The Minister in China (Johnson) to the Secretary of State
[Received February 2—6:40 a.m.]
107. A Secretary of the French Legation has informed a member of my staff confidentially that the Bank of Indo-China signed on or about November 26, 1932, a loan agreement with the Inspector General of the Chinese Maritime Customs, with the authorization of the Chinese Minister of Finance, by which the bank makes a loan of 4,300,000 Shanghai taels at 4½ percent for 4 years. Proceeds to be used for purchase of armed coast guard vessels to prevent smuggling, radio equipment, and to erect a new customs school. Loan is secured on total gross receipts of maritime customs redeemable at the rate of 100,000 taels per month.
Informant states that a clause of the terms gives this loan a prior [Page 630]lien on the customs over all others, including the indemnity. He also states that French Foreign Office has expressed to the French Legation here its surprise that the latter had approved the contract as it felt that a question of principle was involved. The French Legation replied that as the amount was relatively insignificant the service of other loan[s] would not in fact be endangered. The French Minister is now apparently anxious to ascertain whether the American Government would consider it worth making a formal protest if this loan were officially brought to its attention.