493.11 American Metal Co. Inc./95

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

No. 540

Sir: I have the honor to refer to the Department’s telegraphic instruction, No. 100 of July 8, 12 noon,7 suggesting that the Embassy again bring to the attention of the Chinese authorities the matter of the claim of the American Metal Company, Limited, against the Kwangtung Government for payment of the purchase price of silver sold to a Department of that Government in 1919.

The Department has already been informed in a telegram from this office, No. 266 of July 12, 4 p.m.,7 regarding a reply made to a telegram received from Mr. Chester Fritz,8 at Hong Kong.

On July 13, acting under my instruction, Mr. Atcheson9 took up the matter with Mr. Jabin Hsu, Director of the Department of General Affairs of the Ministry of Finance. This seemed to be an advantageous way of handling the matter, since the relations of Mr. Hsu with the Embassy, and with Mr. Atcheson in particular, have for a long time been very friendly. I felt that if any official would be likely to exercise the personal influence which seems called for in this matter, it would be Mr. Hsu.

There is enclosed a memorandum7 of the conversation which took place between Mr. Hsu and Mr. Atcheson. Barring a few of the more vigorous American phrases which Mr. Hsu has retained from his newspaper experience of several years in the United States, and used on this occasion, the memorandum is a faithful account of the remarks made by Mr. Hsu. Its frank statement that the Chinese Minister of Finance acts, in money matters, from purely utilitarian motives is unusual in diplomatic intercourse, but Mr. Atcheson feels that a disclosure of what experience shows must be a conceded fact was more useful in the circumstances than would have been an empty, though polite and soothing, gesture.

Mr. Hsu told Mr. Atcheson, in effect, that the American Metal Company, Limited, would be very well advised to accept any payment on principal offered by the Kwangtung Government and waive accrued interest, this being in accordance with the general rule of the National Government itself in settling up old claims.

I have been connected with the handling of this claim for a matter of twelve years, commencing in the Legation in Peiping, subsequently in the Department, and now in Nanking, and bearing in mind all the [Page 675] fruitless efforts which have been expended, I regretfully express the opinion that the American Metal Company would be well advised to accept what cash it can obtain from the present Kwangtung Provincial Government and write off its losses as the price of injudicious extension of credit in the beginning. On July 13 I again telegraphed to Mr. Fritz at Hong Kong saying that an official of the Ministry of Finance had stated that the Ministry was not likely to intervene in the negotiations.

From the standpoint of the National Government the origin of this transaction is obscure; the Chinese provincial officials who negotiated the purchase have long since vanished from the scene; the aggregate sum of indebtedness handed down to the present National Government by various provincial and national regimes is, from its standpoint, so huge that it has had to adopt a policy of minimum payments just sufficient in amount to retain a reputable cloak of reliability. At the risk of appearing frivolous, the writer cannot but recall a remark made by an official of the Ministry of Finance in Peiping some twelve years ago when the Ministry was being pressed to pay a debt owing to American interests. The Chinese official admitted that the Ministry had just received some cash, but he advanced as a statement whose truth must be apparent that the Ministry of Finance was obliged to keep this money “to spend”, and could not afford to use it in paying off debts. In present day China the needs of the moment appear to the authorities exigent and, as intimated by Mr. Hsu, if anything is to be paid on inherited obligations, such payments must meet some present need. The authorities have been confirmed in the wisdom of this course by the fact that they unaccountably seem able to get credit, in spite of defaults of former administrations.

In this connection, I venture to refer to suggestions advanced by the office of the Commercial Attaché in Shanghai in sundry reports that the American Government utilize appropriate opportunities for demanding some compensating benefit for assistance extended to China in connection with currency stabilization and other projects.

Although entertaining little hope that the communication will produce any results of value, I have sent a note to the Ministry of Foreign Affairs, pressing for action in accordance with the Embassy’s earlier note of May 10, 1937 and the Department’s present instruction.10 A copy of the note of July 15 is enclosed. There are enclosed, also, a copy and a translation of the Ministry’s purely formal reply of July 17, 1937.11

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It is to be hoped that the Department will not attribute to a defeatist frame of mind the opinions set forth in this despatch. It is possible that the American Ambassador would not share those opinions, but from conversations which took place while he was in Nanking, I am inclined to think that he views somewhat in the way I have depicted the futility of attempting to collect long outstanding obligations owed to American organizations by the Chinese authorities, together with accrued interest in full amounts.

Respectfully yours,

For the Ambassador:
Willys R. Peck

Counselor of Embassy
  1. Not printed.
  2. Not printed.
  3. Representative of the American Metal Company, Ltd., in China.
  4. George Atcheson, Jr., Second Secretary of Embassy in China.
  5. Not printed.
  6. Department’s telegram No. 109, July 20, 4 p.m., stated that Dr. Kung, then in Washington, indicated that he would give the American Metal Co. claim his attention upon his return to China (493.11 American Metal Co./90).
  7. Enclosures not printed.