893.51/2493a: Telegram
The Secretary of State to the Ambassador in Great Britain (Davis)24
6114. Referring to the Department’s telegrams of September 16, 4 p.m., and October 11, 1 p.m.,25 this Government has learned that since it made the proposal embodied in its telegram of September 16, 4 p.m., for a tripartite consortium to avert the imminent danger that the desperate financial situation might cause the Chinese Government to have recourse to measures which would be incompatible with plans for the rehabilitation of Chinese finances that situation has become so accentuated that some measure of immediate financial relief appears to be the only alternative to the political disintegration of China. Under these circumstances, and pending a decision as to the formation of an international financial consortium—whether or not including Japan—on terms which do not involve further encroachments upon the administrative and economic status of China, this Government has approved the conclusion by the Chicago Continental and Commercial Bank of a contract for a short term emergency loan of $30,000,000 under an option held by it under the terms of the loan contract concluded by it with the Chinese Government on November 16, 1916.26
This contract, signed October 20 subject to the approval of the Executive Committee of the Bank, will, if so approved, take the [Page 528] place of the five and a half million dollar loan which was the subject of the Department’s October 11, noon.
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 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 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.
It is desired that you communicate to the Government to which you are accredited the conclusion of this loan with the comment that this Government has given its approval on the understanding that in the event of the formation of the proposed consortium the Chicago Bank will fully cooperate with the American Group with a view to devoting to the purposes of that consortium so far as feasible the rights accruing to the Bank under this contract. You will particularly emphasize the fact that this Government’s approval of the Chicago loan indicates no change in its desire for the formation of a consortium on the terms originally proposed and preferably including Japanese participation.
Repeat to Embassy Paris as 9206 without delay.