File No. 893.51/1951

The Acting Secretary of State to the Chargé in China ( MacMurray)

[Telegram]

Your telegram of August 6, 7 p.m., expresses views substantially identical with those held by the Department which is aware of the conditions you mention.

The aim of this Government is to devise plans to end the practice to which you refer and avoid the dangers threatening. It is proposed to create an international consortium which shall have the support of the governments concerned, without whose approval no loan, either administrative or industrial, can be made and which shall control all expenditures. If consortium arranged, all options held by members of it will be placed at the disposal of the consortium. The statement of Reuter quoted by you is inaccurate. There has been no proposal that China cancel all outstanding loans.

The Japanese here in discussing the proposal show an unwillingness to have industrial loans included and are evidently trying also to influence Great Britain and China to declare against their inclusion. The British Government has made inquiry as to this and China has instructed her Minister here to inform us that in the opinion of the Chinese Cabinet industrial loans ought not to be included. To leave them out will defeat the very purpose had in view in organizing the consortium. It is absolutely necessary to the protection of China’s credit and Chinese resources that they be included. The Chinese Minister is so informing his Government. You are authorized in your discretion to impress this upon the Chinese Government.

Polk