893.51 Salt Funds/267

Memorandum by Mr. Walter A. Adams of the Division of Far Eastern A fairs 42

Reference Chungking’s despatch no. 279, January 19, 1942,43 entitled “Chinese Government Salt Monopoly; Status of Foreign Officers of the Salt Administration; the Question of Good Faith Toward Foreign Bondholders”.

In the despatch under reference Mr. Gauss stated that he did not feel that he should undertake representations in the matter without first consulting the Department.

Aside from the interest of this Government in the orderly and efficient functioning of agencies of the Chinese Government, there are two points of direct interest to this Government in connection with repeated efforts on the part of the Chinese Government to alter the organization of the Chinese Salt Administration. The first of these points is the safeguarding of the security for loans held by American citizens, and the second point—growing out of and subordinate to the first one—is the status and welfare of the American officials of the Salt Administration, whose presence and authority had a direct relation to the terms under which loans were made.

With regard to the first of the above-mentioned points, it is believed that the question of repayment of loans by China will depend mainly upon the solvency and soundness of the Chinese Government as a whole and not upon the organization of some subordinate agency of the Government. It is further believed that from now on it will be impracticable to impose upon China foreign authority in Chinese Government agencies.

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With regard to the second point, Mr. R. D. Wolcott, the sole remaining American official in the Salt Administration, is understood to have tendered his resignation and to be now in the United States.

The Department, in its telegram no. 235, March 28, 2 [6] p.m., to Chungking, explained to the Embassy its attitude toward the general question of state monopolies (including salt) in China at this time.

With the foregoing considerations in mind, FE is of the opinion that no useful purpose would be served by further representations to the Chinese Government on the specific question of the Salt Administration. FE believes that the despatch under reference should be filed without action.

  1. Initialed by the Chief of the Division (Hamilton).
  2. Not printed.