The Consul at Peiping ( Freeman ) to the Ambassador in China ( Stuart )5

No. 31

Sir: I have the honor to refer to the Embassy’s letter dated September 5, 1946, with regard to my appointment as American Adviser to [Page 1413] the Peiping Diplomatic Quarter Liquidation Commission, and to enclose copies of the following relevant documents6 concerning the work of the Commission up to the present time:

Agenda for the first meeting of the Commission to which the Foreign Advisers were invited on December 11, 1946;
Minutes of the meeting of December 11, 1946, as recorded by the Chinese Secretary General;7
Letter from the British Consul8 to the Secretary General of the Commission dated December 21, 1946, enclosing a copy of the minutes of the December 11 meeting as recorded by the British Consul and agreed to by the other Foreign Advisers;9
Agenda for the second meeting of the full Commission on February 1, 1947;
Minutes of the February 1 meeting as recorded by the Secretary General;
Letter from the Secretary General dated March 8, 1947;
Reply to above dated March 14, 1947;
Letter from the Secretary General dated March 22, 1947;
Draft of final joint statement prepared by the Commissioners10 presented at the third meeting of the full Commission on August 30, 1947;
Consulate’s letter dated September 5, 1947, to the Secretary General enclosing proposed counter-draft of joint agreement approved by the Foreign Advisers.

For three months after the receipt of the Embassy’s letter under reference, no communication was received from the Liquidation Commission requesting the attendance of the Foreign Advisers at meetings of the Commission. Since July 11, 1946, the headquarters of the Commission had been established in the chancery building of the former Spanish Legation which was forcibly occupied on that date under the direction of the former Mayor, General Hsiung Pin (reference Peiping’s despatch no. 10, August 8, 194611). To all appearances, however, nothing was accomplished by the Commission during this period with the exception of the dispatch of two curt mimeographed circulars which were sent to all residents of the Diplomatic Quarter instructing that representatives of the Commission would shortly visit all properties within the Quarter accompanied by police [Page 1414] with the announced purpose of “conducting an investigation of the lands, buildings and official assets within the Legation Quarter”.*

With the appointment of Mayor Ho Ssu-yuan to succeed Hsiung Pin on November 1, 1946, the work of the Liquidation Commission was given renewed importance and Major General Chang Shu-hsien, son-in-law of General Feng Yu-hsiang, and Director of the Peiping office of the Ministry of Foreign Affairs, was appointed Secretary General of the Commission. A meeting of the full Commission to which the Foreign Advisers were invited was scheduled for December 11, 1946, although the Secretary General chose the Peiping office of the Ministry of Foreign Affairs as the meeting place rather than the headquarters of the Commission within the Spanish Legation compound in order to avoid offending the sensibilities of any of the Foreign Advisers.

It was obvious at the outset of the first meeting of the full Commission that the Chinese had very ambitious desires with regard to the work of the Commission. The Mayor (who is concurrently Chairman of the Commission) stated, for example, that the term “official assets” should be interpreted to include not only the open glacis areas, the roads, equipment, etc., which were in the ownership or charge of the former Administrative Commission of the Diplomatic Quarter, but also all land within the Quarter which had been allotted to the various foreign governments. The Commission thus planned to carry out investigations into the origin and title of all private and foreign government properties in the Quarter with an eye to the possibility of fraudulent acquisition. The Commission was also of the opinion that the determination of whether the various foreign governments were using the property allocated to them for official purposes in accordance with the provisions of the treaties abolishing extraterritorial rights (Article II, paragraph 3 of the Sino-American Treaty) was a responsibility of the Commission.

The British Adviser and I objected strongly to this interpretation of the term “official assets” and to the scope of the Commission as envisaged by the Chinese. We expressed our opinion that the term “official assets” should be held to include only those assets which were [Page 1415] in the actual ownership or charge of the Administrative Commission of the Diplomatic Quarter; that the question of determining title to individual properties, whether held by private individuals or by foreign governments, was not within the purview of the Commission as contemplated under the treaties; that the question of whether a foreign government was using the property allocated to it solely for official purposes was one for bilateral discussion between the Chinese Government and the foreign government concerned; and that the status of properties allocated to foreign governments which had been enemies of China during World War II was likewise one which did not come within the scope of the Commission. We suggested that the function of the Commission was a relatively simple one: to determine what were the official assets, obligations and liabilities of the Administrative Commission of the Diplomatic Quarter, and to transfer control of the Quarter (together with all the Administrative Commission’s property, services and debts) to the Chinese Government.

After considerable discussion and explanation, the views of the Foreign Advisers apparently prevailed, mainly because the Chinese members of the Commission had very little idea of how to proceed with the matter at hand and welcomed what appeared to be a relatively simple solution. The Foreign Advisers, on the other hand, were lulled into a false sense of optimism by the smooth way in which the first meeting had gone and by the acceptance of the Chinese of our suggestions as to procedure. In fact, it appeared as though the Commission would complete its work within a few months at most.

The second meeting of the full Commission, held on February 1, 1947, was devoted almost entirely to a review of the assets of the Administrative Commission of the Diplomatic Quarter as listed in the archives which had been located in various municipal offices in Peiping. Consideration was also given to the methods to be used by the Land Bureau of the municipal government in eliciting information concerning the title and ownership of private property within the Quarter. A small incident in this regard was illustrative of many similar complications which arose later. A printed form to be sent to all private residents of the Diplomatic Quarter for completion was circulated among the Commission for suggestions and approval. As the form was headed “Peiping Municipal Government and Commission for Liquidation of Official Assets, Obligations and Liabilities of the Legation Quarter”, the Foreign Advisers objected that it had already been agreed that the investigation of land titles was not a [Page 1416] function of the Commission and requested that the name of the Commission be removed from the form. In all other respects the form was approved. Two days later, however, residents of the Diplomatic Quarter began bringing copies of this form to their Consulates for advice in filling in the desired information and it was noticed that the form was exactly the same as that presented to the Commission with the name of the Commission still in bold letters at the top. The French Consul was the first of the Foreign Advisers to protest to the Secretary General of the Commission over this action taken in direct contravention to the expressed wishes of the Foreign Advisers but the former was informed that the function of the Foreign Advisers was solely one of giving advice—that advice to be accepted or rejected by the Commission as deemed advisable in the circumstances.

As the entire position of the Foreign Advisers in future relations with the Commission appeared to be involved in this admittedly trivial matter, it was decided in an informal meeting of the Foreign Advisers to forward to the Secretary General a copy of Foreign Minister Wang Shih-chieh’s note dated June 6, 1946, to the British Ambassador12 on the subject of Liquidation Commissions. Paragraph 5 of this note reads (in translation) as follows: “The decisions of the Liquidation Commissions shall only be binding when agreed to by both the Chinese members and the Foreign Advisers; where a decision cannot be reached, the Ministry of Foreign Affairs and the diplomatic mission concerned shall be requested to discuss and decide the matter.” No reply was received by the British Consul to his letter forwarding a copy of the note under reference, but the fact that the Foreign Advisers were not invited to attend another meeting for six months was indicative that the Commission intended to go about its business without any additional interference on the part of the Foreign Advisers.

How far the Chinese had reversed their stand (or rather, reverted to their original position) since the first meeting of the full Commission on December 11, 1946, was clearly evidenced in a letter from the Secretary General dated March 8, 1947.§ General Chang stated in this letter that the official assets of the Legation Quarter had been decided by the Executive Yuan to include the land “originally allotted for the use of the allied and neutral governments” as well as “all assets in the possession of the enemy governments”. In my reply of March 14, 1947,|| I stated that the Executive Yuan’s definition of the term “official assets” was in direct contradiction to that agreed [Page 1417] on and recorded in the minutes of the December 11 meeting and that the subject of American Government property in the Legation Quarter did not, in my opinion, fall within the purview of the Liquidation Commission. General Chang’s reply of May 22, 1947 indicated that he was conscious of the stipulation that decisions of the Commission required the unanimous agreement of the Commissioners and the Foreign Advisers in order to be binding. He countered, however, with the ingenious and surprising statement that the meeting of December 11 was an informal one rather than “a regular official meeting”, and that therefore points reached in that meeting were tentative and could not be considered as unanimous decisions. It was becoming obvious that the area of disagreement was one which stemmed from Nanking, and there appeared to be little hope of breaking the deadlock through local negotiations.

The arrival in Peiping on April 28, 1947, of Dr. Ruth Bacon,13 who had been holding discussions with the Minister for Foreign Affairs in Nanking on the subject of the Liquidation Commissions, provided a needed opportunity for a thorough airing of the situation in Peiping and confirmation that the attitude which had been adopted by the Foreign Advisers did in fact represent the views of the Department. Shortly after Dr. Bacon’s return to Nanking, the Embassy’s telegram no. 81 of May 7 was received informing the Consulate that the Foreign Minister had stated categorically that the competence of the Liquidation Commission did not extend to such matters as the investigation of titles of foreign government property in the Diplomatic Quarter, and that instructions to this effect were being sent to the Commission. No indication was received from the Commission of a change in instructions, however, and it was not until July that Mr. Lin Ch’i-han, Adviser to the Ministry of Foreign Affairs, was sent to Peiping to discuss matters directly with the members of the Commission and the Foreign Advisers.

In a conversation with Mr. Lin and Dr. C. C. Chi, Special Representative of the Ministry of Foreign Affairs for the Peiping–Tientsin Area, it was agreed that for a slight concession on the part of the Consulate the whole question of investigating the titles and official use of the property allocated to foreign governments would be dropped by the Commission and work would proceed on the basis of the decisions reached in the meeting of December 11. This concession was to permit representatives of the municipal Land Bureau to survey the interior of the four American compounds for purposes of compiling an accurate and up-to-date plan of the Diplomatic Quarter, but it was [Page 1418] agreed that the written request therefor should be made by Dr. Chi as the Special Representative of the Foreign Office rather than by General Chang as Secretary General of the Liquidation Commission.

Finally, on August 30, 1947, the Foreign Advisers were again invited to a meeting of the full Commission to discuss a proposed joint statement which had been prepared by the Chinese and was to represent the final action of the Commission.** Following several suggested changes in form and wording made by the Foreign Advisers, it was proposed by the Netherlands Adviser that I prepare an alternate draft of the joint statement which would incorporate the various changes suggested, obtain the approval of the other Foreign Advisers, and submit a copy duly initialed by the Foreign Advisers to the Commission for consideration. This was done as suggested†† and there the matter now rests. In view of the understanding that any action taken by the Commission will be subject to confirmation by an exchange of notes between the Ministry of Foreign Affairs and the Embassy, it was not considered necessary to obtain the prior approval of the Embassy to the counter-draft agreement before submitting it to the Liquidation Commission for consideration.

Future developments in this matter will be reported as they occur.

Respectfully yours,

Fulton Freeman
  1. Copy transmitted to the Department by the Consul without covering despatch; received October 2.
  2. Enclosures not printed.
  3. Maj. Gen. Chang Shu-hsien.
  4. J. R. Boyce.
  5. The American Consul, Fulton Freeman, and the French Consul, Georges Perruche.
  6. Messrs. Freeman, Boyce, Perruche, the First Secretary of the Belgian Embassy (Brogniez), and the First Secretary of the Netherlands Embassy (Baron Van Boetzelaer).
  7. Not printed.
  8. These circulars were distributed on October 31, 1946, the final day in office of Mayor Hsiung, and were probably drawn up hurriedly in an effort to conceal the fact that the Commission had accomplished nothing during his term of office. No action was taken, however, and on December 18 a letter from the new Mayor was received apologizing for the negligence on the part of the former members of the Commission in forwarding the circulars to the diplomatic and consular establishments. [Footnote in the original.]
  9. The Spanish Legation property was evacuated by the Commission shortly after January 1, 1947, presumably under instructions from the Ministry of Foreign Affairs, and the Commission’s headquarters was moved to the Peiping office of the Ministry of Foreign Affairs. [Footnote in the original.]
  10. Enclosure No. 3 to this despatch. [Footnote in the original; enclosures not printed.]
  11. Not printed; Sir Horace James Seymour was the British Ambassador in China.
  12. Enclosure No. 6 to this despatch. [Footnote in the original.]
  13. Enclosure No. 7 to this despatch. [Footnote in the original.]
  14. Enclosure No. 8 to this despatch. [Footnote in the original.]
  15. Special Assistant to the Director of the Office of Far Eastern Affairs (Vincent).
  16. Enclosure No. 9 to this despatch. [Footnote in the original.]
  17. Enclosure No. 10 to this despatch. [Footnote in the original.]