893.48/1029: Telegram
The Consul General at Shanghai (Davis) to the Secretary of State
[Received December 30—7:56 a.m.]
800. For Hornbeck from Young.
“Reference my message December 3. Earnestly hope authorities concerned agree receive reduced payment flood obligation December 31st pending completion negotiations. I have assisted prepare terms forwarded today which I consider mutually fair in all the circumstances. Reduction of current flood and reconstruction loan payments is desired in order to assist decrease deficit thereby strengthening finances with a view to avoid inflation and currency depreciation with serious consequences. Consequently increase of payment on defaulted obligations should be gradual with principal deferred beyond 1940 in view of heavy loan and indemnity obligations next five years and because it would be short-sighted for creditors to insist upon payments beyond China’s capacity conservatively considered. Moreover China cannot establish a precedent of payment on particular, obligations which could not be applied, with appropriate regard to different circumstances, to defaulted obligations as a whole since it would become discrimination. Therefore hope those concerned will acquiesce in acceptance 250,000 December 31st thus affording substantial and greatly needed current relief.” [Young.]