File No. 893.77/1085.
Minister Calhoun to the Secretary of State.
Peking , October 5, 1910 .
Mr. Calhoun says at conference between bank representatives and presidents of the board of communications relative to Hukuang loan, the Chinese argued that the agreement which was initialed June 6, [Page 291] 1909, could not be taken as final but as a draft open to modification since it was subject to the approval of the board of finance and to the sanction of the Throne; that the state of popular feeling was such in Hunan and Hupeh that the agreement in its present form could not be concluded without risking serious local trouble; that in order to allay popular objections modifications were necessary, and that if such modifications could be arranged so as to make further objections unreasonable the board was prepared to effectively carry out the agreement. Mr. Calhoun says the presidents did not state exactly what modification they had in view, and that the bank representatives did not deem it advisable to inquire, but that latter are of the opinion that the validity of the initialed agreement should be upheld, as otherwise the negotiations would not rest on solid ground. Mr. Calhoun states that the representatives believe also that the presidents exaggerate the danger of local trouble in order to obtain easier conditions, and that China should be able to carry out original terms without risking serious disturbances, and that she should be pressed to do so by the four Governments; but, if the Governments are not inclined to take this view, the representatives suggest that the legations might invite the Chinese Government to state the desirable modifications in order to find a mutual basis for understanding, at the same time upholding inviolability of initialed agreement.
Mr. Calhoun adds that the Chinese appear much elated over the success of the 7 per cent loan for £450,000 sterling which provides for no control or direct lien and that they are now endeavoring to make purely financial loans in spite of the dangers which they may present later on for China and that competition is so keen that the attempt may succeed as the Hongkong, Shanghai, and German banks show a disposition to lower, their terms as much as seems necessary in order to secure the loan. Mr. Calhoun says in view of the fact that the present complications and delay have been attributed to the action of the United States in forcing admission last year, he recommends on the part of the department a continuation of the policy of concerted action with other banks even if it does not seem that a contractual value could be properly attached to the initialed agreement. Asks instructions.