893.48/1027
Memorandum by the Chief of the Division of Far Eastern Affairs (Hornbeck) of a Conversation With the Chinese Ambassador (Sze)
I requested of the Ambassador that he call at his convenience. The Ambassador came in this morning. After an exchange of observations with regard to items in the news today, I read to the Ambassador as an oral statement the statement of which a copy is here attached.64 I emphasized the point that this was to be regarded as an oral communication but that he might use the copy which I was giving him as a basis for such communication as he might decide to make to his Government. I then handed the Ambassador copies of the illustrative schedules of which copies are here attached.63 I emphasized the point that the whole matter was tentative and that we were anxious to have some clear evidence of interest and concern on the part of the Chinese Government with regard to outstanding obligations of the kind referred to in the oral statement. There followed some discussion of ways and means, and at an appropriate point I mentioned [Page 656] the “Chicago Bank Loan” as a case in point. I then gave the Ambassador a carbon copy of the factual statement with regard to the Chicago bank loan.66 The Ambassador volunteered the statement that the Chicago bank loan was essentially in a class by itself; he said that if he had been Minister in Washington at the time that loan would not have been concluded. I asked him whether he would care to say just why. He replied that his Government should not have been borrowing at that time and that he, in London, advised against the conclusion there of similar loans which were proposed and that his advice was accepted.
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I said to the Ambassador that in any communication which he might make it would be desirable that he make his own recommendation to his Government; that if he mentioned any one loan or group of loans he should do so as on his own initiative and responsibility. The Ambassador said that he would follow that suggestion, but that his Government did not pay much attention to his recommendations. I said that I felt that his word carried a good deal of weight in Nanking. I said that we felt and we were sure that he agreed with us that it is definitely to China’s disadvantage to permit the Chinese Government’s credit to fall further and further into disrepute through negligence in regard to outstanding obligations and especially in regard to those where the sums of money involved are not considerable and where the Chinese Government itself has destroyed the original securities and might with a little exertion on its part make substitution of other securities.
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