File No. 893.516/48

Minister Reinsch to the Secretary of State


My despatch No. 95. [1295.] The President and Minister of Finance have expressed to me their desire to create a strong industrial bank devoting to it the greater part of proceeds of Chicago loan, now being negotiated.

The bank could be made joint Chinese-American enterprise incorporated concurrently in China and in the United States with joint management; or a Chinese Government institution having its capital created chiefly out of the loan, with an American co-manager during the life of the bonds which would be secured not only by general government guaranty and special taxes pledged but also by assets of the bank.

It would be the function of the bank to supply funds for public and private enterprises dealing with natural yields, colonization, forestry, municipal utilities and various manufacturing industries; such loans to be made on basis warranted by assets and definite prospects of enterprise. The bank might also float special industrial bond issues in China and the United States.

This project offers a means of assisting economic development of China along sound lines through an institution whose scope would expand as security and experience warrant. It is eminently desirable that the proceeds of any American loan should have some perpetual destination and that their proper application should be guaranteed through participation in management in order to avoid both international protests as to the purposes of the loan and an unprofitable expenditure of the resources thus supplied.