893.51/4273
The American Group to the Secretary of State
[Received April 28.]
Sir: As Mr. Lamont52 is sailing for Europe tomorrow and may not be readily available while the questions relating to China are under consideration, we take the liberty of supplementing our letter of April 26th53 to cover even more explicitly, if that be possible, some of the points involved that we consider (on a further review of the subject) to be of special if not vital importance.
The only untouched security available for refunding China’s debts will be the proceeds of the customs surtax. (As pointed out by Minister Schurman, the revenues of the present customs tariff and of the salt tax are already overburdened). It will be in the power of the Special Conference to impose any conditions it may see fit to the taking effect of the customs surtax. It may avoid any present liens attaching to the proceeds of the surtax. It may cause such proceeds to come to the Maritime Customs Administration with such liens, and such priorities, as it may deem proper. It may limit the lien to foreign debts alone, or it may include domestic debts, on a parity or otherwise, within the liens created by it.
The protection of the interests of the foreign creditors (representing debts aggregating, let us say 150 million gold dollars) as well as the re-establishment of the Chinese Government’s credit in foreign markets,—two important objects to be attained,—will necessarily require [Page 539] that the present foreign debts be refunded by a bond so well secured as to be salable by or for the foreign creditors without much, if any, loss.
This means, in our opinion, that a first and preferential lien on the surtax proceeds for the bonds issued in exchange for the foreign debts, should be created. The dependable proceeds of the surtax will not be sufficient to allow the domestic debts to be included, on a parity with the foreign debts, and still accomplish the two objects above mentioned. This is a very important fact to be borne in mind at all times.
We are impressed with the fact that, in view of the prevailing chaotic political conditions, any cash advance to the Chinese Government will not materially advance the settlement of the political conditions (rather the contrary). And we venture to hope that the idea that such an advance will be made will not be encouraged in any authoritative quarters, although this may possibly be not the best time to shatter the hope of the Chinese officials therefor. Possibly the conditions may be improved when the Special Conference convenes; and when it shall have determined what status is to be given to the bonds to be issued for the present foreign debts, there may be a greater willingness than at present to make fresh advances.
We are not unmindful of the larger aspects of the matter, mentioned particularly in your letter of April 13th,54 but in our study of all the matters involved we are obliged to be governed to no small extent by the practical situation that governed the proposal involving fresh advances by the American banks.
You will, of course, understand that nothing in the foregoing should be understood as modifying our willingness, already expressed more than once, to have the matter of a consolidation of China’s debt considered by the four groups’ representatives in Peking.
Trusting that you will appreciate our motive in making a résumé in this manner of the views already expressed, we are [etc.]
For the American Group