File No. 5315/432–435.
Chargé Fletcher to
the Secretary of State.
American Legation,
Peking, July 23,
1909.
No. 1213.]Sir: In continuation of my No. 1207 of the 14th
instant, on the subject of American participation in the pending Hukuang
Railway loan, I have the honor to inclose my reply to the note of the
Wai-wu Pu, dated July 14 (copy of which was forwarded to you by the last
mail). The department will observe that I have embodied in my note the
substance of its telegram of July 15.
On the afternoon of July 15, I called at the Wai-wu Pu and suggested to
Mr. Liang—stating that the suggestion was made wholly upon my own
responsibility—the feasibility of increasing the loan by about 12½ per
cent and admitting equal American participation. I explained that the
European bankers had offered to admit us to participate to the extent of
about 12½ per cent, so that if the loan were increased by the difference
an agreement should be possible. I informed him that I understood that
the amount of the present loan would prove insufficient for the
construction of the two sections mentioned. He approved the idea and
promised to have it presented to Chang Chih-tung.
[Page 182]
I also told the bankers here of my suggestion to Mr. Liang and that I had
hoped it might prove a basis of settlement. It seemed to meet their
approval, but Mr. Cordes expressed doubt as to Chang Chih-tung’s
attitude. This proposal has been discussed between the bankers and the
Chinese for the last few days. Yesterday Mr. Hillier (of the Hongkong
and Shanghai Banking Corporation) palled. He informed me that the
bankers here had conferred and were about to telegraph to their
principals to the effect that I thought an increase of the loan by
£500,000, which should be allotted to the Hupeh section of the
Hankow-Szechuen line, and an arrangement of the bankers whereby the
American bank should finance £1,500,000 of the loan thus revised, would
satisfy my Government, and that I would be authorized to withdraw the
American protest, and the agreement thus altered would be ratified and
signed. He then added that it should be understood that no other
conditions of the loan agreement shoul be changed in any respect. I
asked him what he meant. He said he referred to those provisions of the
agreement which had reference to the service of the loan and the right
of the banks to furnish sums needed for the completion of these lines in
the future. He stated that more money would be required in the future
for the Hankow-Canton line, and thought that as we claimed nothing on
the Hankow-Canton line we should be content with one-half of any sum
which would be needed in the future for the completion of the
Hankow-Szechuen line. As this interview was closing, I received the
department’s telegram of the 20th instant, and explained to Mr. Hillier
your position that the American participation in the present loan,
revised as proposed, should be equal in every particular to that of the
other banks, and that it should include all rights with regard to
furnishing materials, appointment of engineers and auditors, and of any
other benefits which would naturally accompany a one-fourth interest in
the loan. He remarked that we were now claiming more than we had claimed
in the London conference. I replied that we had heretofore indicated a
willingness, in the interests of harmony, to accept one-fourth
participation practially on the French basis, but that this offer had
not been met in the same spirit and had been rejected. He promised again
to confer with his fellow bankers and to communicate our position to the
principals in Europe.
The bankers and China seem to attach great importance to reaching a
settlement on the basis of the present agreement, altered only as to the
amount. Chang has stated that he did not wish to use any American money
on the Hankow-Canton line and the bankers have endeavored to have our
participation in this loan limited in all respects to the
Hankow-Szechuen line. As the increased amount would, as the agreement is
drafted, have to be allotted to one or other line, I see no objection to
having it allotted to the Hankow-Szechuen line. This to some extent
saves the face of the bankers and of China, but I have clearly stated
was only a question of allotment; that our participation in the present
and future benefits of the agreement must be absolutely equal and just,
as if we were a party to the agreement, which to all intents and
purposes we would become by a separate but synchronous document.
On the receipt of the department’s telegram of July 15,1 called on Mr.
Liang Tun-yen, on the evening of the 16th, and asked if his board had
received the telegram which the President had sent direct
[Page 183]
to His Imperial Highness the
Prince Regent. He informed me that it had been received and would be
submitted the following day, and that he would acquaint me with the
reply made by the Regent. I asked him to see that the friendly nature of
the telegram was explained to His Imperial Highness, so that no
misunderstanding might arise. He said he could not present the matter
personally, but would see that it came before the Regent in the proper
light. Mr. Liang seemed to think that the telegram would have a good
effect, as it would make further quibble on the part of Chang Chih-tung
difficult, and would also save his face if his agreement should be
altered by the interposition of the Regent.
Under these circumstances and for other considerations, I did not think
it necessary to ask an audience of the Regent, but should it seem
advisable later to do so, I shall avail myself of the department’s
authority in this respect.
On the receipt of the department’s telegram of July 21, containing the
direction of the President to convey to the Prince Regent, through the
Wai-wu Pu, the President’s appreciation of the prompt action of His
Imperial Highness and of the cordial spirit of His Highness’s message, I
embodied these instructions in a formal note to Prince Ching (copy
inclosed) and handed copy of it to Mr. Liang Tun-yen this morning. At
the same time, as instructed, I handed him a memorandum (copy inclosed)
containing the substance of the department’s telegrams of July 16 and
20, making clear to him your position with reference to equal American
participation in the present loan.
He promised to make it known to the bankers, and again expressed the hope
that the matter might soon be settled.
With reference to the note of the Russian minister, mentioned in my
telegram of the 18th instant, I am of opinion that it will not
materially alter the situation. Mr. Korostovetz called on me on the 20th
and explained that while Russia had no such rights as ourselves respect
to the present loan, she felt that, by reason of her large commercial
interests in the Yangtze, especially in the tea trade of Hankow, and on
the principle of the open door, he was justified in notifying China of
Russia’s readiness and willingness to participate in this or any other
foreign loans needed by China. He said the Russo-Chinese Bank was
practically a governmental concern, and he believed Russia should have
financial interest in China as well as the other powers. He asked me
what I thought would be the position of my Government. I replied that
his Government could learn that more definitely through the embassy in
Washington, but that I personally thought the American Government would
welcome Russian financial interests in China on the principle, which we
have always adhered to, of equality of commercial opportunity and the
open door. He said that the European bankers would be approached by the
Russo-Chinese Bank for a share of this loan, and that the bank would be
content with a very small share. He asked me what would be the attitude
of our bankers if the Russo-Chinese Bank asked them for a share. I
replied that this would be a matter for the bankers to decide later, but
that our present concern was to secure American participation in the
loan, and that I trusted he would not interfere with our efforts to
reach a settlement. He said he had no such intention.
[Page 184]
He stated that if the present agreement
were upset he would ask to participate in the loan subsequently
arranged, though he admitted he did not see his way clear to insist.
Russia has at present a number of important and somewhat involved
questions pending with the Chinese Government and is not in a position
to support in any extreme way the desire of the Russo-Chinese Bank to
participate in this loan. I see no objection, however, to bona fide
Russian participation in Chinese financial enterprises, though the bonds
will likely be sold in Paris.
I have, etc.,
[Inclosure 1.]
Chargé Fletcher
to the Prince of Ching.
American Legation,
Peking, July 16,
1909.
No. 550.]Your Imperial Highness: I have the honor to
acknowledge the receipt of Your Highness’s note of July 14 last on
the subject of the participation of American financiers in the
Hukuang Railway loan.
Your Highness quotes the text of two communications received by Your
Highness’s board from His Excellency Chang Chih-tung, director
general of the Canton-Hankow Railway and of the Hupeh section of the
Hankow-Szechuen Railway.
In the first of these communications His Excellency states, with
reference to the desire of American capitalists to participate with
the British, French, and German financiers in the loan about to be
contracted for, that—
If this matter had come up before the signing of the
agreement with the banks of the three countries mentioned I
would have no objection. But the agreement has now been
signed and there is now no way to discuss the loan with
America. It is hardly feasible to direct the makers of this
loan to broach this new proposition lest other difficulties
arise.
This communication from the director general was evidently written
some time ago. He has no doubt since been informed by Your
Highness’s board that the matter of American participation did come
up before the pending loan agreement was initialed.
Your Highness’s board will recall that Mr. Rockhill, on May 25 last,
in an official interview with His Excellency Liang Tun-yen, referred
to certain reports appearing in the newspapers to the effect that
Germans, British, and French were arranging a loan for the
construction of a railway from Hankow toward Szechuen, and he stated
that if this report was correct he would have to remind the Wai-wu
Pu that China had assured Mr. Conger that in case China was unable
herself to provide the funds necessary to build this railway
American and British capitalists would simultaneously be notified,
and he informed Your Highness’s board that the American Government
holds that this assurance guarantees to American and British capital
the preference in any foreign loan floated for this purpose. Your
Highness’s board promised to bring this matter to the attention of
His Excellency Chang Chih-tung, who, it was stated, was in charge of
these railway matters.
The subject was again brought up by Mr. Rockhill in an interview at
the Wai-wu Pu on May 28 last, and he was informed by His Excellency
Liang Tun-yen that he had no reply to make and could say nothing
definite on the subject.
Again, on June 1, Mr. Rockhill and I called at the Wai-wu Pu. Mr.
Rockhill stated that he was that day turning over the legation into
my charge, and he referred to the telegram which he had shown His
Excellency Liang Tun-yen on May 25 on the subject of American
participation in the Hankow-Szechuen Railway loan, and asked his
excellency if he was in position to give him an answer to the
representations which he had already made on this subject. His
excellency replied that he had referred the matter to His Excellency
Chang Chih-tung, but that he had as yet received no reply.
On June 5, acting under directions from my Government, I again called
at the Wai-wu Pu and asked for a reply to the representations which
had been made
[Page 185]
by Mr.
Rockhill on this subject. I was informed that no reply had been
received from His Excellency Chang Chih-tung, and on the same day I
sent to your Imperial Highness a formal communication, as follows:
In further reference to the representations made by Mr.
Rockhill and myself to Your Highness’s board recalling the
assurances given to this legation in 1904 to the effect that
in case China was unable herself to provide the funds
necessary for the construction of the Hankow-Szechuen
Railway American and British capitalists would
simultaneously be notified, and informing Your Highness’s
board that the American Government held that this assurance
guaranteed to American and British capital the preference in
a foreign loan floated for this purpose, I now have the
honor to inform Your Highness that the American Government,
in view of the reports that British, French, and German
financial groups have under consideration an agreement with
China to provide a loan for the construction of a portion of
this line, has recalled to the British Government the
original understanding between China, Great Britain, and the
United States, and has informed that Government that the
United States has taken no action which could be construed
as a relinquishment of the right of American capital to
participate in this enterprise.
This legation has now been informed that the representations
heretofore made on this subject have been communicated to
His Excellency Chang Chih-tung, director general of the
Hankow-Szechuen Railway, and the attitude of my Government
on the subject made clear to His Excellency, but that he has
made no reply on the subject.
I now have the honor to request Your Highness’s board at once
to notify His Excellency Chang Chih-tung and the other
officials charged with this matter that the American
Government insists that the assurances of 1904 be observed
and that American capitalists be consulted and allowed to
participate in the loan about to be floated.
I trust that I may be favored with an early reply which I may
communicate to my Government at Washington.
On the following day, notwithstanding the oral and written
representations made by this legation, and to which even no reply
was made, an agreement for a loan of £5,500,000 (five million five
hundred thousand pounds sterling) for the construction of the
Hupeh-Hunan section of the Canton-Hankow Railway and of the Hupeh
section of the Hankow-Szechuen Railway was initialed by His
Excellency Chang Chih-tung and representatives of the British,
French, and German banks in Peking.
In view of these facts, I can not understand the statement of His
Excellency Chang Chih-tung quoted above.
On the 9th of June I addressed another formal note to Your Highness’s
board on the subject and had the honor in a number of personal
interviews with President Liang subsequently to point out clearly
the attitude of my Government with respect to the assurances given
in 1903 and 1904 to Mr. Conger and the importance which the
President and Government of the United States attached to American
participation in the pending loan on a footing of equality with the
European bankers, and I alluded to the unfortunate effect which
would be caused in the United States were China to exclude us.
At length on June 24 I was informed by His Excellency Liang Tun-yen
that the bankers with whom the pending loan agreement was negotiated
had been notified that China would not conclude the agreement unless
a settlement were reached with the American capitalists. This
welcome intelligence I lost no time in sending to my Government. The
representatives of the European and American bankers arranged to
meet in London on the 8th instant to adjust the matter. It would
seem by the letter of the Peking bankers to His Excellency Chang
Chih-tung that the Americans were offered at this conference only
one-eighth of the loan. This they could not accept, and no agreement
was reached, as my Government holds that we are entitled to and
should receive equal treatment. Another meeting will undoubtedly
soon be held. The British, French, and German Governments have all
indicated their willingness to have Americans participate equally in
this loan. Your Highness’s board has expressed itself to the same
effect. It is, therefore, not likely that the European bankers will
refuse to heed the wishes of all the Governments concerned.
The decision of this question rests with the Government of China. The
position of my Government with reference to the assurances
heretofore given, as well as the broad policy of friendship and
cooperation which it wishes to pursue in availing itself of them,
has been fully explained in my personal interviews. The American
Government sincerely hopes that the Imperial Chinese Government,
having respect for these assurances and for the uniform friendship
which has always existed between our two countries, as well as for
the broad lines of national and international policy, will plainly
notify the framers of the pending agreement that the American
bankers must be admitted to participate equally in the loan
required.
If your Highness’s Government will adopt this just and equitable
course, I venture to predict that the matter will quickly be settled
and a satisfactory agreement reached. It is inconceivable that after
such plain expression of Your
[Page 186]
Highness’s Government’s wishes individuals
would longer seek to defeat the policy of all the Governments
concerned.
If, on the other hand, the United States were expected to consider
less than equal participation by its bankers in this loan, it would
be inconsistent not only with the dignity and moral right of the
American Government, but also incompatible with a policy hitherto
friendly on the part of China.
I must solemnly warn Your Highness’s board that if the reasonable
wishes of the American Government should now be thwarted, the whole
responsibility would rest upon the Chinese Government.
My Government finds it difficult to believe that China, in return for
the uniform friendliness of the United States, intends to disregard
her obligations and true interests and act with such singular
unfriendliness to America.
In view of the expressions of the British, French, and German
Governments recognizing the equity of the American demand for
participation, and having regard to China’s specific promises and
moral obligations, this legation and the Department of State are
amazed at the apparent influence of individuals in so long retarding
the consummation of so equitable an arrangement as is proposed.
The American Government greatly deplores a situation in which it
seems that individuals in China or elsewhere are able to defeat the
practical operations of the policy of the open door and equal
opportunity.
Should the objections of the bankers of the other countries to equal
American participation prove so insistent as not to be overcome by
the wishes of China and of their respective Governments, the time
would seem to have arrived when China should exercise her right to
determine the matter by confining her dealings to those who are
willing to respect her highest interests.
I avail, etc.,
[Inclosure 2.]
Chargé Fletcher
to the Prince of Ching.
American Legation,
Peking, July 22,
1909.
Your Imperial Highness: I have the honor to
inform Your Highness that I have been directed by the President of
the United States to convey through Your Highness’s board to His
Imperial Highness the Prince Regent the President’s high
appreciation of the prompt action of His Imperial Highness the
Prince Regent in instructing that arrangements be made through the
American chargé d’affaires for equal participation of American
capital in the pending railway loan, as requested by the President
in his telegram to the Prince Regent of July 15. The President
especially appreciates the cordial spirit of His Imperial Highness’s
message.
I avail, etc.,
[Inclosure 3.]
memorandum.
American Legation,
Peking, July 22,
1909.
Chargé Fletcher to His Excellency
Liang Tun-yen.
Referring to his conversation with His Excellency Liang Tun-yen,
president of the board of foreign affairs, on July 15, in which it
was suggested that the pending loan might be increased to, say,
£6,000,000 (six million pounds sterling) and American capitalists
admitted to participate equally with British, French, and German
capitalists in the loan thus revised, the American chargé d’affaires
has the honor to inform the board of foreign affairs that he has
submitted this proposal to his Government and is now in receipt of a
telegraphic reply approving this suggestion and instructing him that
the American Government would regard such an arrangement as
satisfactory provided American interests enjoyed absolutely equal
rights in every particular—that is to say, all rights with regard to
the furnishing of material, appointment of engineers and auditors,
and any other benefits which would naturally accompany a fourth
interest in the loan.
