893.51/3027: Telegram

The Acting Secretary of State to the Minister in China (Crane)

309. Your 340, October 22nd, 8 p.m.20 communicated to the American Group which replies as follows:

  • “(1) We recognize that the councils [counsels?] of the Japanese are at times divided, but in the matter of the Consortium the Japanese Banking Group seems to be acting in perfect good faith and with no lack of authority. The Japanese made no suggestion as to the Land Tax and the Minister must have been entirely misinformed on that whole point because there has been no request that the Land Tax be included as security.
  • (2) It must be made clear that the Consortium is not prepared to rehabilitate the Chinese Government if such rehabilitation requires the advancement of considerable sums for early administrative purposes. The success of the bankers in floating Chinese loans is dependent entirely upon the favorable attitude of Western investors. These investors are well aware today that the Chinese Government is incurring a deficit of from six to eight million dollars per month and American investors will not subscribe to a loan made for the purpose of meeting such a deficit. The only chance to induce investors to buy Chinese loans is if they are intended for really constructive purposes. As already stated, the American Group is now working on a loan plan with such ends in view.
  • (3) American Group has requested that State Department arrange with the other three Governments to issue a joint announcement of the final formation of the Consortium, which announcement will presumably be made in the near future.
  • (4) The Governments are not in a position to state that the Consortium’s operations will be withdrawn at any given time. The present Consortium agreement covers a period of five years. Further, it should be manifest that without the cooperation and active desire of the Chinese people and Government the Consortium cannot operate at any time.”

  1. Not printed.