893.51/5860: Telegram

The Minister in China (Johnson) to the Secretary of State

93. Reference Legation’s despatch No. 2431, December 22, 193399—Hukuang loan.

1. National Government Gazette January 15 contains regulations governing issuance $100,000,000 of customs treasury notes of 1934 which provides that this issue shall be secured upon “customs revenue designated by the Ministry of Finance.” Interested banks have requested the American and British Legations to file protest.

2. British Legation suggests the following draft for joint memorandum:

“In their memorandum of 20th December 1933 the undersigned representatives of France, Great Britain and the United States of America had the honor to inform His Excellency the Minister for Foreign Affairs that their attention had been drawn to the text of certain regulations governing customs treasury notes of the year 1933 which provided that the treasury notes of this issue to an amount $100,000,000 should be secured on the receipts from the increased customs revenues.

The attention of the undersigned representatives has now been drawn to the text of certain regulations promulgated on 13th January in connection with the issue of a new loan of $100,000,000 to be known as the 23rd with regard to [as the 23rd-year] customs treasury notes, article 7 of which states that the sinking funds required for the payment of interest and redemption of principal of these notes shall be earmarked by the Ministry of Finance from the customs revenue.

The undersigned representatives are once more constrained to point out, as they did in their memorandum of December 20th, to which no reply has been received, that the continued hypothecation of customs revenues for the service of new internal issues while no attempt is made to give effect to articles 8 and 9 of the Hukuang Railway 5% sterling loan agreement of 19111 is not only inflicting a great injustice on the bondholders of the loan but is causing doubt to be cast upon the validity of pledges of the Chinese Government.

The undersigned representatives have accordingly the honor to urge once again that the Chinese Government devise measures as early as possible to implement the undertakings given in the abovecited clauses of the loan agreement, the constant defaults in the service [Page 547] of which formed the subject of the undersigned representatives’ memorandum of 28th July last.”

3. The Legation requests the Department’s authorization to join in the memorandum as drafted.

  1. Not printed; it enclosed joint memorandum dated December 20, 1933, addressed by representatives of France, Great Britain, and the United States to the Chinese Government regarding default in the service of the Hukuang Railway 5% sterling loan agreement of 1911. See telegrams Nos. 867 and 885, November 22 and 29, 1933, from the Minister in China, Foreign Relations, 1933, vol. iii, pp. 654 and 656, respectively.
  2. Signed at Peking, May 20, 1911, MacMurray, Treaties, 1894–1919, vol. i, p. 866.