711.932/8–1544

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

No. 2876

Sir: I have the honor to enclose copy of a memorandum of conversation22 with the Commercial Counselor of the British Embassy at Chungking from which it appears that British banks here are facing the problem of “forced loans” or contributions, and that the British are giving thought to the need for a stipulation in the commercial treaty between China and Britain prohibiting forced loans or contributions.

Inquiry by the Embassy discloses that the British banks—Hong Kong and Shanghai Banking Corporation, and the Chartered Bank of India, Australia and China—have been called upon as members of the Bankers’ Association (which they were obliged to join in order to become members of the Clearing House) to subscribe heavily to Chinese Government loans. More detailed information on this subject will be found in the Embassy’s despatch no. 2877 of August 15, 1944, entitled “Position of Foreign Banks in China”.23

It is common practice amongst the Chinese in floating loans and in collecting funds for public activities to “allocate” the amount of subscriptions expected from various organizations and individuals and [Page 1020]to expect that such subscription shall be forthcoming. While these forced subscriptions may not, strictly speaking, be legal and compulsory, they are nevertheless made in such manner as practically to force compliance.

We may expect this to be one of the difficulties which not only American banks, but business houses, individuals, and organizations, such as chambers of commerce or trade associations, will have to face in post war China, and if it is possible to do so, I believe that there should be included in our draft commercial treaty with China some provision which will protect American interests in China from this practice. I do not anticipate that we would experience any difficulty in providing for similar protection for Chinese and Chinese organizations in the United States.

Respectfully yours,

C. E. Gauss
  1. Not printed.
  2. Post, p. 1067.