893.51/2690: Telegram

The Ambassador in Japan (Morris) to the Acting Secretary of State

46. Your December 23, 6 p.m.85 Replying to my December 20, 6 p.m.86 I have received this morning the following memorandum from the Japanese Foreign Office:87

“The Japanese Government have given most careful consideration to the American Ambassador’s memorandum dated December 27, 1919,88 on the subject of the Chinese loan.

The Japanese Government have learned with satisfaction that the American Government still maintain the policy of withholding diplomatic support from the loan of the Pacific Development Corporation. It is, however, a matter of great surprise and regret to know that the United States Government is powerless to prevent and would be reluctant to interfere with, the activities of its financiers of this kind, unless the consortium should be organized, and in particular that it regards the conclusion of the loan at issue as being due to the delay in the organization of the new consortium which it asserts is caused by the objections raised by Japan, thus apparently placing the responsibility for the conclusion of this loan at the door of Japan.

The existing consortium, by virtue of the first reorganization loan agreement, are given the option in regard to loans of a similar nature. The loan of the Pacific Development Corporation is distinctly in conflict with the said option. The Chinese Government in accepting it have committed an act in breach of the agreement. The fact that the existing consortium are in possession of such option must have been well known to the American corporation. If so, it can hardly disclaim the responsibility for taking upon itself to perform an act of unwarrantable interference. It will be recalled, moreover, that in regard to the question of financial assistance to China, it was first proposed by the United States Government that no assistance could with advantage be rendered to China by the powers concerned, pending the achievement of a reconciliation between the North and South. Although the said proposition was not incorporated in the terms of the joint representation made by the five powers to China, the principle of concord on that point has since then been faithfully maintained by them. Viewed in this light, the loan of the Pacific Development Corporation is quite at variance with the principle of international concord between the powers.

As regards the new consortium, it has long been the desire of the Japanese Government to see the return of the American group, and in conformity with the suggestion made by the Japanese group on the occasion of the conference of representatives of the banking groups which met in London some years ago, the existing consortium [Page 633] extended an invitation to the American group to return, which invitation, however, was not accepted. Subsequently a fresh proposal for the formation of a new consortium upon a basis distinct from the existing one was put forward by the United States Government. Notwithstanding the above detailed circumstances, the Japanese Government on that occasion signified their readiness to welcome the cooperation of the American group upon the basis of the new lines of policy adopted by the United States Government; and it is well known to the United States Government that the Japanese Government have accepted and confirmed the resolutions passed at the conference of representatives of the banking groups in May last in Paris. The fundamental principles respecting the organization of the new consortium have thus been decided upon, and it is only the settlement of certain difficulties naturally arising out of the special circumstances in which Japan stands, independently of the other three powers, as to the scope of the enterprises to be thrown open to the common activities of the new consortium, that is now made a subject of frank exchange of views between the Governments of Japan and other powers concerned. The Japanese Government, needless to say, are hoping with the same solicitude as the United States Government that by the organization of the new consortium, they may be enabled to contribute to the welfare of China and promote friendly relations among the four powers.

At this time when the powers concerned are cooperating in the organization of the new consortium it is deemed to be a matter of prime importance that the principle of concord should scrupulously be maintained among them. The organization of the new consortium will naturally bring in its train the result of checking undesirable competition, but in the light of past experience, it is feared that even after the formation of the new consortium, independent activities on the part of financiers of this type can hardly be stopped altogether. Furthermore should there be no means whatever of controlling loans which run counter to the policy of the Governments, it is apprehended that the whole basis of the activities of the consortium might eventually be jeopardized. It is therefore most earnestly hoped that the United States Government will take this point into their further serious consideration.”

  1. Foreign Relations, 1919, vol. i, p. 552.
  2. Ibid., p. 550.
  3. The original of this note was in the Japanese language; for the text as received in this telegram there has been substituted a translation furnished by the Japanese Government.
  4. See telegram of Dec. 23, 1919, to the Ambassador in Japan, Foreign Relations, 1919, vol. i, p. 552.