (Ch’en Lu)

No. 948

Excellency: I have the honor to acknowledge the receipt of your note of April 30, containing the two proposals of the Chinese Government for dealing with the cancelled rights and privileges of the Germans in the Hukuang Railway Loan. As to how the German rights are to be distributed now that they are cancelled, the matter needs careful consideration in view of the provisions of the Loan Contract. I am not able at present to give a decisive reply as to the policy to be adopted concerning the two proposals, which do not seem to be very clear. I will defer expressing myself on the subject until we can go into particulars more thoroughly after the representatives of the different banks at Peking have received instructions from their head offices.

I avail myself [etc.]

Paul S. Reinsch