The Secretary of State to the Minister in China (Schurman)
Sir: The Department has had under careful consideration the Legation’s despatch No. 1168 of May 6, 1921, relative to the administration of the ex-German and Austrian concessions at Tientsin and Hankow and notes that the various efforts of the Chinese Government directed towards the organization of the administration of these ex-enemy concessions has been a matter of some concern to the Legations of the allied and associated powers in view of the effect of these efforts upon the nationals of those countries either now resident in those areas or who may at some future date establish themselves there.
The Legation will recall that the second paragraph of Article 132 of the Versailles Treaty provides with regard to the ex-German concessions at Tientsin and Hankow that “China, restored to the full exercise of her sovereign rights in the above areas, declares her intention of opening them to international residence and trade. She further declares that the abrogation of the leases under which these [Page 973] concessions are now held shall not affect the property rights of nationals of allied and associated powers who are holders of lots in these concessions”. A similar provision is to be found in the Treaty of Peace with Austria concerning the restoration to Chinese sovereignty of the Austrian concession at Tientsin. The Government of the United States is not a party to either of these treaties. It is understood that while China is not party to the Versailles Treaty she obtained by the separate agreement with Germany of May 1920  confirmation of that treaty whereby the German concessions at Tientsin and Hankow were restored to Chinese sovereignty. As regards the Austrian concession at Tientsin it is understood that China is party to the Austrian Treaty above referred to.
Under the circumstances it would appear that the ex-Austrian and German concessions at Tientsin and Hankow have, by these agreements, been restored entirely to the sovereignty of China, the one condition imposed upon China being that she will open them to international residence and trade and that the abrogation of the former leases under which these concessions were held by Austria and Germany would not affect the property rights of nationals of the allied and associated powers who are holders of leases in those concessions. Under the circumstances above recited the Legation should limit its activities with reference to these concessions to efforts directed to the protection of existing property rights of American lot holders as well as to the right under the treaties which Americans have to lease and hold land at ports open to international trade and residence. In this connection the Legation should of course also exert every effort to see that American citizens are not denied the enjoyment of any privileges or rights granted to other nationals which, as a matter of course, accrue to American citizens by reason of the most favored nation clause of our treaty with China, whether these privileges or rights relate to the question of taxation or to participation in the local municipality.
I am [etc.]