893.51/2550: Telegram
The Chargé in China (Tenney) to the Secretary of State
[Received November 21, 2.12 a.m.]
Referring to Department’s telegram of November 11, 6 p.m. As Hsu En-yuan on October 30th received a communication from Abbott announcing cancellation of the loan, with the reasons therefor, I did not elaborate to the Chinese Government the reasons given in Department’s telegram for the stoppage of the Chicago Bank loan negotiation, but only announced to the Chinese Government that the Department has decided to advise the substitution for the Chicago loan of a loan of about pounds sterling five million to be made by [Page 540] the American, British, French and Japanese groups jointly. I have now received the following letter addressed Honorable Charles D. Tenney, Charge d’Affaires of the United States of America, American Legation at Peking. China Government’s November 19th, 1919.
“Sir: Mr. Galen L. Stone, of Hayden, Stone and Company, Albert H. Wiggin, Chairman of the Board of Directors of the Chase National Bank, and the undersigned left Vancouver on October 30th, in company with the Honorable Hsu En-yuan. Just before our departure Vancouver Mr. Hsu received a telegram from Mr. John Jay Abbott, Vice President of the Continental and Commercial Trust and Savings Bank of Chicago, to the effect that the bank had decided not to approve the loan agreement of October 20th which he had entered into on behalf of the bank with the Government of the Republic of China and that the bank was holding the contract subject to the orders of the Chinese Government. The reasons given by Mr. Abbott for this action of the bank were, first, the extremely unsatisfactory condition of the American investment market, due to the poor reception given to the $250,000,000 loan of Great Britain; and second, a message received from the Chinese Legation at Washington, that the pledge of the salt surplus might cause the Chinese Government embarrassment, and an offer from them to substitute the goods tax as an alternative.
Aware of the long series of failures attending negotiations for Chinese-American financing, and with large present and prospective interests in the development of Chinese commerce and industry, we were at once very deeply concerned over this new, disappointing development. It seemed to us that it might at once cap the climax and render exceedingly difficult a resumption of similar negotiations on the part of Americans at any time through a long future. Consequently we felt that we should take such action as possible to give effect to the arrangements made by the Honorable Hsu En-yuan with the Chicago Bank, and, as a result of negotiations which we carried on with Mr. Hsu, the Pacific Development Corporation has entered into a contract with the Republic of China, executed by the undersigned as President of the Pacific Development Corporation, and by the Honorable Hsu En-yuan, acting under special authorization from the Cabinet and the Minister of Finance of the Republic of China, under the terms of which the Pacific Development Corporation is accepted by the Chinese Government as the successor to the Continental and Commercial Trust and Savings Bank of Chicago, and has agreed to arrange an immediate loan of $5,000,000, with an option for an additional loan or loans of $20,000,000, to be secured by the revenues of the Wine and Tobacco Administration and carrying with it the appointment of Associate Inspector General of that administration.
Respectfully,
Pacific Development Corporation.
By Edward B.
Bruce, President.
I await instructions as to the attitude of the Legation. Please send copy of the above letter to New York office of Pacific Development Corporation.