The Counselor of Embassy in China ( Smyth ) to the Secretary of State

127. Yesterday British Embassy here gave us substance note which it is about to address to Chinese Foreign Office (Embtel 9, Jan. 2, to Dept, repeated Shanghai as 3) as follows:

As already stated in our aide-mémoire (i. e., caveat) of Dec. 21, the “measures for taking over settlements, et cetera” do not seem [Page 1353] compatible with provisions of 1943 treaty. Embassy has been directed by British Foreign Secretary12 to state that British Govt is unable to accept Chinese Govt’s interpretations of 1943 treaty relating to transfer of international settlements, et cetera, as revealed in above measures and in communications from Ministry Foreign Affairs. In particular British Govt cannot agree to unilateral assumption by Chinese Govt without further discussion of administrative control including assets and obligations of those special areas as proposed in the measures. It also cannot agree to claim of assessment of obligations by Liquidation Committee. British Govt considers that 1943 treaty does not by itself represent instrument of transfer but merely an agreement to transfer, the manner and details of which were to be agreed upon subsequently by mutual discussion. British Govt considers therefore that discussions between Chinese Govt and British and other interested govts should now be initiated to arrange manner of formal transfer, et cetera. The following 5–point procedure is therefore presented as being in our opinion a satisfactory method of completing transfer primarily of international settlement at Shanghai but equally mutatis mutandis of other special areas concerned: (Sent Dept as 127, repeated Shanghai as 39.)

A joint committee to be appointed by Chinese Govt and interested foreign govts, foreign members of which should include representatives of former municipal and other administrations. Duty of this committee would be to work out the details of transfer and to agree upon a statement of official assets and official obligations and liabilities of area in question. In event of disagreement in regard to any item or items, matter should be referred to a higher level for final decision.
Formal instrument of transfer should be drawn up by mutual agreement.
The Chinese Govt could designate a nominee such as the future municipal administration in whose favor it desires formal transfer to be effected.
The Foreign Govts concerned, including His Majesty’s Govt in the United Kingdom, should join in appointment of one or more representatives to effect transfer on their behalf.
The formal instrument of transfer would then be executed by representative or representatives of foreign govts concerned and nominees of Chinese Govt respectively (end substance of note).

Pending receipt of Dept’s instructions requested in our previous telegrams, we have taken no action regarding these matters. Dept’s instructions as to position we should take would be appreciated.

  1. Ernest Bevin, British Secretary of State for Foreign Affairs.