893.51/6791: Telegram

The Consul General at Shanghai (Gauss) to the Secretary of State

87. By strictly confidential letter dated January 29 and delivered, yesterday the Inspector General of Customs points out that the deadlock between China and Japan in respect of customs revenues and servicing of loans and indemnities is largely a matter of “face” and suggests that in these circumstances the United States, Great Britain, [Page 812]and France might possibly consider an offer to mediate with a view to securing Japan’s compliance with and China’s non-objection to the following modus operandi: Japanese to release forthwith Japan’s share of the quotas already accrued and periodically accruing in the occupied areas including back quotas provided the powers concerned give an undertaking that they in turn will secure the remittance to the Yokohama Specie Bank of Japan’s portion of the Boxer Indemnity now aggregating £525,000 and also the accumulated revenue now lying in the Hong Kong and Shanghai Bank aggregating 26,700,000 Chinese dollars, on the understanding that China will offer no objection to the Inspector General liquidating the plan thus proposed by the powers; that is, will not veto the release by him of the above balances.

I am informed by the secretary to the Inspector General [that] the same suggestion has been made to British and French Embassies.

Repeated to Chungking, Peiping, and Tokyo.