893.51/6773: Telegram

The Chargé in China (Peck) to the Secretary of State

34. American Embassy’s No. 30, January 16, 1 p.m., suspension of debt service. Following is Central News release, Chungking, January 15:

“Commenting on the statement issued today concerning debt service a spokesman of the Ministry of Finance stated that on several occasions [Page 807]in the past, in order to safeguard the interests of holders of its obligations, the Government has provided the amounts needed to make up shortages of pledged revenues which have resulted from civil wars and economic depression. When the Japanese detained the revenues collected in the areas under their military occupation, a shortage was thereby caused. Despite prolonged efforts to induce them to permit the application of such revenues to the service of all the obligations outstanding before the hostilities to which the revenues were pledged, no funds were forthcoming, and the Government, in keeping with its general policy of doing everything possible to care for the interests of the bondholders, has advanced each month on the application of the Inspector General of Customs the amounts required to fill the gap.

Although the Japanese said they might allow remittances in respect of foreign currency obligations, they refused any remittances in respect of the equally valued Chinese currency debt outstanding before the hostilities.

Long experience in connection with customs in North China and elsewhere as well as in other matters indicates that [no?] reliance can be placed upon Japanese assurances. Moreover, the Japanese demanded that even the remittances they might allow, which would have covered only about forty per cent of the share of the occupied areas, should be dependent upon conditions which China could not accept.

These conditions included (1) recognition in effect of Japanese interference with customs integrity and alteration of the customs regime contrary to treaties and agreements; (2) deposit of collections in Japanese banks where obviously they might be used against China; (3) agreement to turn over to Japan the amount of the accumulated Japanese portion of the Boxer Indemnity, which has been accrued each month in sterling in a foreign bank as a temporary measure during the hostilities, and to pay future installments regularly each month.

The Ministry of Finance recently received from the Inspector General of Customs a communication requesting a further large advance to make up the January shortage. After most careful consideration the Government felt that it had no other recourse but to decline the request, for the reasons indicated in the official statement.”

Mr. C. Rogers45 is here conferring with officials of the Ministry of Finance.

Peck
  1. Cyril Rogers, of the Bank of England, Adviser to the Chinese Ministry of Finance.