The Secretary of State to the American Group

Gentlemen: Adverting to previous correspondence regarding the negotiations now in progress at Peking concerning the refunding of certain loans to the Chinese Government, I have to state that the Department has been advised that the Ministry of Finance at Peking has agreed to the terms for a renewal of the loan of the Continental and Commercial Trust and Savings Bank with the exception that the Chinese Government is not willing to include provision for the disposition of the Hukuang Bonds. The Chinese Government has taken the position that this is a matter which cannot be immediately adjusted. It is stated, however, that the Chinese Government recognizes the validity of the Hukuang Bonds and that the coupons will be paid as soon as the account against Germany can be settled. It is asserted that if the stipulation relating to the Hukuang Bonds can be omitted from the refunding loan and made the subject of separate understanding, the other articles of the proposed loan agreement may be signed without delay.

From the above information, which comes to the Department from a reliable source, the Department receives the impression that the Chinese Government is prepared to concede the substance of what the Group has desired with respect to the German issue of Hukuang bonds. If that impression is correct, the Department is hopeful that the Group may see its way to make this proposal of the Chinese Government the basis of an arrangement which would enable that Government to cure its recent default with respect to the Chicago Bank loan, and obviate the possibility of a further default with respect to the maturity of the Pacific Development Corporation loan on December 1st next.

I am [etc.]

For the Secretary of State:
F. M. Dearing

Assistant Secretary