893.51 Contractual Obligations/3: Telegram

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

997. Department’s 397, November 20, 11 a.m. Following telegram from the Minister at Nanking, November 15, 4 p.m., was received by the Legation November 16th but was not repeated to the Department when, in reply [to] the Legation’s inquiry, American Consul at Nanking stated telegram was sent to the Department November 15, 2 [4?] p.m.:66

“November 15, 4 p.m. From the Minister: At a meeting presided over by Dr. Wang Chung-hui67 at 3 p.m. today and attended by T. V. Soong, representing Chinese creditors, and representatives of Great Britain, Japan, France, Italy, Belgium and the Netherlands,68 Dr. Wang on behalf of the Chinese Government presented the following memorandum:

‘Confidential. Tentative [plan] without commitment.

The Government considers that the sources, amount, and duration of its duly contracted obligations that are now in arrears.
The Government considers that the sources, amount, and duration of payments to be made by China should first be discussed.
The Government considers that payments should be made from two sources, namely, customs revenue and railway revenue, excepting that payments on the Anglo-French and Crisp loans and a contribution for service of the Hukuang loan would continue to be made out of salt revenue[s].
The Government is prepared to set aside from the customs revenue certain annuities amount of which would be gradually increased. Specific figures will be presented [proposed] after reaching agreement with respect [to the] proposals herein outlined.
Railway debts that can reasonably be carried by the respective railways after measures of rehabilitation and restoration have been taken would be paid out of railway earnings, but, in order to relieve railways of part of their present heavy burden of debt, a portion of sums paid from customs revenue would be used for railway debts.
Similarly, a portion of sums paid from customs revenue would be made available in respect [of] communications debts (other than railway debts) in arrears.
Procedure for the distribution of the sums to be paid out of customs revenue will be presented [proposed] after agreement is made [has been reached] in principle concerning proposals made in this memorandum.
The Government would be prepared to issue bonds based upon above-mentioned sums set aside out of customs revenue.
Paying [The payments] out of customs revenue would be subject to priority of a reserved charge to be used for purposes of rehabilitation.
Payments from the customs revenue would be terminated by 1960.’

Subsequently the following statement was issued to the press by the Chinese Government:

‘An informal conference was held today between representatives of China and the Governments of (list follows) for the purpose of initiating discussions of the adjustment of China’s foreign and domestic obligations that are in arrears. Discussions centered upon the procedure to be adopted for reaching a settlement. A spokesman for the Chinese representatives, interviewed by the Kuo Min News Agency, stated that the Government is desirous of making settlement that will be fair both to China and to the creditors, and that it is hoped that the negotiations will lead to an early settlement of all duly contracted obligations. It was further made known [that] any settlement [negotiated] will be duly submitted for ratification by the National Government before becoming effective.’

In reply to questions, Dr. Wang stated that they would be ready to answer any questions that individual government representatives might have after they had studied the memorandum and that they desired lists from foreign governments of contractual obligations. I stated that I had not had sufficient knowledge upon which to seek instructions, that we were prepared to work sympathetically with the Chinese Government for the settlement of this question insofar as it affects us but that my Government would have to study the proposal very carefully before it could discuss the matter.

In the oral presentation of the memorandum and in the press statement, reference was made to domestic as well as foreign obligations although domestic contracted obligations are not mentioned in the memorandum.

. . . . . . . . . . . . . .

Meeting adjourned sine die.

To assist me in any further discussions it will be necessary that the Department give me a complete list of contracted obligations due American creditors.”

Minister now at Shanghai is being informed.

For the Minister:
  1. Telegram in four sections.
  2. Apparently not sent to Department.
  3. Chairman of Chinese commission for the consolidation of China’s Indebtedness.
  4. Minister Johnson also was present for the United States.