The Minister in China (Reinsch) to the Acting Secretary of State
[Received February 15.]
Sir: In connection with your telegraphic instructions relating to the proposed declaration on the part of the United States, Great Britain, France, and Japan to the effect that no financial support would be given to either party but that upon reconciliation being effected the said Powers would give financial assistance to the Chinese Government, I have the honor to report that the Japanese Minister called on me yesterday and made the following oral communication:
He stated that his Government was willing to join in such a declaration on condition that the reservations made in the explanatory note issued by the Japanese Government and communicated to you in my Despatch No. , of December [7,] 1918, should be observed. He stated that in addition to the reservation made by his Government in the matter of loans of an industrial nature—or such as in the opinion of the Japanese Government could not have extra effect in retarding the reestablishment of peace—the Government of Japan was also constrained to permit a group composed of the Bank of Chosen, the Industrial Bank of Japan, and the Bank of Formosa to complete payments under a loan of Y.20,000,000 made in connection with the secret military agreement.7 He stated that as this was a contract between the Banks and the War Participation Bureau, the Japanese Government was powerless to interfere to prevent its execution.
With respect to the discontinuance of the furnishing of arms and ammunitions to either party, the Japanese Minister stated that his Government was, also, in principal in agreement with this policy; that they however declined to join in a declaration of this kind because it might seem that such action would be considered designed particularly to restrain Japan which is the only country now able to furnish arms and ammunition to China and thus might cast reflection upon the Japanese. The Minister added that his Government found itself in this matter in the same position as stated above with respect to the War Participation Loan. The Tayieh Company had made a contract to furnish certain arms: it was impossible for the Japanese Government to interfere because loss might thus be occasioned to the Company through non-execution of its contract. It was a matter which therefore would have to be allowed to take [Page 292] its course. He stated that deliveries of arms and ammunition were to be made until April 1919.
In a long conversation with the Japanese Minister, I went into the various phases of this matter frankly and fully. I stated that the proposal to give assurances with respect to the furnishing of arms was certainly not intended to, and could not reflect upon Japan because, as a matter of fact, other nations, particularly America, were now able to furnish arms and ammunitions to the Chinese.
With respect to the payment of the War Participation Loan to the War Participation Bureau I queried whether financial support extended to a small group of men interested in that Bureau would not react very unfavorably to Japan and her associates in making it seem that the aims of a small, rather ambitious, and reckless group were receiving special encouragement at a time when we were striving to show the utmost impartiality. It would also be urged that as the loan was to be repaid by the Chinese Government, that Government and the people of North China, themselves, could hardly be pleased with the furnishing of funds which would give great power and influence to certain militant individuals.
The Japanese Minister stated that precautions had been taken to prevent the use of arms or funds obtained in Japan for purposes of internal war. He said that all payments made by the War Participation Bureau out of Japanese funds had to be countersigned by the Japanese Controlling Officer. I recalled to his mind the well-known opposition of General Tuan Chi-jui and his lieutenants to the Peace policy of the President and the fact that their inclination undoubtedly was at an early moment to declare that the Peace policy of the President had failed and that war-like measures must be resumed for which they are now preparing the forces.
The Japanese Minister restated his view that his Government had no alternative but to permit the execution of existing contracts. I recalled to his memory the action of the American institution, Lee, Higginson & Company, which, when it was merely hinted to them that the execution of their five million dollar loan contract would be interpreted as taking sides between contending factions in China, decided immediately not to carry out further the contract. Subsequently the immediate requirements of the situation in China were discussed and we agreed that the long and unwarranted delay on the part of the South to send delegates to the Peace Conference would make desirable another representation by the Associated Powers. We also agreed that if the Government of Hsu Shih Ch’ang had done all in its power to advance peace by discontinuing military operations and by sending a Peace delegation to Nanking, the diplomatic corps would be warranted to [in] not objecting to the use by the [Page 293] Government, for administrative purposes, of the Customs revenue surplus now accumulated.
I have the honor to enclose herewith a copy of the telegraphic instructions of the Japanese Minister from his Government.8 He stated to me that his explanations are to be considered as orally made and that he was allowing me to have a copy of his instructions simply for reference and not as an official document. I beg to request that it be so considered by the Department.
I have [etc.]