In dealing with the conditions under which the British Government
accept the proposals reference is made to a Note, dated the 14th of
August last from the Foreign Office and for the guidance of the
Department I venture to point out that a copy of that Note was
transmitted to Washington under cover of despatch No. 9710 of August
16th last.79
A copy of the attached Note has been forwarded to the American
Commission to Negotiate Peace to-day, despatch No. 102.
[Enclosure]
The British Acting Secretary of State for
Foreign Affairs (Curzon) to the American Chargé (Wright)
[London,] March 17, 1919.
No. 37459/10.F.
Sir: With reference to the note from
the United States Ambassador of the 24th. ultimo and to previous
correspondence respecting the proposal of the United States
Government for the formation of a new
[Page 427]
International Consortium to provide loans
to China, I have the honour to inform you that His Majesty’s
Government have, after careful consideration, decided to
authorise a British group to enter the consortium under the
conditions suggested by the United States Government.
The United States scheme as understood by His Majesty’s
Government may be summarised as follows:—
- 1.
- It is proposed to establish a system of international
co-operation in Chinese finance in the shape of a Four
Power Consortium, comprising Great Britain, France, the
United States and Japan, each Power constituting a
representative group of Banks and Financial Houses,
without prejudice to the claims of Belgium and Russia to
be included at a later date.
- 2.
- The four Groups will share equally in all Chinese
Government guaranteed loans, industrial as well as
administrative and financial, which involve a public
issue, but financial operations not involving a Chinese
Government guarantee or a public issue will remain open
to all.
- 3.
- The groups will pool all existing and future options,
except such concessions as may be already in
operation.
- 4.
- Each national group will receive the active and
exclusive support of its Government in the sphere thus
indicated.
The acceptance of these proposals, as was pointed out to the late
Mr. Page by Mr. Balfour in a note dated August 14th. 1918,80
involves a complete reversal of the policy adopted by His
Majesty’s Government in 1913 when it was decided to exclude
industrial loans from the scope of the Consortium’s activities,
but so convinced are His Majesty’s Government of the urgency, in
the interests not only of China herself, but also of foreign
trade and finance, of adopting some system to ensure the proper
control of loans to the Chinese Government, that they have
determined to depart from their previous attitude and to
authorise on certain conditions the participation of a British
group in a Consortium constituted on the lines suggested by the
United States Government.
These conditions comprise the enlargement of the British group in
such a manner as to make it representative of the banks and
financial houses of this country interested in loans to China
and the pooling by the various members of the group of all their
existing as well as future options for such loans. Further the
inclusion of Industrial Loans in group business is subject to
the understanding that the promise of support by His Majesty’s
Government applies solely to the financial side of such loans,
that the British group is prepared—as is also, I am given to
understand, the United States
[Page 428]
group—to dissociate itself from the
industrial side and while providing for the flotation of the
loans, to put up to public tender the contracts for the
execution of the engineering or other works to be built out of
the proceeds of the loans and for the supply of the necessary
materials.
On these conditions His Majesty’s Government have authorised the
British group to participate in the operations of the proposed
International Consortium and have guaranteed to it exclusive
official support as regards all future public loans to China
which involve a Government guarantee and a public issue, whether
for industrial, administrative or financial purposes. At the
same time I must add that any financial assistance to China on a
large scale from this country cannot be looked for at the
present moment, as, having regard to the heavy pressure on the
capital resources of this country for reconstruction purposes
and to the consequent restrictions imposed on capital borrowing
in the London market, His Majesty’s Government have only been
able to assent to British participation in the Consortium on the
understanding that any loan to China in the near future must be
of very moderate dimensions and that the share of the British
group should be carried by the United States group, in
conjunction with the Japanese group, in the manner suggested in
the memorandum which formed the annex to the note addressed by
Mr. Lansing to the British Chargé d’Affaires on October 8th.
1918.81
Finally I beg to state that I am in complete agreement with the
view expressed in Mr. Davis’ note of the 24th. ultimo, that the
question as to what joint agreements should be included in the
practical working of the Consortium and what options surrendered
could be most easily settled through negotiations between the
groups, subject of course to the approval of the respective
Governments and I am instructing the representative of the
British group accordingly.
I have [etc.]
(For Earl Curzon of Kedleston)
J. A. C. Tilley
