File No. 893.51/1751

Minister Reinsch to the Secretary of State


Your February 21, 5 p.m. Financial situation of China, considering all circumstances, is good, but a moderate amount of support is essential in order to avoid control of China by Japan. Reports of Chinese troubles and insecurity spread in the United States through Japanese agencies are entirely unwarranted in fact. The Japanese are themselves now offering to the Chinese Government funds at favorable rates. Efforts as reported in my telegram of January 15, 6 p.m., are continuing unabated with the evident design of securing American money after Japanese political purposes have been accomplished.

With regard to Chicago loan, Minister of Finance, though unwilling to extend exclusive option, however is ready to continue negotiations for a reasonable time so as to allow representatives of the bank to inform themselves. It is most desirable that the bank send authorized representative immediately. He is willing to give assurance that the revenues pledged will be clearly separated from those affected by French loan and systematically organized and that power [enterprises?] created by industrial investments out of the proceeds of the loan be added to security. I feel assured that the security will be made indubitable. The Chinese Government wants the loan now and is willing to satisfy every reasonable demand of the bank.

Minister of Finance representing the prevailing feeling of the Chinese desires American cooperation and leadership. To preserve Chinese freedom and certain standing moderate American financial support of the Chinese Government is imperative.

Under the circumstances Chicago bank has a great opportunity for important profitable activity. It is to be hoped that it may act promptly but if it requires more time I have the honor to urge very strongly that to save the situation and assure freedom of action for several months a further loan advance be made by the Chicago bank or Lee, Higginson be allowed if possible to complete contracted loan immediately.