861.77/2170a
The Department of State to the Chinese Legation
Memorandum
The Department of State is informed that the Board of Directors of the Chinese Eastern Railway has approved in principle an issue of bonds by the railway to an amount of approximately 25,000,000 taels. A portion of the bonds, it is reported, will be delivered to the Chinese Government, in pursuance, it is presumed, of the supplementary agreement to the contract for the construction and operation of the Chinese Eastern Railway, concluded October 2, 1920,14 by the Chinese Minister of Communications with representatives of the Russo-Asiatic Bank. As the plan is reported to the State Department, the remainder of the bonds will be disposed of in the open market in accordance with the requirements of the railway.
It is understood that the action of the Board of Directors has been taken independently of the Inter-Allied Technical Board.
The purpose of the Inter-Allied agreement for the supervision of the Chinese Eastern and Trans-Siberian Railways, under which the [Page 593] Inter-Allied Technical Board operates, is, it will be recalled, to operate the railways with a view to their ultimate return to those in interest without the impairing of any existing rights. Under this plan the Technical Board is charged with administering the technical and economic management of the railways.
It will be recalled that, shortly after the conclusion of the supplementary agreement of October 2, 1920, Mr. John F. Stevens, Chairman of the Inter-Allied Technical Board, discussed personally with the Chinese Minister of Communications at Peking the effect of this agreement upon the Inter-Allied supervision of the railway and upon the position of the Technical Board.
The Chinese Minister of Communications said on this occasion, as subsequently confirmed by him in a letter addressed to Mr. Stevens, under date of November 4, 1920,15 that the supplementary agreement in no way affected the continuance of the Technical Board or its power of control over the Chinese Eastern Railway. The Minister of Communications expressed the hope of the Chinese Government that the Technical Board would, as theretofore, continue to execute its functions in the manner provided for in the Inter-Allied agreement.
In these circumstances it is difficult for the United States to believe that the Chinese Government has lent its approval to the reported action of the Board of Directors of the railway in projecting a large bond issue without seeking the concurrence of Mr. Stevens and the other members of the Inter-Allied Technical Board.
The bonds proposed to be issued will be secured, it is understood, by a general lien upon all the property and assets of the Chinese Eastern Railway. It is to be noted that the ownership of the bonds would therefore constitute an instrument of potential control over the future operation and maintenance of the railway. The way would be opened, in fact, for an alteration in the status of the railway which might ultimately complicate the question of the interests of China.
If it is necessary to obtain funds for the maintenance of the railway, through bond issues or otherwise, the Government of the United States will be glad to receive the recommendations of the Inter-Allied Technical Board on the subject, or to consult in reference thereto with the Government of China and the other Governments concerned.
- Foreign Relations, 1920, vol. i, p. 713.↩
- See telegram no. 573, Nov. 5, 1920, from the Chargé in Japan, ibid., p. 725.↩