File No. 893.51/1729
Minister Reinsch to
the Secretary of State
[Extract]
No. 1295
American Legation,
Peking,
December 8, 1916.
Sir: In continuation of my despatch No. 1284
of the 29th ultimo,* * * I have the honor to forward herewith the
following enclosures:
- 1.
- Memorandum by Professor W. W. Willoughby which was made, in
substance, the basis of the letter of the Minister of Finance to
the representatives of the banking Consortium, under date of
December 1.
- 2.
- Substance of the reply of the representatives of the
Consortium, under date of the 2d instant.
- 3.
- Memorandum of the substance of the reply of the Minister of
Finance, despatched on December 6.
- 4.
- Copy of the Legation’s note of the 7th instant to the Minister
of Finance.
I have [etc.]
[Page 147]
[Inclosure 1]
Memorandum used as the substance of a letter from
the Minister of Finance to the representatives of the Consortium
Replying to your letter of inquiry of November —, I have the honor to
say that when, more than two months ago, the Chinese Government was
attempting to make a loan coming within the scope of Article XVII of
the Agreement of April 26, 1913, the loan was offered to the
Consortium of Ranks which is collectively a party to that agreement.
This was in accordance with the option therein provided. In reply to
this offer, the Chinese Government was informed that the five Banks,
constituting the Consortium, were no longer able to act as a group,
and that with one of the members of the group the other four members
were unable or unwilling to communicate or cooperate. This
confession on the part of the group that it was not in a position to
exercise the option thus offered to it, of course left the Chinese
Government free to offer the loan in question to any parties that it
might see fit. That is to say, it might offer it to any outside bank
or banks, or to an individual bank or a group of banks from among
those which constitute the Consortium under the Agreement of April
26, 1916 [1913?].
As regards the loan recently obtained from the Chicago bank, I have
the honor to say that it is a loan which does not come within the
provisions of the Agreement of April 26, 1913, inasmuch as it is
neither guaranteed by the revenues of the Salt Tax nor for purposes
of a nature similar to those enumerated in Article II of the said
Agreement.
This loan is an industrial one, and, incidentally, for the aid of the
Bank of China, in which Bank its proceeds are to be deposited in
order that its credit may be strengthened.
[Inclosure 2]
Substance of the reply of the representatives of the Consortium to the Minister of Finance
Peking,
December 6, 1916.
The Bankers can not agree with the views expressed by the Minister of
Finance that the British, French, Russian, and Japanese Banks have
lost their rights under Article 17 of the Reorganization Agreement
through their inability to cooperate with the German Group. This
contention is supported by the Minister’s letter of November 17, in
which he confirmed application for a loan of £10,000,000., although
he had been informed that the five banking groups could not
cooperate.
As to the American Loan the Bankers cannot admit that a loan to be
made for the strengthening the credit of the Bank of China is an
individual loan and therefore not under the provisions of the
Reorganization Loan Agreement. They therefore cannot modify their
attitude towards that loan.
[Inclosure 3]
Memorandum of the substance of the reply of the
Minister of Finance
The Minister of Finance states that in his letter of November 17, he
did not confirm the application of a loan for £10,000,000 to the
four banks, but requested to be informed specifically as to the
instructions which had been received by them with respect to the
action on the option offered in September to the Consortium as a
whole. With respect to the American G$5,000,000 Loan, he said in
substance as follows:
It is necessary for us to point out that the Chinese
Government cannot hold itself bound beyond the explicit
language of the loan agreement, and that a loan for
strengthening the currency reserve of banks is in no way
comprised in that language. Moreover, the ultimate purpose
to which the proceeds of this particular loan are to be
devoted is industrial in nature.
[Page 148]
[Inclosure 4]
Minister Reinsch
to the Minister of Finance
American Legation,
Peking,
December 7, 1916.
Excellency: As you confidentially inform
me that the British, French, Russian, and Japanese banking groups
had entered a protest against the American loan, just concluded, on
the ground that it conflicted with Article XVII of the
Reorganization Loan Agreement, I reported this matter to my
Government and I am now informed that in the opinion of the American
Government the terms of the Continental and Commercial Bank loan in
no way conflict with any agreements between foreign bankers and the
Chinese Government. I may also state that opposition to this
American loan would appear to imply that there is a claim on the
part of others to greater privileges in China than are enjoyed by
Americans; and also that such a claim, founded on an extensive
interpretation of Article XVII of the Reorganization Loan, cannot be
admitted.
Your excellency has also given me specific information to the effect
that the proceeds of the American loan are to be used for the
purpose of strengthening the credit of the two national banks of
China, and of creating a fund for advancing the industrial
development of the Republic. I note this assurance with satisfaction
and it is highly important that the proceeds should entirely be
applied to the constructive and productive purposes indicated,
because should they be expended for purely political uses
unconnected with productive industrial enterprises, the making of
all further loans in America would be seriously discouraged. Without
any desire to interfere at this time with the disposal to be made of
the loan, I feel that I owe you the above indication of the danger
of any diversion of the funds from the purposes indicated.
I avail [etc.]
