893.51/6179
Memorandum by the Third Secretary of Embassy in China (Lyon)97
This morning I interviewed Mr. Hutchison, Commercial Secretary of the British Embassy, in regard to the question of the Hukuang Loan. I told him that we were interested in the statement contained in his letter of March 27, 1936, to Mr. Merrell98 in which he said, “We are assuming that this minor issue will be arranged in the general settlement of the Chinese Government’s indebtedness under the loan which is now under negotiation”. I told him that our interest in this statement arose from the fact that we knew of no loan under negotiation for the general settlement of the Chinese Government’s indebtedness. Mr. Hutchison said that his letter must have been very badly worded and that what he meant was the general settlement of the Hukuang loan question, a proposal for which has been made by the Chinese Government and referred to the American, British, French, and German banks of issue (I understand that the German interest in the loan has been taken over by Chinese banks). I asked Mr. Hutchison if this proposal of settlement had been the result of Leith-Ross’ negotiations. He was evasive in his reply, but said that the settlement plan was one of the Chinese Government. Mr. Hutchison said that at the time of writing his letter of March 27 he assumed, of course, that we knew all about this and he took it for granted that Leith-Ross had discussed the whole question with the Ambassador. He said that Mr. Bennett of the National City Bank knew all the details of the settlement. Mr. Hutchison also said that he understood from Leith-Ross that the reason we did not know about it was “due to the American system of Government”, for the United States Treasury knew all about these negotiations and apparently had failed to notify the State Department. Mr. Hutchison read to me part of a memorandum of a conversation with Leith-Ross, somewhat as follows: “As regards the Hukuang Loans, the proposal for the settlement has been referred to the banks of the issuing countries. The American banks apparently refuse to accept the settlement, it being against their principle to settle except dollar for dollar”. Mr. Hutchison informed me that he understood that it was the American banks’ refusal to agree to the settlement offered by the Chinese Government which was at present holding up the successful conclusion of the negotiations.