893.51/5908: Telegram
   The Minister in China (Johnson) to the Secretary of State

                                      PEIPING, June 30, 1934-noon.
                                             [Received 7: 50 p. m.]
  282. Legation's despatch No. 2609, March 22nd 9 regarding Hukuang
loan.
  1. British Legation has suggested transmission to Chinese Govern-
ment of a memorandum acknowledging receipt of Foreign Office
memorandum of March 13th and continuing as follows:
  "Although more than 3 months have since elapsed no further com-
munication has been received from the Chinese Government by the
undersigned representatives whose attention has now been drawn
to yet another default in this loan on June 15. These accumulated
defaults now amount to nearly 2,800,000 pounds sterling and in these
circumstances continued utilization for extraneous purposes of cus-
toms revenues pledged under the agreement of 1911 for the service of
the Hukuang loan must necessarily create the most deplorable im-
pression abroad.
  The undersigned representatives have accordingly the honor once
again to call upon the Chinese Government to implement their obliga-
tions under articles 8 and 9 of the Hukuang loan agreement and make
available the customs revenues hypothecated for the service of this
loan."
  2. May I sign?                                         JOHNSON

         The Secretary of State to the Minister in China (Johnson)
893.51/5908 Telegram
                                  WASHINGTON, JUly 5,1934-6 p. m.
  197. Your 282, June 30, noon. While the Chinese Government is
obligated by Article 9 of the Loan Agreement to allocate part of the
customs revenues to the service of the loan, the Chinese Government
has not yet carried out that obligation and therefore it is incorrect
to say, as is said in the draft note, that customs revenues have been
"pledged" and "hypothecated" for the service of the loan.
  The Department suggests that, in this draft, the last sentence of
the first paragraph be amended to read substantially as follows:
"These accumulated defaults now amount to nearly 2,800,000 pounds
sterling, and in these circumstances the complete disregard by the Chi-
nese Government of its obligation under the agreement of 1911 to have
the service of this loan made a charge, as prescribed and provided in
the agreement, upon customs revenue while progressively utilizing

9Not printed; it enclosed copy of the Chinese Foreign Office note dated March
13,
1934, acknowledging the joint memorandum of March 7 (not printed), which
had been referred to appropriate authorities for consideration (893.51/5883).



557



CHINA