Memorandum by the Chief of the Division of Far Eastern Affairs (Hornbeck) of a Conversation With the Chinese Minister of Finance (Soong) and the Chinese Minister (Sze)

Upon the conclusion of a discussion of the present situation in North China,54 the conversation was turned to the question of China’s request for further suspension of Boxer Indemnity payments. Mr. Hornbeck referred to the telegrams of which he had earlier given account55 in relation to the papers relating to the sale of wheat and in relation to the action of the Ministry of Industries in connection with American patents, and said that, in all candor, he found himself frequently in a difficult position, in attempting to present requests by the Chinese Government for a liberal attitude by this Government in relation to obligations which the Chinese find it hard to meet, because of the fact that the Chinese Government all too often appears indifferent to or negligent of the interests, the rights and/or the requests which this Government addresses to it as a matter of public business or on behalf of American nationals. He said that it would be far easier to bring about favorable consideration by this Government of the requests which China makes if the Chinese Government would manifest more of effective solicitude in connection with various items of its indebtedness—especially some items to which there attach not only the characteristics of a legal obligation but in addition those of peculiar moral obligation. He cited certain illustrations. He said that he had shown to his colleagues who know most about the subject matter the memorandum of Boxer Indemnity payments56 which Mr. Young had shown him on Friday last and that it had been [Page 673] urged upon him that the proposals contained in that memorandum should not be accepted. He said that tentative acceptance by us of those proposals would necessitate, if we proceed toward their adoption, positive action on the part of the American Government; whereas, our tacit assent to suspension of payments in and after 1917 and in 1932 had involved only negative action (that of refraining from protest) on our part. We did not want to have to take such action. In addition, we felt that any proposal made for a substantial alteration of the schedule of payments over a period of years should, if made to any one of the powers concerned, be made to all. Therefore, we might say, in order to get on with the discussion, that it does not seem practicable to give serious consideration to the proposal submitted by Mr. Young. Mr. Hornbeck wondered whether the Minister of Finance might have in mind any other proposal. However, before putting that question, he would like to say that his colleagues still believe that the instruction which we had given on which had been based our formal reply to the Chinese Government, at Nanking, stating that we felt unable to assent to a further suspension of the payments, was a reasonable and correct reply. It had been our understanding that the British and the Italian Governments had been in the same position in which we were and that they had made the same replies. Subsequently we had learned, to our surprise, that the payments of the Italian portion were not suspended last year but were continued and are concurrently being made. At that point Mr. Soong said that he had supposed that everybody knew that; the payments which the customs makes are matter of public record; he had had no thought of concealing any of the facts. The Italians had not been willing to be as generous as the American and the British Governments had been; he had been able to make a compromise with them; and he had supposed that everybody knew it. Mr. Hornbeck said that perhaps we or our representatives had overlooked something that we should have known, but that we had not known, and that certain things which the Italian Government had said had confirmed to us the impression that all three Governments were in the same position and were dealing this year with the same problem. The Minister said that the Italian Government had given the same reply as had the American and the British Governments but had stated in addition that if the Minister was able to obtain the assent of the American Government to further suspension they, the Italians, would give the same assent. He said that he had been surprised at the question which Mr. Hornbeck had put to him on Saturday with regard to the current payments on the Italian share. Mr. Hornbeck said that he was merely attempting to gain an accurate and adequate knowledge of the facts—it being evident [Page 674] that he and other officials of the American Government had been—no matter how it had happened—“in the dark” in that connection. Mr. Soong said that he had hoped that the American Government, knowing how hard-pressed China was and what desperate efforts her Ministry of Finance had made to keep abreast of current expenses and the demands of the military situation, would be disposed to be lenient with regard to current payments on Indemnity funds which the American Government had already been so good as to “remit” in China’s favor. Mr. Hornbeck said that we did not want to add anything to China’s difficulties; we want where possible to be generous and helpful; but in connection with these funds there are commitments of the Chinese Government to Chinese educational institutions; those institutions are dependent absolutely on those funds; we feel toward the matter that we have a moral obligation, an obligation of quasi trust. Might not Mr. Soong work out a plan whereby he could guarantee that all obligations connected with these funds could be made; might he not take care of certain obligations not connected with these funds but which China has incurred in connection with educational enterprises; might he not do something to wipe off of the slate certain debts which, so long as they are outstanding, will remain damaging to China’s reputation and an obstacle to a restoration of faith in her credit?

At that point, it became necessary to bring the conversation to an end—with the understanding that it would be continued this evening.57

S[tanley] K. H[ornbeck]
  1. See p. 325.
  2. Ibid.
  3. Not printed; see memorandum of conversation with Mr. Young on May 12, p. 671.
  4. On May 19 Mr. Soong informed Dr. Hornbeck that “Mr. Young had talked with him about the subject of petty outstanding items of the Chinese Government’s indebtedness to American creditors and that he [Mr. Soong] hoped to be able to take care, through the Legation, of some of these items.” (493.11/1717)