693.002/488: Telegram
The Ambassador in China (Johnson) to the Secretary of State
[Received 2:45 p.m.]
83. My 72, February 2, noon, and Shanghai’s 140, January 26, 1 p.m. Following is paraphrase of telegraphic instruction sent by the Minister of Finance to the Inspector General of Customs February 2:
“After studying your telegram received January 29 I authorize you to make the following counterproposal if it becomes necessary for you to take action before the Government has received and studied any opinions expressed by the Governments of France, Great Britain and the United States: The entire customs revenue of all occupied areas may be deposited as a temporary measure in two or more foreign banks [Page 647] to act as co-trustees and these banks, one of which may be the Yokohama Specie Bank, shall utilize the revenue in the first place to meet the cost of customs services; then in respect of all obligations paid from the customs revenue and secured thereon as of July 1, 1937, contributions shall be provided toward contractual payments proportionate to average collections prior to July 1, last; in the third place, if there is any surplus remaining, the conclusion of hostilities shall be awaited before surplus is paid out. The willingness of China to make all reasonable concessions to protect the service of obligations and the integrity of the customs is shown by this proposal.
The Government still wishes to await and consider any views which may be expressed by the foreign governments, but in the meantime for your guidance and information it makes the following comment: Depositing customs’ funds in the Yokohama Specie Bank would be tantamount to delivering them to the Japanese, as shown by what has occurred at Tientsin and elsewhere. Moreover, the Japanese have indicated that over and above such sums as they themselves choose to make available for foreign obligations they would seize such funds, and there further is indication in the statement recently made by General Matsui that the Japanese would make adjustment of negotiations and would thereafter reduce even payments whose amount is specified under individual agreements and are thus not open to dispute. If the demands of the Japanese were accepted they would force the payments to themselves or to a bogus régime of most of the revenue collected by the customs which would be an invidious position. The result would be impairment of the credit of the Government and of the rights of bondholders both of which the Government in spite of great difficulties is trying to maintain.”
Repeated to Peiping and Shanghai. Shanghai repeat to Tokyo.