893.51/2503: Telegram
The Secretary of State to the Ambassador in Japan (Morris)35
Your October 27, 11 p.m.36
It is desired that you take early occasion to say to the Foreign Office that this Government and the American Group have for more than a year been seeking the cooperation of Japanese financial interests in the improvement of administrative and economic conditions in China upon terms which should conserve the existing and recognized interests of all the powers concerned and to the consummation of the plan for the proposed Consortium all other American endeavors in China have been subordinated. A plan for coöperation on a basis acceptable alike to all the financial interests involved and to their Governments seemed to be on the point of realization in May last when the Japanese Government through its Group interposed a new condition which appeared irrelevant to the purposes of the Consortium and which the British French and American Governments have had occasion to advise the Japanese Government that they consider inadmissible. During almost six months that have elapsed since the Japanese Government thus made the plan of international coöperation in China contingent upon an extraneous political claim the situation in China has developed towards a crisis. The withholding of funds by the nationals of the powers interested in forming the Consortium—a measure adopted by tacit consent in order to maintain the status quo until the arrangements for international coöperation had received unanimous approval—acquired with the lapse of time a new character, becoming an active force impelling the Chinese Government towards a decision which would inevitably bring about a radical change in that status. As is doubtless known to the Japanese Government the several branches of the Chinese administration have incurred several months’ indebtedness; in particular the pay of the troops is at least three months in arrears; local mutinies have occurred and there has been ample evidence of the danger of such widespread disaffection as would jeopardize the very existence of the Chinese Governmental entity. The financial [Page 536] stringency has been such that with the approach of the traditional autumn settling day the Government has found itself confronted with the dilemma that either it must risk a revolt of the troops and the consequent disintegration of governmental authority or must find money upon any terms on which it might prove available—the best terms in prospect being those which involved the conceding of political claims in regard to Manchuria and Mongolia. The reality and imminence of the danger with which China was thus confronted were fully evidenced by the Japanese Minister at Peking who on October 3 advised the American Chargé d’Affaires of the seriousness with which he viewed the situation and indicated that should the old consortium not find it feasible to make a loan for the relief of the impending crisis it would be necessary for Japan independently to supply funds for the purpose of averting it.
Under these circumstances and in view of the apparent deadlock in the negotiations for financial coöperation the American Government felt that the moral responsibilities resulting from its advocacy of the proposed consortium precluded it from standing in the way of an advance of funds which would enable the Chinese Government to meet the crisis while holding open the possibility of organizing the consortium. It therefore gave its approval to the proposed Chicago Bank loan upon the terms indicated in its telegram of October 22, 5 p.m.,37 which contemplated the possibility that the rights of the Chicago Bank might be taken over by the Consortium as a basis for such international cooperation as this Government has consistently desired.
The British Government has however urged that an immediate loan of say £5,000,000 should be made to the Chinese Government by the banking groups of the United States, Great Britain, France and Japan without prejudice to the discussions now proceeding in regard to the formation of the new Consortium; and in deference to the views of the British Foreign Office this Government has assented to its proposal in the terms of an exchange of notes which is being separately telegraphed to you through the Legation at Peking and has meanwhile requested the Chicago Bank to withhold at least temporarily its confirmation of the contract for the loan of $30,000,000 and to proceed only to the flotation of the smaller loan of which the Department advised you in its telegram of October 11, noon.38
It is hoped that on the basis of the British proposal it may be possible in the near future to effect a working cooperation among the financial interests concerned, if only for the temporary and limited purpose of affording the Chinese Government the means of [Page 537] meeting its present financial crisis and averting the necessity of its taking such steps as would essentially alter the status quo. While assenting to this provisional procedure suggested by the British Government the American Government is hopeful that the Japanese Government may hereafter see fit to allow the Japanese Group to complete the formation of the Consortium upon the understanding suggested in the reply which the Department made on October 29th [28th]39 to the Japanese Embassy’s memorandum of August 27th.40
Repeat to Peking without delay.
- See last paragraph for instructions to repeat to Peking. The same telegram, except for the last paragraph, sent as No. 6174, Nov. 11, to the Ambassador in Great Britain for his information and guidance, and with instructions to “Repeat to Embassy, Paris, as No. 9243, for information and for reference to Mr. Long and Marshall.”↩
- Ante, p. 529.↩
- Ante, p. 527.↩
- See footnote 20, p. 524.↩
- Ante, p. 497.↩
- Ante, p. 480.↩