893.51/2495a: Telegram
The Secretary of State to the Chargé in China (Tenney)
Until the matter herein referred to has been made public by the Chicago Bank you will treat it as confidential save in so far as it may be necessary to discuss it with the interested Chinese officials.
John Jay Abbott, Vice President of the Continental and Commercial Trust and Savings Bank, has concluded, subject to the approval of the Executive Committee of his Bank, a contract with the Chinese Government for a loan of $30,000,000 of which $10,000,000 is underwritten firm and $20,000,000 in respect to which they will immediately endeavor to underwrite or sell. This contract signed October 20th will if so approved take the place of the $5,500,000 loan negotiated October 11th and will provide that out of the proceeds the $5,000,000 maturing November 1 under the Chicago Bank Loan shall be paid. It also provides $1,000,000 for reorganization of Tobacco and Wine Administration and other purposes to be agreed upon: it further provides for arrears in pay of Board of War troops with a view to their eventual disbandment, and for arrears due police, bannermen, staffs of the Legations, and Departments of Justice and Education, and for Manchu pensions and short maturities to native banks. The contract is signed in behalf of the Chinese Government by Hsu Un Yuen, acting under special authorization in the name and on behalf of the Premier and Minister of Finance, and Yung Kwai, Chargé d’Affaires and it is desired that you obtain from the Premier and Minister of Finance at once in writing confirmation of the authority of these representatives to negotiate and sign the contract, also stating in substance that the making of said $30,000,000 loan, pledging of the security, issue of Treasury Notes with coupons as provided for and the execution and delivery of the contract are each and all entered into and duly authorized by the Chinese Government and are each and all in accordance with the Constitution and laws of the Republic of China and in no way contrary to any treaty, convention or agreement of any kind. You will cable to the Department the full text of such communication received from Premier and Minister of Finance. The security for the loan is the entire revenue of the Tobacco and Wine Administration, subject to previous loans already charged thereon and not redeemed and in the event that this security [Page 527] shall be determined by the Bank to be insufficient there shall be given as additional security the surplus Salt revenue released and to be released to the Chinese Government by the Salt Administration and for that purpose the loan referred to is now in the said contract constituted a direct charge upon the said surplus revenues to be released from the Salt Administration to China. The loan is to net the Chinese Government 91 and to draw 6 per cent interest for two years from November 1, 1919.
In order to clear up any question of conflict with the option of the old Consortium it is hoped that the Chinese Government will without delay give notice that it considers that all such rights and options under the Reorganization Loan Agreement have lapsed by reason of the failure to exercise that option when so requested by the Chinese Government.