893.51/6037: Telegram

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

448. Reference Department’s instruction No. 488 [1688], June 25, 193538 and previous correspondence regarding the Hukuang loan. The British Embassy has suggested transmission to Chinese Government of a joint memorandum as follows:

“With reference to the memorandum from His Excellency the Minister for Foreign Affairs dated the 19th October 193438 and to previous correspondence relating to default in the service of the Hukuang Railways loan of 1911, the undersigned representatives of France, Great Britain and the United States of America have the honor once more to invite attention to the great and ever increasing indebtedness of the Chinese Government under the loan agreement. A further default took place on the 15th June last no funds having been provided for payment of coupon 48 and the installment of principal which fell due on that date. Payments which have been made only up to and including coupon 37 of the British, French and American issues (due 15th December 1929) and coupon 36 of the German issue (due 15th June 1929) are 11 coupons in arrears on the British, French and American issues and 12 coupons in arrears on the German issue. The total amount of interest and principal in default is now approximately £3,000,000.

In their joint memorandum of the 10th August 193438 the undersigned representatives stated that the complete disregard by the Chinese Government of its obligations under the agreement of 1911 to have the service of this loan made a charge, as prescribed and provided in the agreement, upon customs revenue utilizing increments [Page 764] of that revenue for other purposes must necessarily create most deplorable impressions. During the year which has passed the customs revenue have been further pledged as security for fresh obligations (or, general for the 24th year currency loan and the 23rd year customs revenue loan) in disregard of the prior claims of the bondholders under article 9 of the Hukuang loan agreement. In these circumstances, the undersigned foreign representatives have the honor once again to request that His Excellency the Minister for Foreign Affairs will urge the competent departments of the Chinese Government to make provision for the service of this loan, either from the general revenue of the Government as provided for in article 8 of the agreement, or from those customs revenues specifically named in article 9 as alternative security in the event of the earnings of the line proving insufficient and the abolition of likin”.

After careful consideration of the above with particular reference to the Department’s 297, August 23, 1 p.m. 193340 and 197, July 9, 5 p.m., 1935 [July 5, 6 p.m., 1934]41 I recommend that I be authorized to sign the joint memorandum quoted above.42

  1. Not printed.
  2. Not printed.
  3. Not printed.
  4. Foreign Relations, 1933, vol. iii, p. 646.
  5. Ibid., 1934, vol. iii, p. 557.
  6. Authorization was given in Department’s telegram No. 277, September 11, 1935, 2 p.m.