893.51/4418: Telegram
The Minister in China ( Schurman ) to the Secretary of State
[Received October 15—10:30 a.m.]
350. My despatch number 1265, January 2.66 French, British, and Japanese Ministers and I addressed joint note to Chinese Foreign Office October 12,66 referring to joint note of December 23, last;67 drew attention to recent mandate providing for permanent continuation of the scheme for securing service of the internal loans on customs surplus resulting from the effective 5 percent tariff and its extension to the service of Chinese portion of the $96,000,000 loan of 1922 thus exempted [preempting?] for the service of these internal loans the whole surplus accruing from the present customs tariff and precluding the use of the latter as security for any general debt consolidating scheme.
Our note embodied formal protest against this action and reminded Chinese Government that certain debts and obligations now in default were contracted by the Chinese Government before date of conclusion of some of these internal loans and also that under the terms of the agreement for such foreign loans the Chinese Government engages in the event of default to provide from other sources sums necessary for payment. We pointed out that such foreign loans are entitled to automatic priority which recent action of Chinese Government entirely ignores.
Text of note66 will be made public tomorrow and will be forwarded by pouch.