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

No. 296

Sir: I have the honor to acknowledge the receipt of the Department’s instruction No. 113, of May 14, 1930, respecting a request by the Continental Illinois Bank and Trust Company, of Chicago, Illinois (successors to the Continental and Commercial Trust and Savings Bank), for diplomatic aid and protection in the matter of a loan of G$5,500,000 to the Government of the Republic of China on October 1, 1919, the Chinese Government having defaulted as to both the principal and the interest on the Treasury notes issued pursuant to the loan. The bank is concerned over the projected abolition of likin (certain likin taxes being assigned as security for the loan) in accordance with a Mandate of January 17, 1930, published in a Gazette No. 372 of January 18, 1930, of the National Government. The Mandate reads, in translation, as follows: “On and from October 10, 1930, all likin charges as well as all taxes and imposts which are similar to likin throughout China shall be abolished uniformly.”

The Department states that it desires the Legation’s comments and suggestions regarding the handling of the matter: Referring first to the question of entering into negotiations with the Chinese Government for the adjustment in general of the various outstanding obligations of the Chinese Government toward American citizens, I beg to state that the Legation concurs with the Department in feeling it desirable that there should be a simultaneous presentation of claims on the basis of a general plan, presumably involving the creation of a claims commission as laid down in the Department’s written instruction No. 1467, of February 3, 1930. However, Minister Johnson, after a discussion of the subject in Nanking with the Minister for Foreign Affairs (the Legation’s telegram No. 471, of June 20, 12 noon), does not consider the present to be an opportune time for entering into negotiations with the Chinese Government along these lines inasmuch as the current civil war is consuming every bit of the Nanking Government’s revenues. Perhaps this situation will change before autumn with the result that the Chinese Government may find itself [Page 600] in a position, on October 1, 1930, to call its proposed conference of the representatives of its creditors. As indicated in my despatch No. 259, of June 12, 1930,52 the Legation addressed a note of that date to the Foreign Office, requesting information as to the steps being taken by the Chinese Government to bring this conference about. No reply as yet has been received, and I conclude from Minister Johnson’s conversation with Dr. Wang that no effective or definite steps are being taken by the Nanking Government in the matter under present circumstances.

Pending a time (which, as suggested above, perhaps may be this autumn) when consideration of all claims in accordance with a general plan may be undertaken, there seems to the Legation to be no objection to inviting the attention of the Minister for Foreign Affairs of the Nanking Government, “for purposes of record”, to the Continental Illinois Bank and Trust Company’s claim (Department’s telegram No. 176, of May 26, 3 p.m.52). The Department’s authorization accordingly is solicited to address a note to Dr. C. T. Wang along the lines of the enclosed draft.52

In the Department’s instruction under acknowledgment, reference was made to the Legation’s representations respecting defaults in the service of the Hukuang Railways Gold Loan of 1911, which is based on likin taxes as security. Let me state in that relation and with reference to the similar security in the case of the Chicago bank loan under advisement, that it is the belief of the Legation that no effective action looking toward the abolition of likin on October 10, 1930, is being taken by the Chinese authorities (the Legation’s despatch No. 286, of June 24, 1930).

In addition to the Hukuang representations, I beg to add, as of possible interest to the Department in this connection, the following not entirely exhaustive list of claims and/or debts which the Legation has recalled to the Foreign Office recently, in advance of a general plan:

The question of the unpaid Liling indemnity Treasury notes (Legation’s despatch No. 121, of March 31, 193052).
Claims of the American International Corporation, arising from advances of money to the Chinese Government for railway construction work and for the improvement of the Grand Canal (Legation’s despatch No. 237, of May 29, 193052).
An indebtedness of the Chang Hsing Coal Mining Company to Andersen, Meyer and Company, Limited (Legation’s despatch No. 280, of June 19, 193052).
The arrears in salary of certain American professors in or formerly connected with the Peiyang University at Tientsin (Legation’s despatch No. 281, of June 20, 193053).

I have [etc.]

For the Minister:
Mahlon F. Perkins

Counselor of Legation
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