File No. 893.51/1799
The British Chargé d’Affaires to the Secretary of State
Washington, August 21, 1917.
The Chinese Government are requesting a loan of £10,000,000/0/0 for the reform of the currency, which is to be carried out by a special department under a foreign controller. The greater part of the loan would be held abroad as a gold reserve against gold notes, which would be issued for gradual circulation, whilst as security there will be the property of the mint and the profits on the coinage, including the melting of the copper cash, as well as, in case of necessity, the excess salt revenue. All the mints would be under the control of the new department under the supervision of foreign managers.
They desire a further loan, the amount of which is not specified, for administrative purposes, as well as to reduce the diminution of revenue caused by the gradual abolition of likin. This loan would be incorporated with the currency loan.
Furthermore, they desire an immediate loan of ten thousand [million?] yen for administrative purposes.
His Majesty’s Government views with considerable alarm these requirements. From a purely Chinese point of view the occasion seems very unpropitious for assuming so great liabilities, for the terms both of issue and of interest would, of necessity, be exceedingly high, and loans to the amount requested would almost certainly be made conditional upon some form of foreign control. They therefore intend to instruct their representative at Pekin to point out to the Chinese Government that the Chinese financial situation ought shortly to be far more favourable than for a long time past, for the following reasons:
The Allies of their own free will have postponed the indemnity payments, whilst those same payments to the enemy Powers are suppressed. The Japanese Bank has paid them one million sterling. A large sum is being paid for the enemy ships in Chinese harbours. The customs duties have been raised to the effective rate of five percent. [Page 137] The rise in silver has brought about a very great economy in the payments of interests on foreign obligations. Finally, a much greater income is being received from the saltpetre [salt?] industry.
Should they, however, persist in their requirements as set forth above, the only member of the Allied Governments which at present is in a position to furnish them with the money they desire is Japan, which would consequently acquire a predominant position in Chinese financial matters. His Majesty’s Government suggests that the United States Government should send similar instructions to their representative in Pekin.