File No. 893.51/1504.
Minister Reinsch to the Secretary of State.
Peking, February 6, 1914.
Sir: I have the honor to acknowledge the receipt of the instruction, No. 7, of December 2 last, in which the Department stated that it assumed the Currency Loan had been merged with the Reorganization Loan, and asked for definite information as to the mutual intentions of the Chinese Government and the bankers.
In reply I beg to state that the loan for the purpose of currency reform was not merged with or included in the Reorganization Loan issued in April last by the banking groups of Great Britain, France, Germany, Russia and Japan.17 For some time after the issuance of that loan the British, French and German groups, to whom the option for the Currency Loan remained after the withdrawal of the American group in March last,18 questioned the right of the Russian and Japanese groups to a share in such a loan under the terms of the inter-bank agreement. The European offices of the several banks, to which this question was referred, are understood to have been intentionally dilatory in reaching a decision in view of the tightness of the European money market during the past summer, which would have rendered difficult the successful flotation of such a loan. In this connection I am able to state that of the recent £5,000,000 supplementary loan by the British and Chinese Corporation and the Deutsch-Asiatische Bank for the Tientsin-Pukow Railway, approximately £1,800,000 of the bonds remain undisposed of. The decision was finally reached to include the Russian and Japanese banks for the purpose of any currency loan which might be issued.
The Legation is now advised, on the authority of Dr. Chen Chin-tao, Special Financial Representative of the Chinese Government Abroad, that the negotiations now in progress between the Chinese Government and the banking groups of the five powers for a supplementary [Page 63] reorganization loan contemplate the inclusion in that loan of a sum for the purpose of currency reform.
I may add that the five-power banking group has already advanced to the Chinese Government £750,000 to be repaid from the supplementary reorganization loan now under negotiation. But the whole matter of the nature of this supplementary loan—what it is to include and what securities are to be given—is still entirely uncertain, and the Chinese Government has not committed itself to any definite course of action.
I have been assured that the Chinese Government would still welcome the resumption of the currency-loan negotiations with the United States, and that, whether the matter was to be handled entirely as an American loan or the United States was to join with Great Britain, Germany and France in a four-power currency loan, the participation of American bankers would be exceedingly welcome to the Chinese Government.
I have already informed you that in the negotiations between the Standard Oil Company and the Chinese Government the latter asked to arrange for a loan of G$15,000,000 for the purpose of improving the capital of the Bank of China and beginning in that way the reorganization of the national currency. The Standard Oil Company decided that it could not make this loan a part of its arrangements with the Chinese Government, but it is now giving assurances that it will tacitly support a loan of this nature. I am also informed by Professor J. W. Jenks of New York that he believes a Chinese currency loan could be arranged for in that city.
To summarize, therefore: the field is still open for a resumption of the American interest in Chinese currency reform and in a currency loan. The officials of the Chinese Government are urging participation on our part or, preferably, the arrangement of the entire loan through American institutions.
I have [etc.]