The Minister in China (Schurman) to the Secretary of State
[Received July 11—10:35 p.m.]
300. My 275, June 21, 4 p.m.63 Tyndall Wei64 called today on behalf of the Minister of Finance to propose following: Central Government proposes to put case of Pacific Development and Chicago Bank loans before the Provincial authorities and ask them deposit 20 percent of their retained monthly collections wine, tobacco revenues in special sinking fund account in designated banks estimated amount to be thus deposited annually three and a half millions [Page 804] Mexican. Minister proposes to pay on June 1st, 1923, 3,400,000 Mexican dollars equivalent of one million gold as principal payment and 702,000 gold as interest payment for the two loans together calculated on exchange of two to one. Remainder to be paid in eight further yearly installments.
Wei stated Tung65 appreciates this proposal does not follow letter or spirit of loan agreements but it is made as measure of practical expediency to get something paid off. He said that nothing had been paid to date, that nothing would be paid from salt as promised because of heavy prior pledges and that there was no possibility of setting up wine, tobacco administration with foreign inspector since such step was so radical it would arouse great criticism of present Cabinet which is in enough difficulties already. He explained that therefore Tung, unlike his predecessors, who were perfectly willing to let these loans drag unpaid indefinitely, proposed this as the best that could be done and asked for concurrence of Pacific Development and Chicago Bank. Wei added that it would be provided that these two loans would be listed on equal footing with other indebtedness in scheme of Tung now under formulation for issue of some four hundred millions Mexican to refund all foreign and internal floating debts on security of 2½ percent customs increase subject to the consent of foreign powers and American creditors could take choice of two methods of repayment, see my 299, July 10, 7 p.m.66