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File No. 893.53/659.

The Secretary of State to the American Minister .

[Telegram.—Paraphrase.]

Except in pursuance of some general plan of the powers interested to help China meet its international obligations and perform ordinary administrative and police functions, the Department does not consider it wise to make any loan at present. Any such assistance should be confined to short-term loans, designated to be for the immediate necessities of government, including the suppression of nonpolitical disorders, the service of the indemnity fund and other foreign engagements, but not for war purposes. The loans should be strictly neutral as between internal factions in China and should therefore receive the indorsement of the representatives of the various factions, and some form of supervision, such as a foreign trustee, should be devised to insure the proper use of the funds. Moreover, since such loans would primarily be for the protection of the common interests, they should be open to the nationals of all the powers having important relations with China, and the power or powers having the largest interests at stake might well take the initiative.

Knox.