893.51 Contractual Obligations/1: Telegram

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

981. Legation’s 953, November 2, 1 [3] p.m.60

1. Following from Minister Johnson at Shanghai:

“November 11, 9 a.m. Please communicate the following to the Department:

After conversations here with the Japanese, French [Belgian?] and British colleagues and with Arthur Young,63 I believe that it is the [Page 606] desire of the Minister of Finance to see each Minister separately on or about the 15th November and lay before him a plan for the funding of unsecured and inadequately secured loans and will say that China expects to be able to set aside from customs revenues a sum of money which will increase yearly and which will represent China’s capacity to pay; this money is to be set aside each year for a period of 30 years and according to expectations will amount toward the end of that time to a considerable sum. The Minister of Finance will say that it will then be up to interested powers to agree among themselves as to each power’s share of this money. When each power has received its proportion of the available money it will then on its own responsibility arrange with the creditors of its nationality as to how those creditors will be paid.

I am unable to ascertain whether this plan will be intended to cover claims for losses as well as claims due to defaulted contracts and material creditors although one source intimated that it would be expected of the Chinese that all of these claimants would be thus taken care of. Plan appears to be based on China’s capacity to pay with constant reference to [Dawes?] plan but that [sic] whereas Dawes plan was based on revenues obtainable from taxation of German products such as sugar, beer and railways, this plan would be based entirely upon revenues derived from taxation of China’s foreign and coastwise trade all other revenues being left for use of Government. Japanese are primarily interested as the scheme will result in putting unsecured Nishihara loans in a position which they have not enjoyed hitherto. Plan will not help American claimants or material creditors who might otherwise expect payment in full when China becomes more prosperous through revival of trade and rehabilitation of railways. I shall probably not be able to obtain further information until I see Soong in Nanking on 15th.”

2. Following from American Consul at Nanking:

“November 11, noon. The following is a literal translation of the Chinese text of a telegram from the Ministry of Foreign Affairs to Minister Johnson:

‘Your telegram of October 31 has been noted. A note has now been received from the Ministry of Finance: “The creditors representatives conference which will be held in Nanking on the 15th instant states the first meeting will be held informally at which the Minister of Finance, representing the Chinese Government, will interview separately the delegates of the various governments. Further meetings will be participated in by the delegates of the respective governments of the creditors or by representatives nominated by the creditors to represent their respective governments at the discretion of the governments concerned. It is impossible to estimate at this time the duration of the conference but adjourning at an early date is expected.” Seal of the Ministry of Foreign Affairs.’”

For the Minister:
  1. Telegram in three sections.
  2. Not printed.
  3. American financial adviser of the Chinese Government.