File No. 893.51/1253.

The American Minister to the Secretary of State.


As reported in my telegram of December 31,1 after the verbal agreement made by the Chinese Government with the French and Japanese Ministers in reference to liability for damages and appointment of foreign advisers, and while awaiting written confirmation of its terms by the Foreign Office, the Minister of Finance insisted that the groups make an advance of £2,000,000 this month to carry the Government over the Chinese New Year. The groups, under instructions from London, refused to make advances until the issue price was agreed upon and negotiations between the six Ministers were satisfactorily concluded. The Foreign Office then wrote the six Ministers a note saying that the accepted liability for damages was limited to such as were incurred in the zone of military operations; and as to appointment of advisers, when the time came the six Ministers would be privately informed as to their names, duties and powers. This was not satisfactory to the Ministers but the French Minister assumed a very aggressive attitude and said his Government would not approve the loan unless the contract was first submitted to it for its approval and the French advisers were named and their powers prescribed by the interested Powers. He also intimated that the nationality of the appointees should be proportionate in number to the issue of bonds made in the respective countries. The Russian supported the French, and the Russian bankers reported that the issue price must be varied in the several countries and intimated that the loan would not be internationalized. The Minister of Finance then sent a note to the groups saying that as the latter would not agree to make the advance required he was compelled to get money elsewhere, and broke off the negotiations. The British and German Ministers thereupon both said their interests in the country were too great to be jeopardized either by the loan going to pieces, or by the intrusion of other finance elements, and their respective bankers have gone to the Chinese and notified them they will make the advance required and are prepared to accept the contract as it now stands, independently of the other members of the groups.

If this ends the consortium I suggest that our country recognize the Chinese Government at once.

  1. See “Claims of American citizens against China,” p. 204.