893.51 Salt Funds/179

The American Embassy in Japan to the Japanese Ministry for Foreign Affairs


It has come to the attention of the Government of the United States that the Chinese and foreign salt administration officers at Kalgan, Taiyuanfu, Hangchow, Tsinanfu, Yangchow, and Panpu [Pengpu?] have been compelled to evacuate their posts as a result of actual hostilities or of chaotic conditions associated therewith; that the Chinese officers at Tientsin and Wuhu have also been obliged to evacuate; that the Associate District Director at Tientsin, a Japanese subject, participated apparently under compulsion in the seizure of the records and in the subsequent unlawful transfer of funds of the Changlu district directorate to the control of an office allegedly functioning under the Peiping provisional government; that this same officer is reported to have assumed the designation of Associate Director General in North China and as such has appointed a fellow Japanese until recently at Amoy and a former Chinese salt officer as directors of the Shantung district; that at Tsingtao one or possibly two Japanese officers of the service are understood to have been appointed to the eastern areas of Shajitung Province; and that with the forcible evacuation of senior foreign and Chinese personnel from the affected districts the administrative procedure governing production, storage and release of salt against duty payment has either been brought to a standstill or taken over by the de facto authorities of the locality for their own benefit.

The salt revenue in the affected districts for the fiscal year ended June last totaled over 116,477,000 Chinese dollars or 54 per cent of the aggregate for the whole country. The foreign loan quotas due from these Japanese-occupied districts total over 563,000 Chinese dollars each month and are in arrears to a total of about 2,090,000 Chinese dollars to March first this year.

American loans amounting to more than United States $15,000,000 are secured by revenues of the Chinese Salt Administration; specifically [Page 742]there are three loans: the American share of the Hu Kuang loan, the so-called Chicago Bank loan, and the Pacific Development Corporation loan. Arrangements were made early in 1937 for the servicing of those loans from salt revenues with every prospect that payment would be made in full.

Inasmuch as the prospects of servicing those loans are being adversely affected in consequence of the action in China of Japanese armed forces, the Government of the United States desires to bring to the attention of the Japanese Government the substantial American interest in the Chinese Salt Administration and to make full reservation in regard to American rights and interests.