An article published in Bloomberg Businessweekreported that the US intends to tell China it is, under the principle of the succession of states, liable for the debt of sovereign bonds issued during the Qing Dynasty through the period of the Beiyang Government of the Republic of China (ROC) and the Republican period.
Chinese state media have said that foreign countries should look for repayment of any debt from the ROC established by Sun Yat-sen (孫逸仙). That would presumably mean the ROC government of Taiwan.
According to the Legislative Yuan’s Legal Information Network, there are still 44 government bonds issued prior to 1949, of which 35, including those issued by the City Government of Greater Shanghai, were temporarily suspended by the Legislative Yuan in 1973. They were not canceled altogether, in line with Article 19 of the Central Regulation Standard Act (中央法規標準法). There are an additional nine foreign currency gold or railway bonds that have yet to be dealt with, including the 1934 Six Percent British Boxer Indemnity Government Bond.
Article 26-1 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) states that “for any payment owed by the government in the Mainland Area and due in accordance with laws or regulations prior to 1949, in situations where the beneficiary is yet to receive any or full payment, no claim shall be processed before national unification.”
Article 63 of the same act stipulates that “the following debts shall not be repaid prior to national unification: One: Outstanding foreign currency bonds issued in the Mainland prior to 1949 and the short-term Gold Bonds of 1949. Two: Various debts owed by any government bank as well as any other financial institution accepting deposits before their retreat from the Mainland.”
The ROC government has yet to cancel liability for the payment of these debts, keeping open a path to possible legal unification.
However, does this approach mean that the ROC is in the clear? If these government bonds were to be repaid in line with their conditions, with inflation and interest factored in, it would empty Taiwan’s state coffers. In 1953, the Ministry of Finance proposed canceling 56 government bonds, 28 of which were canceled the following year. Legislators at the time had warned that keeping the bonds would create a crisis in state finances. If they were to be paid back in full, the government would have to legislate an alternative method.
For advocates of immediate unification with China, the retention of these 44 government-issued bonds throws a spanner in the works of their “grand unification undertaking,” given that Beijing refuses to acknowledge liability for the debts of the ROC. For advocates of eventual unification, the stipulation that the debts are to be paid at such time as both sides of the Taiwan Strait are unified also presents a problem, as China does not acknowledge them.
If the ROC government on Taiwan goes bankrupt paying the debts, Taiwanese can kiss their pensions goodbye. Under these circumstances, few would support unification.
Neither will independence advocates be happy. The bonds were issued by the ROC regime while still in China, so why should Taiwanese be liable for them, especially as the construction projects and railways they financed are all in China, benefiting Chinese?