calculations and the payments to be received. They decided and China agreed that the indemnity although expressed in Haikwan Taels was an indemnity "in gold" and that the rate in gold of the Haikwan Tael should be fixed on a definite day. This decision was transmitted to the Chinese Plenipotentiaries on July 30, 1901, in the following terms: "The sum of 450,000,000 Haikwan Taels payable 'in gold' at the rate of exchange of April 1, 1901, at 4% interest, represents the grand total of the indemnity demanded by the Powers.["] The rates of exchange of the Haikwan Tael on April 1, 1901, were inserted in Article 6 of the Final Protocol whose text it is fitting to quote below in order to cause to stand out clearly how the Powers and China insisted at that time on the importance of a payment "in gold". "Article 6. By an Imperial Edict dated the 22nd [29th] of May, 1901, His Majesty the Emperor of China agreed to pay the Powers an indemnity of 450,000,000 Haikwan Taels. (a) These 450,000,000 constitute a debt in gold based on the rate of exchange of the Haikwan Tael in relation to the gold currency of each country in the manner set forth hereinafter. This sum in gold shall bear interest Capital and interest shall be payable in gold or at the rates of exchange corresponding to the dates at which the different payments fall due." In the above-mentioned text, the Powers were careful to define the meaning which they intended to give, and which China agreed to give, to the words "in gold": 1) The United States of America which has just adopted the gold standard specified that the rate of exchange of 0,742 referred to the "gold dollar". Russia took the same precaution with regard to the gold rouble in adding the legal weight of fine gold of this currency. 2) The currencies of Belgium, France and Italy have always been quoted at different rates in the international exchanges. On April 1, 1901, Belgian and French francs were quoted at 3.75 a Tael and were at rates almost alike and equivalent to par in gold; the Italian lire was valued at about 3.85 and the Spanish peseta at 5 to a Tael. But, even if the exchange currencies of these four states differ, their gold coinage is legally of the same weight and the same denomination, and it was to represent this weight of 0,290322 of fine gold to a franc that Belgium, Spain, France and Italy all adopted the same rate of exchange of 3.75 to a Tael. 3) Finally all the Signatory Powers as well as China in using the words "rate of the Haikwan Tael to the gold currency of each currency [country?]", excluded from the measures aimed at by Article 6 every evaluation of the Haikwan Tael in relation to the currencies of each country other than their gold currency. They have the right to refuse payment of a Tael in their silver currency, their fiduciary money, their exchange currencies, etc. The measures which the interested Powers took in the Final Protocol were confirmed by China in the text of the letters exchanged on July 2, 1905, as well as in the wording of the bonds delivered to each of the Powers and in the coupons attached to these bonds because Payment "in gold" was the procedure which they adopted in order to assure the distribution of the total Indemnity in the proportions agreed upon by them. To return to the definition of the words "in gold" in the sentence given above from the letters of July 2, 1905, it is clearly the gold value in conformity to the weight and legal standard of each of the currencies specified in Article 6, (a) and at the rates of exchange indicated in the same Article as the equivalent of a Tael which China must pay to each Power for each Tael of the Indemnity of 1901 which she owes. The eight Ministers have desired to show on what foundations the definition which was given by their governments and accepted in 1901 and 1905 by the Chinese Government for the payment in gold of the Indemnity of 1901 rested. In answering the first contention of the note of December 26, 1923, regarding the meaning of the words "in gold" they have, in so doing, refuted the second which, as the Chinese note itself admits, refers solely to the manner of execution of the obligations subscribed to by the Chinese Government in 1901. The character and the total amount of the debt owed by virtue of an obligation cannot depend upon the means adopted for the settlement of this debt. After having recalled this principle of law which is certainly recognized by the Chinese Government, the eight Ministers consider it their duty to take up the principal points of the portion of the notes of December 26, 1923, which concern the exchange of letters of July 2, 1905. The arrangement resulting from this exchange confirmed and carried out Article 6 of the Final Protocol which it had completed. Such as it is, it answers perfectly to their present needs and the Signatory Powers have never thought of modifying it. In recalling the circumstances which preceded and brought about the exchange of letters of 1905, the note of December 26, 1923, makes it evident that at that time the Chinese Government endeavored to secure payment of the arrears of the Indemnity of 1901 in silver and that it was obliged to recognize its obligation to pay "in gold”. This fact furnishes a new argument in favor of the ruling "in gold” as it has been set forth above. This is worth noting in passing. It would be possible to dispute the correctness of this statement of the Chinese note to which the preceding paragraph refers. But the eight Ministers limit themselves in this instance to the repairing of one omission in the said recital and of noting that the arrangement of 1905 had for aim and object the solution of the problem presented by the changing of silver, the currency of China the debtor, into gold. China, having no gold, has had to buy and still has to buy with the silver she possesses, that is to say, with Taels, the gold necessary for the service of the Indemnity of 1901. The method of this transaction not having been settled by the Protocol of 1901, occasioned the subsequent rise of discussions and difficulties ended by the exchange of letters of July 2, 1905. By the terms of Section 3 of these letters China was entitled to bring about the payment to the Powers of the Indemnity of 1901 by one of three systems: "either in silver according to the price of silver on the London market, or in gold bills, or in telegraphic transfers." The machinery of the two last systems, gold drafts and telegraphic transfers, differ only in the more or less rapid means of transmission of the document of exchange from one place to another with a resulting difference corresponding to the rates of exchange. In the two cases, China, the debtor, buys with silver Taels instruments of exchange representing the amount of gold which she owes to her creditor. These purchases, insofar as the service of the Indemnity of 1901 is concerned, are generally made of the banking agents of the Signatory Powers at Shanghai. The arrangement of 1905 has at the same time and quite justly reserved to China the right "to obtain drafts and telegraphic transfers to the best of her interests in any locality and in any bank as cheaply as possible, or by award." The three methods of payment enumerated in Section 3 of the letters of July 2, 1905, lend themselves perfectly to payment “in gold" as it has been defined above by the eight Ministers. The note of December 26 last has confused the quotations of the international exchanges by telegraphic transfer with the telegraphic transfer itself. Telegraphic transfer, in effect, is applied as well to a gold currency as to a silver currency, to a paper currency or an exchange currency. When, on December 30, 1922, the Chinese Government attempted to resume the service of the Indemnity of 1901, in the matter indicated by its note of December 26 [1923?], her representative presented himself, according to established custom, to the Shanghai agents of the interested Governments to negotiate the purchase of telegraphic transfers in francs. The disagreement which ensued was solely about the rates of exchange of the Tael quoted by the two parties. If the representative of the Chinese Government had accepted the rate of the gold franc quoted by the agents of the interested Governments, these agents would have effected the required telegraphic transfers. The Chinese Government, moreover, cannot be ignorant of the possibility of carrying on transactions in gold francs, since it must pay its share of the expenses of the League of Nations in gold francs and since it has accepted the gold franc as the currency of the Universal Postal Union and of its postal conventions with several countries. The eight Ministers, accordingly, support the conclusions drawn in their notes of February 4 [24] and November 5 [3], 1923, and in definitely affirming that for each Haikwan Tael due to each of the Powers under the heading of the Indemnity of 1901, China must pay in gold the sum which is indicated in Article 6 of the Final Protocol as the equivalent of a Tael conformably to the respective weights and legal standards of each of the gold currencies enumerated in the said Article 6. The explanations which the eight Ministers have given above authorize them to state that they require only the complete and unmodified execution of the conventions drawn up in 1901 between China and the Signatory Powers with regard to the Indemnity of 1901. They insist upon this complete execution in order to cause to be respected the right of each one of the interested Powers to receive the proportion of a total Indemnity determined among themselves, whose service and guarantees have been placed under their common control. [File copy not signed] 493.11/977: Telegram The Secretary of State to the Minister in China (Schurman) [Paraphrase] WASHINGTON, March 1, 1924-3 p. m. 46. Your February 28, 11 a. m. The American Government does not have any such direct interest in the controversy regarding the payment of the indemnity in gold francs as would lead it to offer any suggestion as to means whereby the dispute might be settled. If occasion requires, you may inform Minister for Foreign Affairs to this effect. You are confidentially informed that should the issue be referred to the World Court while the relation of the United States to it continues as at present, the Senate not having acted on the proposal that this country accept the Court, the American Government would probably not desire to make use of its right to appear in such a case regarding the interpretation of the protocol of 1901. HUGHES [For further information regarding the attitude of the French Government on the gold franc controversy, see note from the French Ambassador, December 10, 1924, printed on page 440.] CONTINUED SUPPORT BY THE UNITED STATES TO THE FEDERAL TELEGRAPH COMPANY IN EFFORTS TO OBTAIN EXECUTION OF ITS CONTRACT WITH THE CHINESE GOVERNMENT' 893.74/416: Telegram The Minister in China (Schurman) to the Secretary of State [Paraphrase] PEKING, January 4, 1924—5 p. m. 5. My telegram 433 of December 31. Yesterday W. W. Yen called at the Legation, apparently at the instance of the Foreign Office, and quite unofficially asked whether some compromise measure could not be suggested by the Legation which would induce the Japanese to abandon their strong diplomatic pressure in opposition to the Federal Telegraph Company's contracts and in favor of the Mitsui Company. His suggestion was that some joint operation of the Mitsui Peking station might be arranged. It would be appreciated by the Chinese authorities if some method of relief could be devised by the American Government, as they feel that they have 'Continued from Foreign Relations, 1923, vol. 1, pp. 783-826. For texts of agreements between the Federal Telegraph Company and the Chinese Government, see List of Contracts of American Nationals with the Chinese Govern ment, etc., annex VIII (Washington, Government Printing Office, 1925). Foreign Relations, 1923, vol. 1, p. 825. 'Prominent Chinese political leader, appointed Minister of Agriculture and Commerce on Jan. 12. |