893.51 Salt Funds/265: Telegram

The Ambassador in China (Gauss) to the Secretary of State

34. Learning from the American Acting Associate Director General of the Chinese Salt Administration that a Government salt monopoly was to be established effective January 1 and that he had been informed by the Chinese Director General that it was proposed to reduce the status of foreign officers of the Administration from their [Page 496]existing equal authority and joint responsibility with their Chinese colleagues to that of advisors, I made informal inquiry on the subject of the Minister of Finance23 and was informed in reply that the monopoly would become effective from January 1 and “will not affect foreign loans originally secured on salt tax” and that “elective staff members who have been giving satisfactory service and who are technical experts will continue to be employed”.

As China, according to my understanding, gave assurances to British and I believe American interests having loans secured on the salt revenues that China contemplated no material alteration in the existing form of the Salt Administration resulting in [change of?] status of foreign employees, the action of the Minister of Finance raises a question of good faith, and, in addition, of heavy capital outlay to organize this Government monopoly at a time when the Government financial position is disorganized and currency inflation almost beyond control.

  1. H. H. Kung.