File No. 5315/227.
The Secretary of State to Chargé Fletcher.
Washington, June 12, 1909.
Mr. Knox refers to legation’s telegram of June 10, and says the British, French, and German ministers for foreign affairs recognize the importance of the suggestion for financial cooperation advanced in the department’s telegram of June 9. Informs him that the German minister for foreign affairs has promised to take the matter up with the German bankers and is favorable to a group including Americans, and that the French minister for foreign affairs has stated that he would have been glad to see American participation, and suggests the necessity for American groups to reach an understanding [Page 159] with the financiers interested. Mr. Reid says that in his conversation on this subject with Sir Edward Grey, pointed out that of two joint national concessionnaires one can not have the right to fix the period at which the right of the other shall perish through nonuser, and adds that this view will be embodied in a memorandum which will be handed by the British foreign office to the British financiers concerned.
Says it would seem from this that the British, French, and German Governments consider that American participation in the Hankow-Szechuen loan should be arranged with the financiers themselves, and that the American group is now prepared immediately to enter on such negotiations with the British, French, and German financiers when the Chinese Government has fulfilled its clear duty by informing the representatives of the groups with whom this loan has been tentatively negotiated that American capitalists must be admitted. Adds that this is particularly essential, inasmuch as telegrams from the embassies at London and Paris indicate that in addition to the contract for the Hupeh section of the railway an understanding at least has been reached regarding the future financing of the remainder of the line. Directs that he ascertain the truth of this statement.
Mr. Fletcher is instructed to insist that the foreign office take action as suggested, and to state that, in accordance with the express agreement of the Chinese Government, the Wai-wu Pu should have notified the American minister of China’s desire to float a loan for the Hankow-Szechuen Railway. Says that no such notification was received, and that this Government holds that the fact that negotiations have gone so far and that the representatives at Peking of the foreign groups would have it now considered too late to try to delay final signature of the present agreement does not in any wise absolve China from her plain responsibility to us. Mr. Fletcher is directed to remind the Wai-wu Pu that the loan contract was initialed on June 6, despite the fact that the legation had on several occasions prior to that date called attention to the assurances given by the foreign office to Mr. Conger in 1904. Says he may intimate, moreover, if it seems advisable, that in view of the above the present assurance that American capital will be granted participation in future loans can scarcely be considered a quid pro quo sufficient to warrant a waiver of present undoubted rights. Says China’s failure to meet the just claim of the United States would be practically to evade a solemn obligation and would show an unfortunate lack of appreciation for the consideration which this Government has so long shown the Government of China and would not be compatible with China’s repeated professions of friendship and good will.
Quotes the following ideas for Mr. Fletcher’s information and for such use in the discussion of the question as he may deem discreet: Railroad loans floated by China have in the past generally been given an imperial guaranty and secured by first mortgage on the line when constructed. As far as the department is aware, these conditions were first altered in the case of the Tientsin-Pukow line, when provincial revenues were pledged as security for the loan. The proposed hypothecation of Chinese internal revenues for a loan in the flotation of which the United States is entitled to participation at least must, therefore, be regarded as involving serious political considerations. [Page 160] While holding, therefore, that the assurance of 1904 of itself gives American capitalists rights equal to those granted British interests and superior to those claimed by others, the fact that the loan is to be secured on likin revenues makes it of the greatest importance that the United States should participate therein in order that this Government, owing to its lien on the provincial revenues, may be in a position to exercise an influence equal to that of the other three powers in any question arising through the pledging of these levies and to enable the United States moreover, at the proper time, again to support China in her endeavor in securing the abolition of likin and the increase of the customs tariff.
Adds that the department feels that in view of the unvarying friendship which the Government of the United States has shown toward China the Chinese Government should itself be the first to desire the salutary influence of direct American interest in this great investment.