File No. 893.811/274

Minister Reinsch to the Secretary of State

[Telegrams]

Your telegram of October 25, 5 p.m. Carey desires the International Corporation be informed that the situation apparently is not understood; the proposed advance is to be not a charge upon the proceeds of Canal contract which is subject to parliamentary approval but a separate loan repayable within a year and constituting an unconditional obligation of the Chinese Government whose guaranty therefor is amply satisfactory and whose power to make such a loan at the present time is taken for granted both by Chinese authorities and by banking representatives of other nationalities including International Banking Corporation which have recently concluded similar loan agreements.

Under present conditions when floods are directing special attention to the imperative need of such improvements as the Canal contract contemplates, it would be disastrous to the position of International Corporation here if it were to postpone, pending approval of Parliament, advancing funds which are urgently necessary for the latter and not only would American interests be discredited but the purposes of the contract although independently guaranteed would m all probability be ousted from the Canal project in favor of Japanese interests as the Sino-Japanese Industrial Corporation is offering immediate loan on the understanding that it will hereafter have a priority in connection with all conservancy work. Unless confronted with this new obstacle the Chinese Government is prepared to sign Canal contract Monday.

I beg to request that these considerations be brought to the attention of the American International Corporation with Carey’s request for reconsideration of its refusal to authorize advances of the funds on preliminary work and a definite reply by October 31, pending which he is not communicating the present attitude.

Reinsch