893.51/2353
The Minister in China (Reinsch) to the Acting Secretary of
State
Peking, July 7,
1919.
[Received August
5.]
No. 2881
Sir: I have the honor to enclose copy of a
note received from the Foreign Office concerning the confiscation of
the German issue of Hukuang Railway bonds. It was, of course,
impossible for me to accept this interpretation as, undoubtedly,
many bonds of the German
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issue had, in perfectly good faith, come into the hands of American
holders. My British and French Colleagues are of the same opinion. I
have the honor to enclose draft of a note written in reply to the
Foreign Office’s note of June 11th, which I have submitted to my
Colleagues for joint action.
I have [etc.]
[Enclosure 1]
The Chinese Acting Minister of Foreign
Affairs (Ch’en
Lu) to the American
Minister (Reinsch)
[Peking,] June 11, 1919.
No. 976
Sir: We are in receipt of a note from
the Ministry of Communications to the effect that the Loan
Agreement for the Ching-Pu Railway of January 13, 1908, and the
supplementary Agreement of September 28, 1910, and the Loan
Agreement of the Hukuang Railways of May 20, 1911, together with
the various notes connected therewith regarding issue of bonds,
interest and special privileges are all cancelled from August
14, 1917, the date of the declaration of war by China upon
Germany and Austria. The payment of capital and interest on
these obligations ceased from the date of the declaration of
war. But there is a certain number of these bonds which
investigation has shown are not in the hands of enemy subjects.
The Hongkong and Shanghai Bank acted for the Chinese Government
from September 3, 1917 to March 31, 1919 in the payment of
interest on these bonds. This was limited to the numbers of the
bonds and corresponding numbers of the interest warrants as
reported by the Bank. We acknowledge that these bonds were not
in the hands of enemy subjects, and in future the Hongkong and
Shanghai Bank will continue to pay the interest on these bonds.
With the exceptions of the above bonds, all the bonds issued by
the Deutsch Asiatische Bank are reckoned as belonging to enemy
subjects; and will be applied to the settlement of the expenses
incurred by China in the War. No payments of principal or
interest will be made by China upon them. They may not be used
as negotiable securities. The Ministry of Foreign Affairs is
requested to inform each Legation of this decision so that these
bonds reserved to meet the losses of the Chinese Government may
not be transferred from enemy subjects to the hands of those who
are not enemy subjects.
This Ministry now sends you this notification for communication
to the American Government so that American merchants may be
duly notified.
A Formal Despatch.
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[Enclosure 2]
Draft of Proposed Note of American
Minister (Reinsch) to the
Chinese Acting Minister of Foreign Affairs (Ch’en Lu)93
I have the honor to acknowledge the receipt of Your Excellency’s
despatch of June 11th quoting a despatch from the Ministry of
Communications which states in connection with the Tsin-Pu
Railway Loan Agreement of January 13th, 1908, the Supplementary
Loan Agreement of September 28, 1910, and the Hukuang Loan
Agreement of May 20, 1911, that all bonds issued thereunder
through the Deutsche Asiatische Bank will be considered as
belonging to enemy subjects and will be applied to the
settlement of expenses incurred by China in the War. An
exception is to be made, however, in the case of such of these
bonds as were not in enemy hands from September 3, 1917 to March
31, 1919, as evidenced by the payment during that period through
the Hongkong & Shanghai Bank on behalf of the Chinese
Government of principal and interest thereon. Subject to this
exception it is stated that no payments of principal or interest
will be made by China upon such bonds.
I find myself unable to accept the proposal of the Ministry of
Communications. There are a large number of such bonds which
have been purchased in entire good faith by American citizens
both before and after September 3, 1917, in respect to many of
which it is probable that no application has been made for the
payment of principal or interest. It is manifestly unjust and
contrary to recognized international usage that such bonds
should be repudiated. Moreover it is understood that the bonds
issued through the Deutsche Asiatische Bank are practically
identical in appearance with these issued through the other
non-enemy banks interested in these issues, and bear nothing
which would enable the public to distinguish between them. It is
certain thereafter [therefore?] that many
such bonds will be purchased in entire good faith by American
citizens from time to time. Finally, I have the honor to observe
that the bonds of these issues are payable to bearer and are in
reality the same as interest bearing bank notes. It is contrary
to all established practice to declare that any instrument of
this sort is repudiated because it has passed through enemy
hands.
Such action as the Chinese Government may decide to take in
regard to enemy personal property within Chinese jurisdiction is
not a matter which concerns me. But, for the reasons stated
above, I
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must protest
most strongly against any attempt to repudiate Chinese national
bonds held by American citizens and must reserve the right to
demand the execution of China’s contractual obligations in
respect thereto.