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File No. 893.51/502.

Copy of the Note Verbale presented by the Japanese Government to the French Government on June 26, 1911.

[Handed to the Secretary of State by the Japanese Ambassador July 11, 1911.]

The Imperial Government have carefully examined the so-called four powers £10,000,000 loan agreement which China recently concluded with the international financial group banks. They have also at the same time had under attentive consideration the statement formulated regarding Manchurian enterprises to be set apart for exploitation and development under the loan agreement. The statement is unfortunately too general in terms to admit the final conclusion as to whether the enterprises which it signalizes are entirely consistent with the reserved rights and interests of Japan in Manchuria. But as far as it is possible to discover, those enterprises seem to be legitimate. Accordingly the Imperial Government are gratified to be able to declare that to the full extent such enterprises are reconcilable with the reserved rights and interests above mentioned. Due working of the enterprises in question will give rise to no objection or protest on the part of Japan, but a serious cause for objection is found in those provisions of the loan agreement by which are established in favor of the financial group which negotiated the loan preferential rights of the most comprehensive nature—financial, industrial and commercial.

Article 16 of the agreement not only provides in effect that the banks—i. e, the financial group mentioned above—shall have preference over all other foreign financial groups in the matter of supplying any additional funds required to continue or complete operations contemplated under the agreement, but it stipulates that “should the Imperial Chinese Government decide to invite foreign capitalists to participate with Chinese interests in Manchurian business contemplated under this loan or to be undertaken in connection therewith, the banks shall first be invited to so participate”; that is to say, in the whole of the three Manchurian provinces the four powers’ financial group is accorded priority over all other foreigners and foreign institutions not only as regards enterprises contemplated by the [Page 100]agreement but in the matter of any other activities which may hereafter be associated with such enterprises. Preferential rights are frequently asserted in China as measures necessary to the full and complete enjoyment of duly acquired specific industrial concessions, but never before has an attempt been made to secure precedence as regards general, unenumerated enterprises and activities which have no relation to any such concession. Japan possesses in the region of southern Manchuria special rights and interests, and while she is fully prepared in the future as in the past to respect the rights of others, she is unable to view with indifference measures which tend not only to menace those special rights and interests but to place her subjects and institutions at a disadvantage as compared with the subjects and institutions of any other country. In the actual circumstances of the case the difficulties of the situation can be satisfactorily met only, it seems to the Imperial Government, either by entire suppression of Article 16 of the loan agreement or by a revision of that article in such a way as to deprive bank concessionaires of the objectionable preference which the article accorded them.