893.51/2694: Telegram
The Chargé in China (Tenney) to the Acting Secretary of State
[Received March 3, 1920—4:26 p.m.]
51. Your 51, February 24, 5 p.m. Am repeating to you telegram sent to Embassy in Japan, calling your attention to the fact that Japanese group representative has informed the American bankers’ agent that the loan finally made by the Japanese to the Chinese Government was not 13,000,000 yen but only 9,000,000:
Am joining with group agent in reporting to you and Lamont developments at this end in negotiations for £5,000,000 loan to China followed by short-time advance made by Japanese.
Instructions to take part in £5,000,000 loan were announced January 15 by the Japanese Minister. There were three conditions stated: supervision of expenses; soldiers not needed by China to be discharged; and conference on peace between North and South to meet again without delay.
See Legation’s January 30 [29?], 5 p.m.89 Japanese Minister proposed on January 29 that four banks advance certain amounts to China for the Chinese New Year. This advance was to be deducted from later loan of £5,000,000.
The Japanese Legation united with the others in note to China on February 5, calling for the surplus salt revenue for one year as security and setting forth the three conditions named above. China agreed to accept these four [sic] fundamental conditions in a reply on February 7.90 The Government asked that 7,000,000 dollars in silver be loaned immediately. Legation’s attitude was stated in our telegram no. 37, February 10, 6 p.m.,91 and received the approval of the State Department [in its] telegram no. 39, February 12, 6 [5] p.m.92
Despite the action of the British and French Legations, the group agents of those nations were without instructions to start formation of a contract for the £5,000,000 loan. In regard to a short-time loan before the Chinese New Year, the agent of the American bankers also lacked instructions which would permit him to take part.93 Acting under direction of the Japanese ‘Legation, the Japanese group agent made to China on February 19 an independent loan of 9,000,000 gold yen. It was the declared purpose of the Japanese to be repaid from the £5,000,000 loan to be made later. The agent of the Japanese group, nevertheless, made a formal statement to the American group agent to the effect that according to his instructions the chief conditions which might be applied regarding the £5,000,000 were not [Page 637] required in this temporary advance. In replying to this statement the agent of the American group declared that he did not think the American banking group would object at all to the temporary advance by the Japanese if the Chinese Government agreed to the provisions required for the emergency loan being negotiated at the time and the conditions under which the advances are made agree with those for the emergency loan when finally arranged.
The conditions of this short-time loan as stated by the agent of the Japanese bankers follow: a Treasury bill is issued at a price of 96 running for 6 months secured by salt revenue which will be used to pay administrative expenses last month and to pay back the loan by a monthly installment plan beginning this month. The commission for issuing the loan is one half of 1 per cent. The Japanese group agent called attention to the fact that this advance was to be paid out of the emergency loan of £5,000,000 if that were concluded. Mr. Bennett, agent for the American group, later was given telegraphic authorization to take part in making a short-time loan. These instructions were not received in time for him to take part. Mr. Bennett with our approval refrained from taking action because the loan had been made without regard to the conditions set forth by the American group for the emergency loan, the Japanese alone carrying on the negotiations. There is a report that on the basis of this temporary loan certain benefits have been secretly obtained by the Japanese.
A continuation of negotiations for the £5,000,000 loan was suggested on February 25 by Mr. Bennett to the Japanese group agent, Mr. Takeuchi. The latter said he had no authority to negotiate further in this matter. He added that he was leaving today for Tokyo to see Lamont as the conditions under which Japan would enter the consortium were uncertain.
Mr. Bennett and myself would like to have the opinion of Mr. Lamont as to whether or not it is expedient for the agent of the American group to make a short-time loan now, having in mind the complete account given above and also the telegram of Ambassador Morris, no. 65, February 25, 7 p.m.