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, WILLARD STRAIGHT. [Inclosure.] The Acting Manager of the International Banking Corporation to the General Manager. 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, D. A. MENOCAL. 893.51/1460. The American Group to the Acting Chief, Division of Far Eastern Affairs. 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 College, 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 Government, to which I beg to add my own. Very truly yours, A. W. FIEDLER. 1 See letter of March 31, ante. CARNEGIE STUDENT LOAN. NOTE--On June 10, 1913, the Director of Chinese Students in the United 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. 893.51/1381). 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: telegram 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.) 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 the 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 the control of the imperialists. This condition of affairs threatened to 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. revenues collected. Under this arrangement the inspector general collected the revenues and deposited them in the Hongkong & Shanghai Banking Corporation, the Deutsch-Asiatische Bank, and the Russo-Asiatic Bank, at Shanghai. At the time, it was thought that, by reason of the disturbed conditions through which the country was then passing, the customs receipts would fall off; and a contingency might arise wherein they would not be sufficient to take care of the maturing payments of the prior loans; and the three banks aforesaid were made depositaries for the customs receipts by common consent, because they were interested in the service of the loans as well as in the indemnity. No official report of the customs receipts for the year 1912 has yet been made, but it is unofficially reported that the increase over last year amounts to some Hk. Tls. 3,500,000. The three banks aforesaid paid the loan obligations for the year 1912, as they matured, out of the receipts of that year, and on December 31st had on hand a surplus of some $10,273,682.09. These banks continued to hold this surplus, on deposit, in practically equal amounts, which gave them a marked advantage in the local financial market. This fact excited some unrest on the part of the other banks which are interested in the service of the indemnity, but are not interested in the prior loans. These banks claimed that the continued deposit of the surplus in the three depositary banks gave the latter a predominance in the local financial market to which they were not entitled. Therefore the dissenting banks complained to their respective Ministers and asked that the surplus be divided among and deposited with the indemnity banks, so-called, including the three depositary banks, in proportion to the respective national interests therein. The French, Japanese and Belgian Ministers especially were active in supporting this demand of their banks, and at their suggestion a meeting of the Diplomatic Body was convened on January 16th to consider the question. * * The discussion continued through three several protracted meetings and, for a time, it seemed impossible to reach an agreement. Finally it was agreed to distribute the surplus reported on hand on December 31st, or as much thereof as will cover an even number of months, together with four per cent compound interest thereon, and leave the procedure for the year 1913 the same as it was during the year 1912; that is, the inspector general of customs will continue depositing the customs receipts in the three depositary banks as before. The British Minister said he thought that by September, or Soon after, the accumulations will be enough to take care of the loan obligations for the year, and the subsequent receipts may be deposited, as collected, among the indemnity banks for the indemnity recount. We then formulated an identic letter to be sent to the respective banks and also a communication to be sent to the Foreign Office by the Dean, asking its consent to the arrangement and that an order be given the inspector general to distribute the surplus to the indemnity account in the manner agreed upon. My letter was sent the International Banking Corporation on January 18th, and on January 23rd I was notified by the Peking branch of the bank that a deposit of $757,900 had been made therein at Shanghai for the account of the American Government. I have since received a reply to my letter to the International Bank at Shanghai. I have [etc.] * * * W. J. CALHOUN. CLAIMS OF AMERICAN CITIZENS AGAINST CHINA.1 File No. 493.11H52/40. The Acting Secretary of State to the American Minister. No. 290.] [Extract.] DEPARTMENT OF STATE, Washington, October 4, 1912. SIR: In view of the claims already presented and the likelihood that others will be forthcoming, it is requested that the Legation report what action, if any, has been taken by the commission appointed by the Diplomatic Body at Peking to formulate principles for the guidance of the various Legations in disposing of the claims of their respective nationals against China resulting from recent disturbances. I am [etc.] File No. 493.11/367. HUNTINGTON WILSON. The American Minister to the Secretary of State. [Telegram-Paraphrase-Extract.] AMERICAN LEGATION. Peking, December 31, 1912. At a meeting of the French and Japanese Ministers with the Chinese Minister for Foreign Affairs and the Minister of Finance this morning the Minister for Foreign Affairs admitted in principle his Government's liability for damages caused to foreigners by the revolution, and agreed that claims should be settled by the Government of China with the diplomatic representatives of the interested Powers. In case of disagreement about disputed claims they will be referred to arbitration. The Government of China is willing to borrow two million pounds sterling to pay these claims. The French and Japanese Ministers reported the above to their colleagues this afternoon. File No. 493.11/379. CALHOUN, The American Chargé d'Affaires to the Secretary of State. No. 814.] [Extract.] AMERICAN LEGATION, SIR: Referring to the Department's instruction No. 290, of October 4, 1912, requesting the Legation to report what action, if any, had been Continued from For. Rel. 1912, p. 171. |