The Chinese Embassy to the Department of State

Text of a Statement To Be Issued by His Excellency Dr. H. H. Kung, President of the Executive Yuan, Chungking, China, on January 16, 1939

For over a year the Japanese authorities, despite their assurances, have been detaining all the revenues, pledged for debt service, that have been collected in the areas under their military occupation except for a single remittance from the Shanghai Customs last June. In order to make up the amounts that should have been remitted from those areas the Chinese Government has advanced about 175 million dollars. The Central Bank of China, moreover, has provided all the foreign exchange required, although the Japanese have been interfering with the Chinese currency and forcing the acceptance of several forms of Yen, military and puppet notes which has reduced the collections in legally valid currency on which obligations of the Government are secured.

Notwithstanding all difficulties, the Chinese Government has provided for service of China’s debts thereby demonstrating the utmost consideration for the holders of its obligations.

Under existing conditions the Chinese Government very reluctantly has been forced to the conclusion that this situation has become too anomalous to be continued. The Government therefore has been obliged to reject the Inspector General of Custom’s request for a further advance. As from this date, however, the Government is prepared to set aside in special accounts in the Central Bank of China a share of the long term debt service, proportionate to the collections in the areas not subject to Japanese interference, of the revenues pledged to all such debts outstanding before the hostilities. It is hoped that remittances of the share attributable to the pledged revenues from the areas under Japanese military occupation may similarly be forthcoming and that interference with Chinese currency will cease so that service of these debts may be duly effected. This measure is a temporary arrangement in view of present abnormal conditions.