File No. 893.51/1815
The British Embassy to the Secretary of State
The British Embassy present their compliments to the Department of State and, with reference to the latter’s memorandum of September 8, 1917, have the honour to state that they have received a telegram from Mr. Secretary Balfour from which it appears that a memorandum was communicated to the United States Embassy on September 17 explaining the position, as understood by His Majesty’s Government, with regard to an application of the Chinese Government for a loan of 20,000,000 pounds for currency reform.
[Page 145]The Embassy are instructed to inform the State Department that it appears from advices received by His Majesty’s Government from Tokio that the Japanese Government are supporting the Chinese application on the grounds of the importance of currency reform, and that that Government are themselves ready to advance half the necessary sum. It seems further that the Japanese Minister for Foreign Affairs himself suggested that the United States Government might be willing to reconsider the attitude which they have hitherto adopted in regard to political loans to China, and might advance the other half. The Minister for Foreign Affairs expressed the opinion that a strict control should be exercised over the disbursements and, in this connection, he referred to the fact that the Allied Powers had acquiesced in the appointment of a Japanese adviser to carry out this requirement.
Mr. Secretary Balfour has instructed the British Embassy, in communicating the above for the confidential information of Mr. Secretary Lansing, to convey to him the view of His Majesty’s Government that it would now be useless to endeavour to persuade the Chinese Government to abandon this loan project by pointing out to them that the moment is inopportune for the issue of such a loan and that it is unnecessary, having regard to the fact that the Japanese Government agree to the Chinese application. The fact must now be faced that the issue is inevitable. The Allied Powers are, as the Japanese Minister for Foreign Affairs points out, committed to the appointment of a Japanese financial adviser to supervise the issue of the next loan, and a degree of undivided control over the finances of China would be obtained by Japan were they, in addition, to be the sole subscribers to the loan.
In the circumstances and in view of the fact that it is the Japanese themselves who suggest American participation, it appears to His Majesty’s Government that the Department of State may wish this participation to materialise and, in that event, the decision would be most welcome to His Majesty’s Government.
The cooperation of an American Group, by which a portion of the projected loan could be subscribed, and a residuary participation of a British Group provided for in Article 4 of the Sextuple Group Agreement of 1912, would ensure to the American and British Governments some voice in the elaboration of currency reform and in the control of the scheme.
Washington , October 3, 1917.