File No. 893.51/1822
Minister Reinsch to the Secretary of State
Peking, September 28, 1917.
Sir: I have the honor to submit the following memorandum on the financial situation.
On account of the favorable rate of silver the revenues of the Government have increased, as far as application to the foreign loan is concerned; hence the Government is in a fairly favorable financial situation. The greatest need is the restitution of the Government bank notes to their par value; at present the notes of both banks range between seventy and eighty. Two parties in the Government are making attempts to secure foreign loans; both have connections with Japanese interests.
The Minister of Finance, his excellency Liang Chi-chao, is cooperating with the Yokohama Specie Bank which at the present time is taking the lead in the international Consortium. He is pinning his hope to a large loan to be made for the purpose of currency reform. He receives no encouragement from the other party in the Government.
The Communications party (Chiao-tung faction) is represented by his excellency Tsao Ju-lin, the Minister of Communications. He is cooperating with a Japanese group made up of the Industrial Bank of Japan, the Bank of Chosen and the Bank of Formosa. They have now completed negotiations for a loan of twenty million dollars which is to be applied to the rehabilitation of the Government bank notes. The Premier informed me that it was likely that another loan of twenty million dollars would follow.
While the two Chinese parties involved in these financial dealings are under the surface bitterly opposed to each other, the Japanese interests involved are both acting in direct assistance of their Government. The loan of twenty million dollars was originally discussed at the time when Japan was urging the entry of China into the war last March. It was at that time opposed by Parliament. As Parliament is not now in session the parties interested are on the point of consummating the loan, to which otherwise objection might be made.
I have [etc.]