The Secretary of State to the Minister in China (Johnson)
Sir: The Department transmits herewith a copy of a letter dated April 29, 1930, received from the Continental Illinois Bank and Trust [Page 594] Company, Chicago, Illinois,37 requesting that the Department take certain action in connection with the alleged threatened destruction of the security assigned to a loan of $5,500,000 made by the Continental and Commercial Trust and Savings Bank, predecessor to the Continental Illinois Bank and Trust Company, on October 11, 1919.
A copy of the Department’s reply to the letter from the Continental Illinois Bank and Trust Company is enclosed herewith.38 The Department requests that the Legation give careful attention to this correspondence with particular reference to the question of the possibility of entering into negotiations with the Chinese Government for the adjustment of outstanding debts and claims against that Government held by American citizens. The Department understands that it was your intention to take up this matter with the Minister for Foreign Affairs on the occasion of your present visit to Shanghai and Nanking (see the Legation’s despatch No. 100, March 24, 1930, last paragraph).
With reference to the request made by the Continental Illinois Bank and Trust Company that the Department protest to the Chinese Government against the abolition of certain likin taxes, such taxes having been assigned as security for the loan negotiated in 1919, the Legation’s attention is invited to its despatch No. 35, of February 19, 193037 and to the last paragraph of the third enclosure therewith, being a copy of a note, dated February 12, 1930, addressed to the Chinese Government by the diplomatic representatives of the United States, France and Great Britain,39 relating to the reported abolishment of likin taxes assigned as security for the Hukuang Railways loan of 1911. While the Department would prefer that a method be adopted for taking up simultaneously with the Chinese Government all outstanding obligations due to American citizens, nevertheless, the Department suggests for your comment the question whether it would be advisable to approach the Chinese Government in regard to the loan referred to in the enclosed letter without awaiting the adoption of a general plan. An argument that would seem to be in favor of such a course is to be found in the similarity, so far as the assignment of likin taxes as security is concerned, between the Hukuang Railways loan and the loan now under discussion, repeated representations having been made by the Legation in recent years in regard to Hukuang defaults. It is to be borne in mind, also, that bonds issued pursuant to the Chicago Bank loan are understood to be held by large numbers of American citizens who were purchasers in good faith, and that the Department addressed to the Continental and [Page 595] Commercial Trust and Savings Bank, on October 21, 1919, a letter40 commenting favorably on the loan now under discussion and ending with the statement that “To the accomplishment of this end, this Government is willing to take all proper steps to ensure the execution of equitable contracts which are made in good faith”.
The Department awaits with interest the receipt of the Legation’s comments and suggestions regarding the handling of this matter.
I am [etc.]