893.51 Con. Ob. Continental/123

Memorandum by Mr. Raymond C. Maehay of the Division of Far Eastern Affairs of a Conversation With the Chinese Ambassador (Sze)

The Ambassador said that he wished to acquaint the Department “very informally” with certain recent developments in connection with the so-called “Chicago Bank Loan”; that Mr. John Abbott of the Continental Illinois National Bank and Trust Company of Chicago had, in the course of a long distance telephone call, informed him (the Ambassador) of the receipt of an inquiry from a New York bank, presumably J. P. Morgan and Company, in regard to the nature of the call made on Mr. Abbott by Mr. K. P. Chen, Mr. P. W. Kuo and Mr. Y. C. Koo while the latter were in Chicago en route to Washington;91 that Mr. Abbott had replied to the effect that Mr. Chen and party had called purely as a matter of courtesy and in order to convey to Mr. Abbott the cordial greetings of Finance Minister H. H. Kung.

The Ambassador said that he had used the opportunity thus presented to inform Mr. Abbott of the receipt, through Mr. Chen, of instructions from Minister Kung to assume responsibility for negotiations in regard to a possible settlement of the Chicago Bank Loan; that Minister Kung was prepared to offer to holders of Chicago Loan bonds terms similar to those offered to holders of Tientsin–Pukow [Page 588] Railway bonds; that a detailed statement of the proposed Tientsin–Pukow agreement had been forwarded by mail to Mr. Abbott and that the Department would be provided with a copy thereof (subsequently received and attached hereto);92 that he (the Ambassador) had suggested to Mr. Abbott that the views of at least most of the Chicago Loan bondholders in regard to such a proposal might be obtained by issuance on the part of the bank of notification to those individuals whose names appear on the records of the bank; and that some sort of arrangement would have to be effected whereby authority to enter into final agreement would be delegated by the bondholders to Mr. Abbott or the Continental Illinois Bank or a bondholders’ committee. The Ambassador said that Mr. Abbott, after indicating some of the difficulties involved, had stated that he would write a letter of explanation to all bondholders of record.

The Ambassador said that, although he was charged with responsibility for effecting negotiations in regard to not only the Chicago Bank Loan but also the wheat and cotton credits of 1931 and 1933, Mr. Chen and party were under instructions to assist in such negotiations and that he (the Ambassador) therefore wished to “push” matters while Mr. Chen and party are still in Washington. The Ambassador inquired whether he might with propriety, in view of his understanding that both of the credits under reference have been transferred to the Export-Import Bank, discuss these matters directly with the bank’s president, Mr. W. L. Pierson.

Mr. Mackay, in reply, stated his opinion to the effect that matters relating to the outstanding obligations of the Chinese Government to American creditors should, with the possible exception of the F. C. A. credit of 1931 and the R. F. C. credit of 1933, be discussed with the Department but that subject to confirmation by Mr. Hornbeck (later obtained and conveyed to the Ambassador) there would seem to be no objection to a direct approach by the Ambassador to Mr. Pierson in regard to the particular credits named.93

  1. For correspondence concerning the Chinese Economic Mission to the United States, see pp. 465498, passim.
  2. Not printed.
  3. The Chinese Ambassador in his covering letter of April 28 to the Chief of the Division of Far Eastern Affairs enclosed a copy of a proposal for the settlement of the Chicago Bank Loan, which he handed to Mr. Abbott on the same day (893.51 Con. Ob. Continental/131).