893.51/2900
The Department of State to the Japanese Embassy
Aide-Memoire
The Department of State has received an Aide-Memoire dated July 27th, from the Imperial Japanese Embassy, with reference to the action of the American Minister at Peking in communicating with the Chinese Government regarding the terms of the loan contract of November 26, 1919, between the Pacific Development Corporation and the Chinese Government.
In November last, the Legation at Peking advised the Department that the Pacific Development Corporation had entered into a contract with the Chinese Government for an immediate loan of $5,000,000 with an option for an additional loan or loans of $20,000,000. The [Page 654] negotiations were carried on by the Corporation without the knowledge or consent of the Government of the United States. In view of this Government’s commitments with respect to the proposed Consortium, diplomatic support on the part of the American Government was at that time withheld from the transaction. Both the Chinese Government and the Corporation were also notified of the withholding of such support.
A telegram was sent to the American Ambassador at Tokyo instructing him to explain to the Japanese Foreign Office the situation created by the independent action of the Pacific Development Corporation.13 It was pointed out to the Japanese Foreign Office that the contract was further evidence of the growing interest of American financiers in the situation in China, and that the American Government would not be in a position to restrain or circumscribe such independent activities save in the interest of the broad international policy represented by the proposed Consortium.
Subsequently, negotiations were entered into between the Pacific Development Corporation and the American Group with a view to the taking over by the latter, for the benefit of the Consortium, of the option held by the Corporation under its contract of November 26, 1919. In this connection a question arose as to the date on which the option should be construed to expire, that is, whether it expired seven months after the date of the contract, or seven months after the date upon which the Associate Inspector of the Wine and Tobacco Administration should enter upon his duties.
On June 29, 1920,14 the Department telegraphed the Legation at Peking stating that the Pacific Development Corporation had advised the Department that the Chinese Government had refused to permit the functioning of the officer above mentioned, and that the Chinese Government intended to terminate all rights granted by the loan contract with respect to the revenues of the Wine and Tobacco Administration, in the event of the Corporation’s failing to exercise the option, which was about to expire, for a further loan.
The Legation was instructed to inform the Chinese Government that the American Government regarded the provisions of Articles 10 and 11 of the Contract between the Corporation and the Chinese Government as interdependent, and could not acquiesce in the contention that the specified period of seven months for the option should begin to run against the Corporation so long as the Associate Inspector of the Wine and Tobacco Administration should not be permitted to function.
[Page 655]Such action was deemed proper because the Department had been advised by the American Group and the Corporation of the existence of a tentative understanding between them for the pooling of the latter’s rights into the Consortium. The Legation was instructed so to advise the Chinese Government.
Under date of July 20th, the American Group informed the Department that arrangements had been completed for taking over the Pacific Development Corporation option by the Group; and on July 24th, the Department informed the American Group and the Pacific Development Corporation that in view of the arrangements agreed upon between the Group and the Corporation in connection with the loan option, the Department was prepared to recognize and support the loan contract of November 26, 1919.
From the foregoing it will be observed that the action of the Government of the United States in this matter has materially advanced the interests of the new Consortium by including under it this independent enterprise. Since Japan has pledged itself no less whole-heartedly than have the United States, Great Britain and France to the new Consortium, it is confidently believed that the action taken by Minister Crane, in pursuance of this Government’s instructions, and under the circumstances as stated above, will convince the Japanese Government that the American Government was prompted solely by a desire to further the success of the new Consortium.
- Foreign Relations, 1919, vol. i, p. 552.↩
- No. 158, p. 646.↩