China has a secret: It owes American investors hundreds of billions of dollars.

The Chinese government doesn’t like to talk about it, and the U.S. government doesn’t want to raise it. But decades ago, Beijing defaulted on debt owed to Americans, as well as investors and governments around the world.

More than 20,000 American investors own this debt. The U.S. government may also own Chinese war debt, unpaid since World War II.

The story begins in 1913, when the government of China began issuing bonds to foreign investors and governments for infrastructure work to modernize the country. As the country fell into civil war in 1927, paying these debts became increasingly difficult and the government fell into default. Even so, in April 1938, the Nationalist government of China began to issue U.S.-dollar denominated bonds to finance its war against Japan.

The government issued these bonds into 1940, and the U.S. government further provided a $500 million credit to China in March 1942. China doesn’t appear to have repaid this debt either, according to State Department records.

The new Communist government in 1949 refused to pay any of these claims. In 1979, as part of normalizing relations, Washington released government financial claims regarding the expropriation of American property and appears to have dropped the matter of the war debt entirely.

However, it is one thing for government decision-makers to let go of government debt. And it is another thing for individual citizens to press their claims. Some U.S. investors tried to sue the Chinese government in the 1980s and 1990s, but the Foreign Sovereign Immunities Act makes it hard because the law generally says U.S. courts do not have jurisdiction.

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