893.51/2807: Telegram
The Chargé in China (Tenney) to the Secretary of State
[Received 7:45 p.m.]
98. Lamont sends thanks for information as to replies to the Japanese Government in view of which he asks you kindly communicate the following to American group.
“Leaving Peking May 1st arriving Tokyo May 6th. Cabinet declines for the present to interpose [change?] attitude with reference to Hukuang coupons. This decision simplifies our immediate problem and accordingly have been obliged to decline to renew negotiations for emergency loan or to make any fresh loan proposals. Group representatives here all absolutely in accord with this policy. In default of any apparent steps by the Government to bring about effective peace conditions and disband unnecessary troops and in face of our consent [sic] to Government deficit at the rate of approximately 100,000,000 dollars per annum, it is apparent that consortium could not in any event have laid out any firm proposals on a broad scale. Have made it clear to Government, to all factions both North and South, and to public generally, that consortium if and when finally formed will be in position to offer comprehensive plans to meet such improving conditions as may appear in China. Leaving here with apparent good will and confidence of Government and men of affairs generally, and, despite continued attacks on consortium’s motives etc., with the belief that the majority of people here desirous for consortium to be [completed] and to be prepared to function and especially anxious for American group to take position of leadership.
Have stated informally to Government that had they made favorable decision on Hukuang coupons would probably have been able to make [terms] for a limited loan say five million sterling for purposes of payment such coupons, taking over Pacific Development Corporation position etc., such loan being preliminary and first step to larger plan. Government may reconsider Hukuang decision and in that event we may desire to reopen the question of small initial loan, but we are absolutely without any commitment on this point. On Hukuang coupon question Cabinet badly split and predictions freely made that early change in Government may occur. For your information Minister of Communication and Minister of Finance [Page 644] both opposed to Premier who desired to pay Hukuang coupons, both Ministers preferring frankly to ruin China’s credit rather than forego opportunity to thwart and discredit present Premier. Government has requested me to postpone my departure but both Legations and group representatives agree that probably nothing can be accomplished by remaining and that it is wisest for me to proceed forthwith to Japan.
Three groups interested in Hukuang Railway, namely, American, British and French, recently received inquiry from Minister of Communication[s] as to whether further Hukuang construction could presently be proceeded with. Have now sent formal reply pointing out impossibility further Hukuang loans with present default existing but adding that if default is removed and conditions permit, shall be glad to consider development of Hukuang upon large scale and welcoming cooperation of certain Chinese banking institutions in offering domestic silver loan, if such should prove feasible. …”