File No. 893.51/1809

Minister Reinsch to the Secretary of State


Your September 20, 7 p.m. If independent financial assistance can be advanced to China the fundamental needs of the situation will be met. Participation by the Consortium was advocated only as a pis aller.

But in order that our Government may have a clear understanding of the situation I have to report the following facts: As the Chinese Government has delayed arrangement a movement is gaining strength and enlisting progressive Chinese support. Japanese influence over the Government exercised through the Minister of Communications, Minister of Finance, Minister of Interior, is apt to be developed into control. Spongi [Tuan?] is loyal, but so intimidated, stated in the presence of Admiral Knight that the Government did not dare to announce its readiness to send hundred thousand troops to Europe for fear of diplomatic complications. Japanese policy apparently is to discourage Chinese Government giving substantial military assistance in order not to strengthen Chinese army and national life generally. The Chinese are flooded with reports of Russian weakness. Recently they have been frightened by the report that Japan is on the point of changing sides in the war. Allied Legations cannot take any effective initiative because they must discuss everything with Japan.

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Therefore there is every reason to exercise care in order that the proposed action may not defeat essential purposes of the United States. If independent American assistance is to be clearly connected with indication [intention?] of inviting China to enter the war and especially with the note of June 718 its effect will be liberating in the highest degree. If it is made without such connection, as an isolated act, its effect will be to strengthen combination manipulated by the Japanese through Liang and Tsao to be used in suppressing by force the South and the parliamentary party, thus aiding everything that is vicious and opposed to American ideas.

But if assistance is made conditional upon the restoration of Chinese national unity evidenced by the convocation of Parliament, it would strengthen Chinese national life and set free her energies effectively for use in war. According to the method pursued, this loan will tend either to unify China and prepare her for efficient national action, or furnish the means for corruption and civil strife in an effort of the dominant faction to fasten its power upon the country. If applied with foresight the loan will greatly strengthen the policies for which the United States is contending.

It would be advisable to specify uses of the loan but upon the conditions just mentioned reliable forces in Chinese public life would be so strengthened that the application of the funds to such pressing needs as sending expedition to Europe and restoring national bank credit might be expected.

I earnestly commend to your consideration the suggestions in my telegram of September 16, midnight.

  1. Should be June 6, communicating message contained in Department’s telegraphic instruction of June 4, 3 p.m., printed under Political Affairs, p. 48, above.