893.48/1027
Oral Statement by the Chief of the Division of Far Eastern Affairs (Hornbeck) to the Chinese Ambassador (Sze) on December 19, 1935
Referring to the requests made by the Chinese Ambassador, on behalf of his Government, of the Farm Credit Administration and of the Reconstruction Finance Corporation for alterations, favorable to the Chinese Government, in the agreements concluded in connection with the Chinese Government’s purchase in 1931 of certain quantities of wheat and flour and that Government’s purchase in 1933 of certain quantities of cotton, wheat and flour,—
It is well known to the Ambassador and to his Government that the American Government has been and is sympathetically disposed toward [Page 657] the Chinese Government and the Chinese people and that this Government has on many occasions given evidence of its desire to be appropriately helpful to China. This Government would wish, whenever it is appropriately possible, to be sympathetically considerate in regard to problems of finance which confront the Chinese Government. We believe that we have given ample proof during recent years that such is our attitude. We would wish to be responsive, insofar as the circumstances may permit, to the present requests of the Chinese Government for a postponement of payments due on the wheat credit of 1931 and the cotton and wheat credit of 1933.
Conceivably, such responsiveness might, in the case of the Reconstruction Finance Corporation credit, take the form of an extension by two years and, in the case of the Farm Credit Administration credit, of an extension by approximately three years of the periods within which the respective accounts may be liquidated. It might also be found possible to arrange in connection with the Farm Credit Administration credit a sliding scale of payments which, for example, would call for a payment on December 31, 1935, of as little as $250,000 as compared with $3,070,942.18 due under existing agreements.
The American Government, in giving sympathetic consideration to those requests of the Chinese Government which relate to the subject of outstanding obligations, recalls that there have been over a period of many years numerous instances in which the Chinese Government has failed to give due consideration to various of its obligations to American creditors. We are aware that in certain cases, notably in connection with indebtedness incurred on large purchases of American railway materials by agencies of the Chinese Government, new agreements, although greatly in favor of the Chinese Government, have been accepted by American creditors in order that they might be assured of payment for goods long since supplied. However, there are cases in which the Chinese Government has not only permitted outstanding accounts of American creditors to remain wholly in default but it has also, in disregard of applicable agreements, effected the extinction of at least a part of the security offered and has failed to provide other and satisfactory security.
Under these circumstances, it is to be hoped that, if the American Government should be in position to comply, in the manner suggested, with the requests under reference of the Chinese Government for a postponement of payments due on the American credits of 1931 and 1933, the Chinese Government would wish to give positive assurance that it will proceed toward liquidation of obligations to American creditors. To that end it would not seem too much to expect of the Chinese Government that, although it may not at this moment be in position forthwith to effect payment in full of such obligations, it will nevertheless provide adequate security in place of securities [Page 658] which have been withdrawn in contravention of the terms of the loan agreements and will begin making payments on such loans and will make provision for later payments at periodic intervals until the obligations are liquidated.