893.51/5010
The Minister in China (MacMurray) to the Secretary of State
Peking, December 21,
1926.
[Received February 5, 1927.]
No. 870Sir: I have the honor to refer to my despatch
No. 509 of March 25, 1926,43 with which I transmitted copy of a joint
memorandum dated March 18th signed by the representatives of France,
Great Britain, Japan and the United States, protesting against the issue
of a $20,000,000 bond issue, to be known as the “Fifteenth Year Public
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Loan Bonds”, to be secured
on that portion of the Customs revenues formerly required for the
service of the German indemnity; also to my telegram No. 346, of August
24, 4 p.m., in which I quoted a note I addressed to the Ministry of
Foreign Affairs on the same date protesting against the report that the
Chinese authorities were about to issue new Domestic Loan Bonds to a par
value of silver $25,000,000; as well as to my despatch No. 790, of
October 20, 1926,44 with which I transmitted a
translation of the reply from the Ministry of Foreign Affairs to my note
of August 24th in which I protested against the issuance of the
$25,000,000 bond issue.
In connection with the foregoing I have the honor to transmit herewith
enclosed, for the Department’s information, copy of a joint memorandum
dated November 20th, signed by the French, British, and Japanese
Ministers, and myself, in which opposition is reaffirmed to any further
hypothecation of the Customs revenues for the purpose of floating new
internal loans as long as no steps have been taken by the Chinese
Government to make good the existing unsecured and inadequately secured
foreign obligations of the Chinese Government.
I have [etc.]
[Enclosure]
The American, British,
French, and Japanese Ministers to the Chinese Ministry of Foreign
Affairs
Memorandum
The Undersigned Representatives of France, Great Britain, Japan and
the United States have the honour to acknowledge receipt of a
memorandum from the Wai Chiao Pu dated 13th October, in reply to
their joint memorandum of 18th March protesting against the issue of
any new internal loan on the security of surplus Customs revenue
while longstanding foreign obligations remain in default.
The Undersigned note that the Ministry of Finance maintain that the
interests of China’s foreign creditors are in no way affected by the
assignment, as security for a new loan, of surplus Customs revenues
hitherto set aside for the service of the consolidated internal
loans. Such a contention is obviously untenable, and has already
been answered in the memorandum of 10th [18th] March in which it was pointed out that, when there is
only one source of revenue from which China’s creditors can hope for
payment, every new lien created thereon must necessarily postpone
pro tanto the expectation of such
payment. And it is, indeed, self-evident that the interests of
China’s
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foreign creditors
must suffer by every fresh hypothecation of that revenue.
At the present time the Chinese Government are reserving the surplus
Customs revenue for the service of the internal loans consolidated
in accordance with the Presidential Mandates of 1921, thereby
disregarding the claims of their foreign creditors. Their
protestations of good faith towards the latter clearly require that
surplus Customs revenue should be utilized for meeting prior foreign
claims before any new charges are placed thereon.
The Undersigned Representatives are, therefore, under the necessity
of reaffirming their opposition to any further hypothecation of the
Customs revenue for the purpose of floating new internal loans as
long as no steps have been taken to make good the defaults in the
existing unsecured and inadequately secured foreign obligations of
the Chinese Government.
[File copy not signed]
Peking, November 20,
1926.
