693.002/705: Telegram
The Consul General at Shanghai (Lockhart) to the Secretary of State
[Received 7:15 p.m.]
899. The Inspectorate General of Customs has just informed this office that orders have been received by it from the Ministry of Finance [Page 732] to pay from revenues collected in Chinese controlled ports only 44.66 per cent of the loan and indemnity payments secured on the customs revenues and due on June 30. Loans due June 30 include one of United States dollars 788,437 for the quarterly payment on the consolidated note of the United States consignment [commodity] loans of 1931 and 1933 and one of United States dollars 157,760 for the American share of the Boxer indemnity. No funds have yet been put at the disposal of the Inspectorate General under the Anglo-Japanese agreement for the loan quotas of the ports under Japanese occupation and these quotas would amount to 55.34 per cent of the total amount due. The Inspectorate General states that in a similar crisis over payments due earlier this month, Japanese authorities were prevailed upon to pay a sufficient amount from the quotas that would be due if the agreement were implemented to prevent a default and in strict confidence said that arrangements had been made with the Ministry of Finance for an overdraft sufficient to prevent a default in case the Japanese did not pay. However, both the Japanese authorities and the Ministry of Finance stated at the time, according to the Inspectorate General, that no such provision would again be made to prevent default. The Inspectorate General states that the Japanese authorities are adamant this time in their demands that the Anglo-Japanese agreement regarding the Chinese Maritime Customs be implemented in full with regard to all items favorable to the Japanese before further contributions will be made toward loan payments. The Inspectorate General states that while every effort is being made to persuade the Chinese Government to prevent a default, no assurance has yet been obtained that an overdraft will be available in case the so-called Japanese share is not provided by the Japanese authorities and confidentially expressed the hope that the interested governments would endeavor to persuade the Japanese authorities to release adequate funds from the customs collections now being withheld to them to enable full June 30 payments to be made.
Repeated to Hankow, Peiping and Tokyo.