of work with the Council or with any individual group before all the creditor representatives have fully communicated with each other. Therefore, in the hope of effecting an early agreement, I should greatly appreciate your cabling to the Department of State that this Government would be grateful if the Department would explain the situation to the American creditors' representatives and use its good offices in favor of adoption of the procedure I have indicated. With reference to the inquiry in Mr. Clark's telegram concerning customs charges, I should appreciate your communicating to him that other than the report from local authorities (see page 10 of the last published Finance Ministry report) which ranks as of March 1, 1936, no charges have been placed on the customs revenue subsequent to the Tientsin-Pukow Railway settlement which covers the 3,150,000 pounds of outstanding bonds plus 678,000 pounds of bonds subsequently validated to settle the advance made by Deutsch-Asiatische Bank before 1916 secured on unissued Tientsin-Pukow Railway bonds; and that no other charges will be permitted on the customs revenue before the announcement is made, provided that it is made promptly. (Foregoing word underscored by the writer). With reference to the last sentence of Mr. Clark's cablegram, there are no documents to be communicated additional to the announcement and the memorandum communicated to you on March 1. And further, I understand that you telegraphed to Washington the text of the memorandum as well as of the draft announcement." The Department has doubtless received a copy of Clark's telegram.** Sent to the Department; by mail to Peiping. PECK 893.51/6336: Telegram The Ambassador in China (Johnson) to the Secretary of State NANKING, March 22, 1937-2 p. m. [Received March 22-11: 15 a. m.] 128. My 118, March 16, 11 a. m. The following letter addressed to me as American Ambassador, dated March 21, has been received from Dr. H. H. Kung: "With reference to my letter of March 13 transmitting a copy of Mr. Clark's telegram of March 9 concerning the Hukuang loan, in response to which letter Mr. Peck in your absence kindly telegraphed to Washington, I should appreciate your good offices in now forwarding to Washington a further communication to the representatives of the American creditors, as follows: the British, French and German Groups have accepted the proposed Hukuang loan announcement. Phrasing such as that suggested by Mr. Clark has not been requested in previous settlements. Moreover sentence in opening paragraph of the proposed announcement, stating that the other provisions of the contract remain unchanged, makes it unnecessary to change paragraph 1 as Mr. Clark suggested. As to his other suggestion, the change will "Not printed. be duly constituted as I have already assured him and as stated in the memorandum communicated March 1 will remain in force until the loan is fully redeemed. In view of the foregoing I do not wish to make further changes, since I consider the statement to be clear and accurate in the premises. In order to avoid further delay and particularly because I wish to complete the arrangements before sailing for Europe April 2, I should like to be advised promptly that the representatives of the American creditors accept the draft for recommendation to bondholders as has been done by the representatives of other than American creditors who are understood to hold a much greater proportion of the bonds than that held by Americans. Also I should be grateful if you would request that the Chinese Ambassador be advised, for his information." Sent to the Department; Peiping, by mail. JOHNSON 893.51 Con-Ob Continental/185: Telegram The Ambassador in China (Johnson) to the Secretary of State NANKING, March 23, 1937-noon. [Received 3:05 p. m.] 131. My 122, March 19, 10 a. m.95 Letter dated March 20 from Kung, Minister of Finance encloses draft offer for Chicago Bank loan settlement prepared in response to telegram dated March 15 from the Foreign Bondholders Protective Council and also an explanatory memorandum. He requests that these documents be communicated to the Council and to the Chinese Ambassador. Texts follow: "March 20, 1937, draft Chicago loan announcement. His Excellency the Minister of Finance (or the Chinese Ambassador under instructions from his Government) announces the following offer concerning service of the Treasury notes of 1919 (the so-called Chicago Bank loan) of United States dollars 5,500,000: 1. Interest is to be paid at the rate of 22% per annum for the 3 year period commencing November 1, 1936, and at the rate of 5% per annum as from November 1, 1939, payable semiannually May 1 and November 1. 2. Noninterest bearing scrip is to be issued in respect of: (a) arrears of interest computed at one-fifth of the contractual rate, simple interest, from May 1, 1921, to November 1, 1936; and (b) one-fifth of the difference between 212% interest to be paid for the period from November 1, 1936, to November 1, 1939, and 5% to be paid thereafter. 3. Payments of principal of the notes and of installments of the scrip are to be made on June 1 of each year beginning in 1942 according to the following schedule: in 1942 and 1943, 5% each; in 1944 and 1945, 6% each; in 1946 and 1947, 7% each; in 1948 and 1949, 8% each; in 1950 and 1951, 9% each; and in 1952 and 1953 and 1954, 10% 95 each. The Government upon reasonable notice and without premium may increase the amount of principal to be retired on any payment date. The notes are to be retired by drawings at par to be effected by the fiscal agent of the loan in the month of August prior to each date on which drawn notes are to be paid. 4. Payment of interest and principal is to be made out of the salt revenue after making provision for charges existing as of blank (announcement date) and in priority to all charges that may be created subsequent to that date. 5. Holders accepting this offer will present their notes for attachment of new coupon sheets, on the stub of which the text of this offer will be printed. Since the new coupon sheets will not be ready by May 1, 1937, interest will be paid on that date against delivery of the last unpaid coupon attached to the notes." "March 20, 1937. Memorandum supplementing points contained in the draft announcement: 1. The text of the offer would be printed on the stub of the new coupon sheets and pasted on each note, the caption to be: 'offer announced by the Chinese Government (blank) date. By presenting note number (blank) for the affixing of this sheet the holder accepts all the terms and conditions of this offer'. The new coupon sheets also scrip certificates would bear numbers corresponding to numbers of the original notes. 2. Coupons would contain the loan title with the following in parenthesis below: 'payments in respect of this loan will be made in accordance with the offer announced by the Chinese Government (blank) date.' The following also would appear on each coupon: 'coupon for United States dollars (blank) payable to bearer on (blank) date at (blank) (name and address of paying agent)', together with facsimile signature of the Minister of Finance. 3. In view of the history of these obligations the Government considers that the issuing bank's successor would be the logical institution to act as fiscal agent for the notes, also as agent for stamping bonds and issuing new coupon sheets and scrip and further to assist Ambassador in meeting Stock Exchange requirements. Kindly ascertain informally and advise whether bank would accept invitation so to act. The Government would pay the expenses of engraving new coupon sheets and scrip. 4. Salt revenue collections are stated on page 7 of the Finance Ministry report published in 1936. Last year's collection was dollars 205,433,000. 5. Apart from the 1898 Anglo-German loan, Boxer indemnity and 1930 reorganization loan which enjoy certain liens on salt revenue but are now paid from customs, the following loans charged on salt revenue are being paid therefrom: Anglo-French loan of 1908, pounds 4,000,000; Hukuang loan approximately pounds 5,650,000; Crisp loan of 1912 approximately pounds 3,900,000; Vickers and Marconi Treasury notes approximately pounds 3,400,000 (under 1936 settlement); total principal approximately pounds 12,450,000. Total yearly service requirements from salt revenue in respect of these loans assuming Hukuang settlement completed as agreed in principal would be about pounds 904,000 in 1937; pounds 912,000, 1938; pounds 812,000, 1939; pounds 834,000, 1940; and not exceeding pounds 205655-54- -43 750,000 thereafter. In addition there are loans not now being paid having claims on salt revenue, to wit, Tsingtao Treasury notes principal approximately 1,300,000 and Japanese portion of 96,000,000 loan principal approximately 32,000,000; and about Chinese dollars 48,000,000 in respect of certain internal obligations contracted by the former Peiping Government before 1925. 6. There are four other loans secured to some extent on other than salt revenue but predominantly on certain subsidies from salt revenue and/or on special salt taxes the proceeds of which subsidies and/or taxes the National Government granted to provincial authorities in consolidating its administration of salt taxation as a national revenue. These loans are thus of different category than those enumerated in paragraph 5. The outstanding total of these loans is approximately Chinese dollars 91,000,000.” Sent to the Department, copy by mail to Peiping. JOHNSON 893.51 Con-Ob American Group/42 The Chinese Minister of Finance (Kung) to the American Ambassador in China (Johnson) 96 [NANKING,] March 31, 1937. DEAR AMBASSADOR JOHNSON: Now that the Hukuang and Chicago Bank loan settlements have been effected I desire to take up the case of the Pacific Development Loan. To this end I should appreciate your transmitting by telegraph, as you recently were good enough to do in the case of the Hukuang and Chicago loans, the attached communication to Mr. Lamont 97 of Messrs. J. P. Morgan & Company which contains a proposal of settlement. Also I should appreciate having a copy furnished to the Chinese Ambassador at Washington. Yours faithfully, H. H. KUNG 893.51/6382 The Chinese Minister for Foreign Affairs (Wang) to the [Translation] [PEIPING,] April 27, 1937. SIR: I have the honor to quote hereunder a joint despatch which has been received from the Ministries of Finance and Railways: 96 Copy transmitted to the Department by the Ambassador in his despatch No. 415, April 9; received May 3. 97 Thomas W. Lamont, representing the American group of the China Consortium. Copy transmitted to the Department by the Ambassador in his despatch No. 1220, May 7; received June 1. "With reference to the Hukuang Railway Loan, we, the two Ministries, have held prolonged discussions with the creditors of the four nationalities, British, French, American and German. A procedure for adjustment has recently been decided upon. This procedure was advertised in the press on April 5 in an announcement to the public. There are enclosed copies, in Chinese and English, of the announcement and the amortization schedule with the request that they be transmitted to the British, French, American and German Embassies in China for their records." I have the honor to indite this note for your information, and to transmit with it one copy each of the announcement in English and Chinese as well as a copy of the amortization schedule referred to above.99 Accept [etc.] WANG CHUNG-HUI [Enclosure] Announcement of Offer Concerning Service of the (Published April 5, 1937) Their Excellencies the Ministers of Finance and Railways announce the following offer concerning the service of the outstanding bonds of the Hukuang Railway Loan of 1911 amounting to about £5,650,000, under which the interest rate paid is to be reduced in 193738 and the amortization plan modified. Other provisions of the Hukuang Loan contract are to remain unchanged. 1. Interest is to be paid at the rate of 22% per annum in 1937-38 inclusive and 5% per annum thereafter. Payment of interest is to be made out of net earnings of the railway and guaranteed out of salt revenue. Interest due as from January 1, 1941, is to be guaranteed also out of customs revenue with rank as to the date of this announcement. 2. Amortization is to begin in 1941 and to be completed in 39 years from 1937 according to a table to be filed with the paying agents. Payment of amortization and of the scrip to be issued in accordance with paragraph three hereof is to be made out of net earnings of the railway and any deficiency to be made good from revenues under control of the Ministry of Finance. The Government upon reasonable notice and without premium may increase the amount of principal retired on any payment date. Bonds drawn but not yet retired are to be paid according to the order of drawing. 3. Interest in arrears is to be calculated at 1% per annum simple interest instead of 5%. Non-interest bearing scrip is to be issued for arrears of interest so calculated, and also for one-fifth of the short 99 Not printed. |