TAIPEI (Taiwan News) -- As U.S. President Donald Trump mulls reviving claims on US$1 trillion worth of Chinese bonds dating back to the Qing Dynasty, Taiwan's former Premier Sean Chen (陳冲) says that Taiwan is not legally obligated to repay the debts, but Communist China is.
In the latest twist in the increasingly bitter U.S.-China trade war, Trump met with a group of bondholders called the American Bondholders Foundation (ABF) who are requesting that the president push China into repaying debt accrued during the Qing Dynasty to build a railroad. The Hukuang Railways Sinking Fund Gold Loan of 1911 was issued bonds that year by a consortium of banks in London, Berlin, Paris, and New York to fund the Hukuang Railway from Hunan to modern-day Guangzhou.
The group, led by Tennessee cattle rancher Jonna Bianco, claims that as the communist Chinese government in Beijing claims sovereignty over the whole of "China," it is the inheritor of the debt issued in 1911. "The People’s Republic of China dismisses its defaulted sovereign obligations as pre-1949 Republic of China debt, but doing so contradicts the PRC’s claim that it is sole successor to the ROC’s sovereign rights," Bianco said to Bloomberg in late August.
The bonds amount to US$1 trillion when factoring in their terms, inflation, and interest. The Trump administration is delving into the possibility of forcing China to repay the debt as a term of the trade negotiations or swapping it for the US$1 trillion in U.S. treasury securities it currently holds.
Chinese state-run mouthpiece the Global Times claimed that when the Communist regime took power in Beijing on October 1, 1949, the government abolished all unequal treaties and canceled foreign debts. It claimed that it does not have any obligation to pay back any outstanding debts after Chiang Kai-shek (蔣介石) fled to Taiwan in 1949 with a number of loans in hand.
On Sept. 9, Chen said that according to Article 63 of the Act Governing Relations between the People of the Taiwan Area and the Mainland Area (臺灣地區與大陸地區人民關係條例), "The following debts shall not be repaid prior to national unification: Outstanding foreign currency bonds issued in the Mainland prior to 1949 and the short-term Gold Bonds of 1949. Various debts owed by any government bank as well as any other financial institution accepting deposits before their retreat from the Mainland."
As for ownership of the debts, he gave the example of bonds issued by Farmers Bank of China (農民銀行), which was originally operated by the ROC government in China. However, in 1949, the bank's assets were seized by the Chinese Communist Party and incorporated into the People's Bank of China, which later became the Agricultural Bank of China.
Chen said all debts owed to bondholders by the former Farmers Bank of China are now held by the Agricultural Bank of China, reported CNA. Therefore, the Chinese government is ultimately responsible for these bonds
Chen emphasized that the Taiwan government does not bear the assets of the Republic of China before 1949 and has no reason, legal or based on principal, to repay debts incurred prior to that year. He concluded that the government should revaluate why Article 63 retains any debts to be repaid upon "unification," according to the report.