The Secretary of State to the Minister in China ( Crane )
130. Your 133, March 29, 1 p.m. Following from Lamont who is now in London:
“Have conferred with British Group which is in accord with the following definitions;
- Loans to existing railways fall within the scope of Consortium when they involve the issue of a public loan. The public issue is the determining factor (see Consortium Agreement54).
- View of British as to agency provisions seems to me tenable. As long as the concessionaire has existing agency arrangements and does not resort to issue of public loan the Consortium cannot intervene.
- I have no knowledge of additional loans except possible extension of Tao–Ching line from Chinghua to Menghsien. Any public loan required by such extension would fall within the scope of Consortium.
- Yellow Bridge loan: This would undoubtedly fall under the scope of Consortium; in fact in connection with this project American contractors and suppliers of material, assuming that they secure, the contract, have offered the financing thereof consisting of four million dollars Chinese Government notes to Consortium through American Group which, however, has not accepted same, notes not being of a nature to appeal to present American market.
- Peking–Mukden. No public issue is contemplated but private advance has been arranged which British Group, in accordance with spirit rather than letter of Consortium Agreement, have offered to other Groups. French and Japanese Groups have taken share. American Group has not, seeing no present advantage to be gained therein.
- Peking–Suiyuan line is, I am informed, Chinese owned. If any public foreign issue were to be offered in connection with it same would come within scope of Consortium.
In general as already explained it is quite impossible at this stage of Consortium progress always to render absolute definitions nor is it possible to lay down precisely what constitutes a banking advance. We must leave the amount in general to be determined by the natural limit set to private as contrasted with public issues. So long as public issue is not involved it is not the policy of the Consortium to discourage or obstruct the free flow of foreign capital to China or the development, so far as is possible, of the railways of China out of their own earnings. Consortium’s decision to recognize in principle that railways should not be handled sectionally and its proposal for the establishment of a standing committee or board to be charged with the supervision and control of all Chinese Government railways are evidences of the ultimate Consortium aim. But until the board is established it would be alike premature to hurry the process and unwise in the interim to place restriction upon their independent processes.”
The above is an expression of Mr. Lamont’s own views, which the Department communicates with all reserves, noting particularly that it still has under consideration the question whether the Yellow River Bridge project falls within the scope of Consortium activities.