893.51/2480
The Minister in China (Reinsch) to the Secretary of
State
Peking, September 3,
1919.
[Received
October 17.]
No. 2980
Sir: Sometime ago the Chinese Government
gave notice that the interest coupons of Hukuang Railway bonds,
German issue, would not be paid except those that had previously
been paid through the Hongkong and Shanghai Bank in London. As the
issue is an international one, it was considered that such a refusal
to pay interest due to bona fide holders, of
other than German nationality, was not proper. I have the honor to
enclose the draft of a note to the Foreign Office which is to be
sent in jointly by my British and French colleagues and myself.
I have [etc.]
[Enclosure]
Draft of Note of the American Minister
(Reinsch) to the Chinese
Acting Minister of Foreign Affairs (Ch’en Lu)98
Sir: I have the honour to acknowledge
receipt of Your Excellency’s note of the 11th June99 regarding payment
of interest and [Page 588]
repayment of principal of Tientsin-Pukow and Hukuang Railway
Bonds. Your Excellency informs me therein that bonds of those
issues, other than those on which interest has been paid by the
Hongkong and Shanghai Bank in London from September 3rd, 1917 to
March 31st, 1919, will be regarded as being held by enemy
subjects and therefore as being neither negotiable nor
valid.
On receipt of that note I at once communicated its contents to my
Government, by whom I am now instructed to protest against this
decision of Your Excellency’s Government.
As regards differentiation between bonds of which coupons have
previously been paid and those which have not this protest is
based on the following grounds:
- 1.
- It would be practically impossible to make a list of
numbers already paid.
- 2.
- The Stock Exchange[s] would object to any arbitrary
difference being made in value of bonds with the
exception of a difference based on enemy
ownership.
- 3.
- Investors would not understand refusal to pay interest
on bonds bearing certain numbers, while paying bonds of
same issue bearing other numbers.
- 4.
- It would be impossible to place any future Chinese
securities in foreign markets if a certain number are to
be arbitrarily made valueless.
As regards the Hukuang Railway Loan in particular, it has to be
observed that the Bonds and coupons of this loan have been
internationalized, that is to say payment of interest and
repayment of principal in each of four international centres is
a direct obligation of the Chinese Government as expressly
stated on coupons and bonds of this loan. As a consequence the
Hongkong and Shanghai Bank in London, in its capacity of
Clearing House, is not in a position to exercise supervision
over bonds and coupons cashed at other centres and advised to it
for clearance. The proposal to limit the payment of interest on
German issued bonds to those of which the relative coupons have
been paid in London is therefore clearly impracticable, since
the internationalisation of these bonds makes them good delivery
in the various centres where the relative coupons are payable
indifferently as regards the place of issue, as each coupon
explicitly states. It is on these terms that investors of the
Allied and Associated countries as well as neutrals have bought
these bonds, and the widespread injustice to bona fide holders which would result from carrying out
the present instructions of the Minister of Communications makes
it impossible, in my opinion, to justify the limitations now
imposed on the grounds either of equity or policy.
I avail myself [etc.]
