What Secretary Yellen thinks she will achieve in her visit to Beijing is a mystery, but while she’s there, she could ask President Xi whether Communist China intends to honor its obligations to the American holders of Chinese gold bonds. These bondholders say they are owed as much as $1 trillion from the regime at Beijing, which inherited the debt obligations of the Chinese government overthrown by the communists.

The debts in question were issued by China’s government before World War II, mostly “long-term sovereign bonds for the construction of infrastructure,” according to the American Bondholders Foundation, a group that is advocating on behalf of some 20,000 American creditors. “Under well-established international law,” the group contends, Communist China is the “successor government” and therefore on the hook for the debt.

The bonds have obscure-sounding names, the Financial Times reports, like the “Hukuang Railways Sinking Fund Gold Loan of 1911,” the “Reorganization Gold Loan of 1913,” and the “Liberty Bonds of 1937.” They were bought by investors in the expectation that China would repay the loans. Yet when Chairman Mao’s party took over in 1949, the FT reports, China “broke with the tradition of maintaining the debt obligations of previous regimes.” 

Even so, the FT says, China “never formally de-recognized the debt.” As a result, the bonds were instead deemed to be in default. “Long forgotten,” the FT describes the bonds, “taking on mainly antique value,” and found “mostly in people’s private collections or attics.” Yet the age of the bonds is “irrelevant,” a policy analyst at the Heritage Foundation, Andrew Hale, writes in the Hill, because the debts are a “sovereign obligation.”

Just in 2010, Mr. Hale says, Germany made the last payment on its World War I reparations debts. In 2015, he adds, Great Britain repaid bond debt “from the 18th century.” What makes these old Chinese debts a potential boon for today’s creditors, though, is the fact that they are, as Mr. Hale puts it, “gold-denominated bonds.” If that is the case, that means creditors are entitled not just to the face value of the bonds, but the equivalent value in gold.

Admittedly, if Ms. Yellen decides to push Mr. Xi to honor the gold value of these old bonds, the U.S. Treasury doesn’t have much of an ethical leg to stand on. That’s because during the Depression, America canceled the gold clauses in its own bonds, a startling breach of faith with creditors — and a Constitutional violation, the Supreme Court ruled in 1935. Even so, the high court required America to repay only the bonds’ value in fiat money.

That default left American creditors with bonds worth 60 percent less than the amount to which they were entitled if the gold clauses had been honored. So it could prove difficult for Ms. Yellen to insist that China honor its bonds’ full gold value. Plus, too, in 1987, when Margaret Thatcher insisted that China honor its pre-Communist bonds in order to get access to London capital markets, Beijing paid back British creditors but $37 million.

America has failed to exhibit Thatcher’s shrewdness in its negotiations with Beijing. Senator Graham is among those suggesting using the Chinese bonds as leverage against the $850 billion America owes Beijing. What a chance for President Biden and the Congress, Mr. Hale avers, “to enforce the well-established international rule that governments must honor their debts.” Might Secretary Yellen emerge in Margaret Thatcher’s league?