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herewith a copy of a telegram from Messrs. Morgan, Grenfell & Co., transmitting a message received from Peking reporting the action taken in pursuance of our telegraphic instructions to Mr. F. H. Meknight, in Peking, a copy of which was transmitted to you with our letter above referred to. Very truly yours,


Morgan, Grenfell « Co. to the American Group.

LONDON, April 15, 1913. Hong Kong & Shanghai Banking Corporation have received a cable from Peking, as follows:

Following for four groups: Currency loan. We have written Minister of Finance provided Chinese will pay forthwitli accrued interest to date and will extend agreement in favor of English, French, German groups to October 14th next, all the four groups are prepared to extend £400,000 advance for six months subject to prior payments at option of groups out of proceeds any comprehensive reorganization loan which may be issued in the meantime. American representative cooperates with representatives other three groups, but we have explained Chinese that interest in (sic) American group in loan agreement ceases April 14th and that if extension granted all their obligations and rights thereunder will be assumed by English, French, German groups.



File No. 893.51/1365.

The American Group to the Secretary of State.


New YORK, March 31, 1913. Sır: Supplementing our letter of March 19th' covering transactions with the Chinese Government in which we referred to certain arrangements already made by us jointly with the British, German, French, Russian and Japanese financial groups, we beg now also to call your attention to the two loans which we separately have made to the Chinese Government for the maintenance of its organization for the education of Chinese young men in the United States under the arrangement made following the remission by the United States of a portion of the Boxer indemnity. *

We authorized Mr. F. H. McKnight, our representative in Peking, to contract to lend to the Chinese Government for the purposes mentioned above the sum of $200,000. This agreement, which was approved by the American Minister at Peking, was signed on the twenty-sixth day of November, 1912,

We have now advanced to the Provisional Government of China $160,000 on account of this loan of $200,000 contracted for on November 26th, 1912. In accordance with the request of the Chinese Government, communicated through Mr. McKnight, our representative in Peking, we shall, on the first of April, pay $25,000 in Washington to the order of Director Wong Ting for the account of the Chinese Government, and transmit the sum of $15,000 to Peking, which advances will constitute the final installments on account of this loan.

See p. 171.

Under a further contract dated January 14th, 1913, the American group agreed to loan the Chinese Government the sum of $185,000 to repay the advance obtained by it from the International Banking Corporation for the maintenance of students as described above.

* January 17th, we deposited * * * with the International Banking Corporation in New York $185,000 to the credit of the Provisional Government of China and to the order of Mr. Wong Ting.

The agreements above mentioned were concluded with the approval of the American Minister in Peking, and copies thereof were filed with the American Legation at the capital and, we assume, were transmitted to the Department of State and are now included in your official records. These agreements provide that the loans above mentioned shall be paid from the portion of the Boxer indemnity which is refunded to the Chinese Government by the Government of the United States as each payment of the indemnity is made by the former to the latter.

It is our understanding that with the consent of the powers Chinese indemnity payments have been deferred since November 1911. It has been our understanding, moreover, that these arrears would be liquidated from the proceeds of the reorganization loan. Inasmuch as we have withdrawn from the negotiations therefor, as we stated in our letter to the Departmont on the 19th instant, we now lay this matter before you and beg to request that at such time as you shall deem convenient you will take such steps as may be necessary to arrange for the payment of these obligations by the Chinese Government. Very truly yours,


File No. 893.51/1365.

The Secretary of State to the American Group.


Washington, April 3, 1913. Sms: I have to acknowledge the receipt of your letter of March 31 on the subject of loans made to the Chinese Government for the education of Chinese students in the United States under the arrangement made following the remission of the Boxer indemnity and in reply to state that the matter will be given due consideration by the Department. I am [etc.]


cation of Chiollowing the ren will be giver

File Yo. $93.51/1432.

The American Group to the Secretary of State.

NEW YORK, June 5, 1913. Sir: Referring to our letter of March 31, 1913, regarding the two loans made by the American group to Chinghua College, we beg to enclose herewith a copy of a communication, dated May 13, 1913,

addressed by Mr. D. A. Menocal, Manager of the International Banking Corporation in Peking, to the home office.

We should appreciate any information which the Department may give us as to the steps which have been taken in this matter. Very truly yours,



The Acting Manager of the International Banking Corporation to the General


PEKING, May 13, 1913. DEAR SIR: In view of the fact that the outstanding arrears of the Chinese indemnity due to the American Government will be repaid from the proceeds of the reorganization loan as soon as arrangements are completed for this flotation, it is our intention to request the American Legation here to remind the proper authorities at Washington of the lien held by the American group upon that portion of the indemnity, and its arrears, to be returned to China by the United States Government. This hypothecation is covered by loan agreements between the American group and the Ch'ing Hua College dated the 26th November 1912 and the 14th January 1913. We consider it advisable to take this precaution for fear that the portion to be returned might be paid over to the Chinese Government either in Europe or America, when the parties receiving these funds may inadvertently apply them to other purposes before satisfying the rights held by the American group.

But as it is quite possible that the State Department may take no action upon such a telegraphic request from the American Legation here, we will wire you direct as soon as we send in our letter to the American Chargé d'Affaires, with the idea that you may take such action with the American Treasury Department as you deem necessary. At the same time we will, of course, communicate in the above sense with both the Ch'ing Hua College and the Minister of Foreign Affairs and Finance. Yours very truly,



The American Group to the Acting Chief, Division of Far Eastern


NEW YORK, August 27, 1913. Dear Sir: We beg to advise you that we have now been fully reimbursed by the Chinese Government for the two loans made by the American group to the Chinese Government and Chinghua Coilege, for $200,000 and $185,000 respectively, together with accrued interest to August 21, 1913, inclusive.'

It seems to us fitting at this time to express our keen appreciation of your services on our behalf in the settlement of these loans.

You may be gratified to learn that we are this day in receipt of an official communication from the Chinese Legation at Washington, from which we quote as follows:

I avail myself of this opportunity to express to you, for your friendly aid to Chinghua College in time of stress, the grateful appreciation of my Governinent, to which I beg to add my own. Very truly yours,


· See letter of March 31, ante.


NOTE.--On June 10, 1913, the Director of Chinese Students in the T'nited States, Doctor T. T. Wong, informed the Department that Mr. John W. Foster had requested Mr. Andrew Carnegie to lend the Chinese Government $200,000 for the support of the Chinese indemnity students, and that Mr. Carnegie had consented to do so. On June 12 Doctor Wong sent to the Department a memorandum, prepared by Senator Root, of the basis for arranging advances by Mr. Carnegie, one feature of which-the only one of interest to the Department-was that “ Whenever the funds of the Republic of China become available to resume the payment of indemnity, the amount advanced under this arrangement is to be reimbursed from the first installments.” (File No. 893.51/1452.)

On July 4, 1913, the Chinese Government authorized the loan and gave notice thereof to the American Legation. (File No. 893.51/ 1456.)

This loan is not related to those made by the American group of bankers set forth in the correspondence above.

MISCELLANEOUS LOANS. NOTE.-The loans of which memoranda are here given have no direct connection with the loans heretofore treated and are mentioned merely as illustrative of the financial conditions alluded to from time to time in the foregoing correspondence. The file numbers are those of the communications conveying the data.

In this connection see despatch No. 929 of July 11, 1913, from the American Chargé d'Affaires to the Secretary of State and the instruction in reply dated September 11, 1913. (Ante, p. 183.)

Two Austrian loans of £2,000,000 and £1,200,000 respectively, made April 10, 1913, by Arnhold, Karberg & Co. for a group of Austrian banks, in an agreement of that date with the Minister of Finance. (File No. 893.51/1439.)

The Pukou-Sinyang Railway loan agreement of November 18, 1913, for £3,000,000 between the Central Railways, Ltd. (British) and the Government of China. (File No. 893.51/1483.)

The Hukuang Railway loan. Letter from Willard Straight to the Department as to the validity of the loan agreement. (File No. $93.51/1381). Despatch from the American Chargé d'Affaires inclosing correspondence as to carrying out of loan agreement (File No. 893.51/1382). Same to same relative to proposed delegation of the rights of the American group to the International Banking Corporation (File Nos. 893.51/1402, 1426, 1413).

Belgian loan. The Compagnie Générale des Chemins de Fer et Tramways en Chine with the Government of China : telegrann from

* For. Rel. 1912, pp. 87-88.

the American Minister stating that the Belgian company that constructed the Kaifeng-Honan railway signed a new contract on September 30, 1912, to build a line from Haichou via Kaifeng to Lanchou in Kansuh; 215,000,000 francs, the railway as security; the French interest in the company must consent before ratification. (File Nos. 893.51/1229, 1235; 1350 with text of contract and instruction to examine the project; 1419, reply to 1350.)


File No. 893.51/1316.

The American Minister to the Secretary of State.


No. 725.]


Peking, January 27, 1913. Sir: I have the honor to report that the question of applying the surplus maritime customs receipts to the payment of accrued indemnity installments has been the subject of earnest discussion among the members of the Diplomatic Body.

Before stating the issue involved, I will briefly recite the history of the events which lead up to it. As you doubtless know, a number of foreign loans were negotiated by the Chinese, before the Boxer trouble of 1900, for which the receipts of the maritime customs were pledged as security. This indebtedness remains in force, less ihe annual payment of amortization and interest charges. In addition, under the Protocol of 1901, the indemnity payments were also made a charge upon the customs receipts, but the lien of the latter is subordinate to that of the prior loans.

Under the old régime the customs receipts were paid direct to the local customs Taotai, a Chinese official, and became a part of the general funds of the Imperial Government. When payments on the loans and indemnity matured, the Chinese paid them out of their general funds without reference to the source from which they were derived; so that no question ever arose as to the relative rights of the loans and the indemnity, and no accounting of the customs receipts in reference thereto was ever made.

Soon after the revolution broke out, some of the treaty ports passed under the control of the revolutionists and others remained under i he control of the imperialists. This condition of affairs threatened io demoralize the customs revenues and to divert the receipts, in whole or in part, from the payment of the debts for which they were pledged. The Diplomatic Body made an arrangement with the Imperial Government, whereby the current customs receipts were collected by the inspector general of customs and by him held and deposited in certain foreign banks in Shanghai for the account of the maturing payments on prior loans and indemnities. The revolutionists were not parties to this arrangement, but they respected it by their non-interference with the customs authorities or with the

* Continued from For. Rel. 1912, p. 159.

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