File No. 893.51/1824
Minister Reinsch to the Secretary of State
Peking, November 2, 1917, 10 p.m.
Your telegram of October 15 [13], 2 p.m. has been communicated to the Chinese Government and the interest shown by the American Government is greatly appreciated by the Chinese as well as the British and French. I am also confidentially informed that the Japanese have indicated to the Minister of Finance that they view with favor the prospect of American participation.
The representatives of Consortium have received recently instructions to proceed with negotiating a second reorganization loan for the purpose of currency reform. They have so informed Minister and have requested him to submit detailed plans of reform: but although joining in this request the Japanese Bank favors making the loan unconditionally and leaving the details of reform to be elaborated by the currency advisers to be provided for by the loan agreement.
It is learned that, since the withdrawal of the American Group from the Consortium in 1913, the remaining parties to Currency Loan agreement of 1911 have pooled their rights therein with those held jointly by the Consortium which negotiations delayed by the reorganization loan, and have obtained the consent of the Chinese Government to the proposal that any loan for the purposes of the currency loan agreement should be included in a further reorganization loan in the negotiation of which the Japanese and Russian banks would participate. This agreement is of fundamental importance as it enables the currency loan to be secured upon the sole available revenue adequate for the purpose, namely, the salt revenue, the option in the hypothecation of which is claimed by the Consortium as a vested right under Article 17 of the Reorganization Loan.
It is understood also that in January last Consortium banks adopted a resolution to invite the American Group to resume its participation or to designate some other American financial organization to succeed to its rights in respect to the reorganization loan.
The way would therefore seem to be open for an arrangement by which either the old or a new group could represent American interests in the pending negotiations for a reorganization loan to be devoted to currency reform. If such an arrangement is feasible it would obviate difficulties inseparable from direct participation by our Government and would be entirely agreeable to the French and British Groups and incapable of objection or obstruction by the other interested parties.
Minister of Finance is determined to make this loan without delay and in view of like haste on the part of the Japanese it is urgent that our Government take action for the purpose of realizing the American interest asserted. The critical situation calls for early appointment of a representative fully qualified to appreciate and to cope with political as well as technical difficulties to be expected in making effective our claim to participation. Pending such appointment I would recommend that some one now here be designated immediately [Page 153] to represent the American interest to the extent of attending meetings of the bankers in order to keep informed of the course of the negotiations now in progress.