893.51/6888
Memorandum of Conversation, by the Assistant Chief of the Division of Far Eastern Affairs (Mackay)
Subject: Chinese Government Proposal in regard to the Service of Loans secured by Customs and Salt Revenues
Mr. Mackay telephoned Mr. White76 and referred to the conversation between Mr. White and Mr. Hamilton which took place on May 2 in regard to the subject stated above.
Mr. White referred to the receipt by him of a copy of the text of a message under date April 14, 1939, received by the Chinese Embassy in Washington from Dr. H. H. Kung in which was set forth a “temporary plan in respect of the unpaid service” of Chinese obligations (see enclosure to 893.51/6876). Mr. White asked for an intimation of the Department’s views in regard to the plan under reference. Mr. Mackay replied to the effect that the proposal as set forth in Dr. Kung’s message of April 14 is by no means clear; that the Department is giving consideration to the matter and that no decision has been reached. Mr. Mackay expressed his personal view that a proposal by the Chinese Government which modified existing agreements between the Chinese Government and American bondholders would be a matter for consideration and decision by the affected bondholders rather than by the Department. Mr. White concurred in the view expressed and said that he had under consideration a communication to be sent to the Chinese Embassy in Washington in which, in brief, he would point out that, as a large proportion of the Treasury Notes issued in connection with the so-called Chicago Bank Loan ($3,571,000 out of the total issue of $5,500,000) is believed to be held in China, it might be possible for the Chinese Government to effect service of such notes in Chinese currency, thus eliminating the question of foreign exchange, and by so doing enable the Chinese Government to service in full the remaining notes of the loan which are now held in the United States. Mr. White also said that as the Hukuang [Page 834] Loan was issued only in part in the United States he did not contemplate taking any action in regard thereto, at least until such time as he had heard from the representatives of the bondholders of the portions of the loan issued in London and elsewhere. Mr. White added that his communication to the Chinese Embassy would of course be conciliatory and would indicate full recognition of the difficulties now being faced by the Chinese Government but that for obvious reasons he could not approve of any plan which would be less favorable to American bondholders than to bondholders of other nationalities.
In conclusion Mr. Mackay said that the Department would be pleased to receive any additional information or comment which the Foreign Bondholders Protective Council might wish to offer, and in turn Mr. White expressed the hope that the Department would pass on to him any information of importance which might be helpful to the Council in its consideration of the subject under discussion.
- Francis White, President, Foreign Bondholders Protective Council.↩