Papers Relating to the Foreign Relations of the United States, With the Address of the President to Congress December 2, 1913

File No. 893.51/1360.

The American Group to the Secretary of State.

New York, March 19, 1913.

Sir: We beg to confirm our telephone conversation of today in which the Department advised us that the statement of yesterday issued to the press by the President in regard to Chinese loan negotiations was to be considered as the Government’s reply to the request of the American group in our letter of March 5th that the Department indicate its desire as to our future conduct in this matter.

We beg to enclose herewith a copy of the telegram which we have today despatched to the groups with whom we have been associated, and to our representative in Peking for communication to the Chinese Government, announcing our intention to withdraw from the six-group agreement and to give notification of our withdrawal from the four-group agreement in June next, in accordance with the provisions of article 14 thereof.

We would, however, call to the Department’s attention the fact that, as shown by your records, we are now committed to certain transactions entered into by us with the Chinese Government at the instance of the Department, notably the Hukuang Railway loan agreement; our one-fourth share in the £400,000 advance made on May 23rd, 1911, under the currency-loan agreement, signed on April 15th of that year; and our one-sixth share in the advances made to the Chinese Government on February 28, March 9, May 17, June 12 and June 18, 1912, for which we now hold Treasury bills, and which China intended to repay from the proceeds of the proposed reorganization loan.

In this connection we would beg to call to your attention the fact that the Chinese Government has not as yet redeemed the Treasury bills held by the six groups falling due on February 28 and March 9 respectively, of which the American group’s share is—

• Bills due February 28, 1913, $237,894.13.
• Bills due March 9, 1913, $128,828.84.

The telegram proposed by Mr. Addis, contained in Messrs. Morgan, Grenfell & Company’s communication of the 13th of March, a copy of which was transmitted to the Department with our letter of the same date,¹ was on that date forwarded to Peking.

As is shown by telegram received by us to-day from Messrs. Morgan, Grenfell & Co., copy of which is enclosed,¹ the representatives of the six groups in Peking have officially addressed the Minister of Finance reminding him of obligations due February 28 and March 9, and asking for early information as to arrangements made for payment. In reply, the Minister of Finance has stated his inability to pay owing to non-conclusion of the reorganization loan, and has requested an extension of six months or one year at 7½% interest per annum.

The Peking representatives add that as the reply from the Minister of Finance fails to give definite information as to the arrangements for repayment, they have notified the Legations in accordance with their instructions contained in the telegram of March 13 above referred to, that the Chinese Government is in default, and requested the Legations formally to notify the Chinese Government that its obligations are overdue.

We beg to request that the Department may be pleased to instruct the American Minister in Peking to cooperate with his colleagues in making such representations to the Chinese Government as may be necessary to secure an early adjustment of this matter.

Very truly yours,

Willard Straight.

[Inclosure 1.]

The American Group to Morgan, Grenfell and Company.

New York, March 19, 1913.

Please communicate the following to [naming the representatives of the British, Russian, Japanese, French and German groups of bankers]:

“The President of the United States has issued to the press [a] statement as follows:

[Here follows the statement quoted in the telegram of March 19 from the Acting Secretary of State to certain diplomatic officers; see ante.]

In view of foregoing the American group is with great regret obliged to announce to the other groups its complete withdrawal from negotiations for the reorganization loan. We sincerely trust that our action will in no wise prejudice the position of the other groups. We shall gladly consider any suggestions other groups may be pleased to make as to action they desire us to take in order that our withdrawal may cause them least possible embarrassment. We shall delegate International Banking Corporation to carry on such routine business as may be necessary in view of the commitments already undertaken. We trust that you will appreciate the circumstances which have made our action imperative, and that you will realize our regret at severing our associations with the combination which we, like yourselves, believe to have been in the best interests of China and of the investing public in our respective markets.

In communicating with British, French and German groups please add following:

“The International Banking Corporation will act for us as regards the Hukuang agreement and the currency loan. We presume, in view of amended reorganization loan agreement, currency loan will be merged therewith, but if other groups wish proceed independently we shall gladly do everything in our power be of assistance. We would further notify you that as at present advised we shall in June give notification of our intention withdrawing also from four-group agreement in accordance with article fourteen thereof.”

J. P. Morgan & Co.

[Inclosure 2—Telegram.]

The American Group to its Representative at Peking.

New York, March 19, 1913.

We are today sending following telegram to other groups.

[Here follows Inclosure 1.]

Communicate to your colleagues and officially advise Chinese Government of our withdrawal from negotiations for reorganization loan.

J. P. Morgan & Co.

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