893.51/4932: Telegram

The Minister in China (MacMurray) to the Secretary of State

245. 1. British Minister has informed me of recent developments in a serious situation involving practical disappearance of salt revenues of Central Government. In the various salt-production areas the local militarists have insisted on subsidies in return for permitting Salt Administration to continue its operations, with the practical result that Government’s revenues were cut off from all salt areas except Changlu district, near Tientsin, which until recently continued to pay approximately $13,000,000 per annum which sufficed to serve foreign [Page 951] loans charged upon the salt. Quite recently General Ch’u, who had been put into office as Military Governor of Chihli by associates of General Chang Tso-lin, without reference to the Peking Government, demanded half of the salt revenues from this area. Salt Administration endeavored to compromise with him by a payment of some $450,000 and a monthly subsidy of $120,000, which was the utmost that could be spared without endangering foreign loan services. Ch’u refused and has established his own collecting agency on whose order salt is being removed from Administration’s yards.

2. British, French and Japanese Ministers, representing nationalities interested in reorganization loan, conferred June 11th and agreed to recommend to their respective Governments that for protection of the Salt Administration and the loans secured upon its revenues, they should be authorized to inform Ch’u that if within a week he had not accepted Administration’s offer of subsidy that offer would be withdrawn and the interested powers would assemble at salt fields near Tangku sufficient military and naval forces to prevent further interference with functioning of the Salt Administration.

3. British Minister asked me to inform you of this and to inquire whether our Government would be disposed to join in such action even though American interests are concerned with the salt revenues only to the extent of partial security for their share of Hukuang loan. I consented to do so, although informing him that I did not anticipate my Government would be prepared to use its forces at Tientsin for any purposes other than those incidental to its mission of keeping open the railroad or in case of emergency for the protection of life and property.

MacMurray