893.51/5843
The Minister in China (Johnson) to the Acting Secretary of State
[Received January 2, 1934.]
Sir: I have the honor to refer to the Department’s telegraphic instruction No. 298, August 24, 11 a.m., in regard to the hypothecation of the income of the Peiping-Hankow and other railways under the direct control of the Ministry of Railways as security for a loan of Sterling 4,700,000 from the British Boxer Indemnity Fund for the completion of the Canton-Hankow Railway.
In compliance with the Department’s instruction, the Counselor of Legation at Nanking was directed to make formal inquiry at the Ministry of Railways as to the correctness of the report that such hypothecation was contemplated. The Counselor, as a result of informal inquiries, ascertained that such hypothecation was contemplated [Page 656] by the Ministry of Railways. However, as both the Counselor and the Legation felt that formal confirmation of this information should be obtained before lodging a formal protest, the Legation, on September 6, 1933, addressed a formal note of inquiry to the Minister of Foreign Affairs. A copy of this note is enclosed.31
The Minister for Foreign Affairs replied under date of October 2, 1933 (copy enclosed),31 confirming that the increased passenger and freight rates of the various railways had been hypothecated by the Ministry of Railways as security for the loan obtained from the British Boxer Indemnity Fund.
Accordingly, the Legation addressed a formal note of protest dated October 27, 1933, to the Minister of Foreign Affairs, setting forth the views of the Department as outlined in its telegraphic instruction under reference. A copy of this note is enclosed.31
On November 17, 1933, the Minister of Foreign Affairs replied to the Legation’s protest by making a distinction between the ordinary income of the various railways and that derived from the increased passenger and freight rates, claiming that the latter was a special revenue set aside for such allocation as the Ministry of Railways saw fit. A copy of this note is enclosed.31
There is also enclosed a copy of the Legation’s further note to the Minister of Foreign Affairs31 refusing to accept any distinction between the “ordinary business income” of the various railways and the “special revenue” derived from increased passenger and freight rates, and further protesting this action of the Ministry of Railways which would appear to be manifestly unfair to American creditors.
Respectfully yours,
Counselor of Legation