493.11/1777: Telegram
The Minister in China (Johnson) to the Secretary of State
[Received September 15—4:28 a.m.]
747. My No. 359, April 24, noon;22 and Department’s 181, May 31, 4 p.m.; and subsequent telegrams.
1. With my approval and encouragement Mr. Fowler23 went in July to Hankow to attempt to work out some proposals whereby American material creditors of the Peking-Hankow line might be met. Meeting no success there he proceeded to Nanking and took up the question with the Ministry of Railways on behalf of the following creditors: Andersen, Meyer and Company on their own account and representing in addition Baldwin Locomotive Company, and General American Car Company. As a result of these discussions he submitted on July 24, 1933, for the consideration of the Ministry a declaration of which the following is the essence:
“The interest rate to be reduced to 6% simple interest per annum to July 1, 1933, which interest added to the principal shall be the new principal indebtedness as of July 1, 1933. The amounts to be subject to the final checking by the Peking-Hankow Railway.
[Page 651]The Ministry of Railways to pay on August 1, 1933, and on the first day of each succeeding month thereafter until the whole indebtedness shall have been paid a minimum of Chinese silver dollars 50,000, this amount to be increased as the financial condition[s] of the Peking-Hankow line improve.
In case payments are not made as agreed I reserve the right to terminate the agreement.
In case possible refunding scheme of the Peking-Hankow Railway is effected I [am] to have the option to participate in such scheme on the same footing as all the other creditors of the railway.
It is understood that in drawing up the agreement the provisions of the agreement with the British creditors of the Tientsin-Pukow Railway will be followed.”
Subsequently Mr. Fowler discussed the matter with the Minister of Railways here at Peiping and obtained from the latter a promise to give favorable consideration to the above proposal. Mr. Fowler is now in receipt of a letter from Robert Norman, Adviser to the Ministry of Railways, stating that the Ministry is prepared to consummate such an agreement with him. The Ministry requires that he present his authority from Andersen, Meyer and Company and the Baldwin Locomotive Company to execute this agreement on their behalf.
When these negotiations were undertaken by Mr. Fowler he had the authority of Andersen, Meyer and Company, agents of Baldwin Locomotive Company, to act on behalf of Baldwin Locomotive Company. It has subsequently developed, however, that Baldwin Locomotive Company have repudiated their agent’s authorization to Mr. Fowler and appear to be unwilling to join in this arrangement unless one of their officers or an officer of Andersen, Meyer sign the undertaking. It is probable that the Ministry of Railways will be unwilling to accept separate signatures insisting upon a single agency as was done in the settlement effected with British creditors of the Tientsin-Pukow line.
We have, both at Washington and here, insisted with the Chinese that American material creditors receive treatment no less favorable than that for other creditors of the railroad company but a successful conclusion to these discussions is now jeopardized by the fact that one creditor is refusing to join, not because of the terms offered but apparently merely because he desires joint signatures. It seems to me that it would be tragic if intrans[igent] creditors on the eve of the consummation of an arrangement—the first possible since 1924—which will put their claims upon a live basis, fail for what appears to me to be a reason of no great importance. I, therefore, hope that the Department may find it possible to get in touch with [Houston], president of Baldwin Locomotive Works, with a view to persuading him to drop his insistence upon separate signatures and [Page 652] suggest that without delay he authorize Andersen, Meyer to authorize Fowler to consummate this arrangement on their behalf jointly with the other two creditors. I have encouraged Fowler in the negotiations to agree [to the] arrangement not with any belief that it is in any sense a final or complete settlement of the outstanding debts owing to American material creditors but in the hope that such a settlement will place American creditors in a position where their claims will take on a new life and possibly enable them to do further business.
There is a real danger that the Ministry of Railways may use Fowler’s inability to meet its requirements of single signature as an excuse for not consummating an agreement on this subject.