893.51/3580: Telegram
The Minister in China (Schurman) to the Secretary of State
[Received November 17—9:15 p.m.]
407. My 404 [403], November 16th, midnight. Meeting of diplomatic corps called for 18th to consider request of Chinese Government to dean dated 16th to secure immediate consent of interested legations to earliest possible release of 6,000,000 taels from surplus of receipts of Maritime Customs after deduction therefrom of service, redemption of loans, and payment of indemnities and to notify Inspector General to make prompt remittance accordingly. Dean circularizes following memorandum of Inspector General dated the 17th:
“To relieve the panic which is causing a run on the Bank of China and Bank of Communications, the Government proposes to liquidate part of its very large overdraft on the above two banks by drawing on the Maritime Customs balances in the Inspector General’s hands and has instructed the Inspector General to hand over to the two banks a sum of $6,000,000.
When entrusting the Inspector General with the service of the consolidated silver debt the Government definitely assigned the balances of the Maritime Customs to the formation of a sinking fund for the protection of the bondholders. These balances are therefore a trust vested in the Inspector General and they cannot be drawn on for any other purpose.
Up to the end of the month of October the special funds assigned for the service of the consolidated debt have been duly accounted for. There is, however, no certainty that these funds will continue to be received and in these circumstances the consolidated debt service will have to be supported by drawing on the sinking fund.
Bondholders, Chinese and foreign, have subscribed to these loans on the strength of the guarantee offered by the management of the debt service being in the Inspector General’s control and it would constitute a breach of trust were any portion of the sinking fund diverted.
In these circumstances the Inspector General proposes to disregard the instructions of the Government which cannot be carried out without involving him personally in both [sic].
As the Government has applied to the diplomatic body for a release of the customs balances following the precedent of the years 1919 and 1920 before the sinking fund was created and sanctioned by Presidential mandate, the Inspector General ventures to submit this memorandum to His Excellency the Doyen for the information of his colleagues (signed) F. Aglen, Inspector General.”
For details of this arrangement for sinking fund see my despatch number 62, October 5th.30 I suggest above information of interest to American delegates conference.
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