The Ambassador in Great Britain (Harvey) to the Secretary of State

No. 560

Sir: I have the honor to transmit herewith, for the information of the Department and such action as may be deemed proper, copies of a document received from the Foreign Office, under date of October 18, 1921, entitled “Project for an Extra-Consortium Loan to the Chinese Government”.

I have [etc.]

(For the Ambassador:)
Post Wheeler

Counselor of Embassy

The British Foreign Office to the American Embassy

Project for an Extra-Consortium Loan to the Chinese Government

Information reached the Foreign Office recently to the effect that the Royal Financial Corporation of Vancouver, British Columbia, Canada, alleged to be representing the Union Bank of Canada and other financial houses, concluded an Agreement on August 16th with the Chinese Government for a loan of 3 million gold dollars for one year with interest at eight per cent at the price of 89, the loan to be repayable from the surplus salt revenue in monthly instalments of half a million gold dollars, beginning March 1922. Such a loan would be entirely contrary to the principles of the Consortium and energetic action to prevent its negotiation was immediately taken officially by His Majesty’s Government through the regular channels and also by Sir Charles Addis, who was in Canada at the time.

Although not a party to the Consortium Agreement, the Canadian Government fully recognized the importance of supporting the policy of the Consortium and have taken all possible action within their powers to prevent any Canadian Bank from helping to finance the transaction.

According to reliable information from a confidential source, the Royal Financial Corporation proposed to float two million dollars’ worth of the loan in New York and not more than 1 million dollars in British Columbia. It is understood that it was not proposed that any public issue would be made in Vancouver, and that it has probably been intended to place the Canadian part of the loan in Vancouver amongst Chinese residents there. It was expected that [Page 371] the Banks concerned would be the Union Bank of Canada and the Park Union Foreign Bank Corporation, an American Corporation, the capital of which is understood to be controlled by the National Park Bank of New York. The Union Bank of Canada have emphatically repudiated any knowledge of the transaction. The Royal Financial Corporation are reported to be of secondary standing, and the Canadian Government are not able to exert any direct pressure on them beyond tendering advice, but in view of the extent to which American interests are reported to be concerned, the Canadian Minister of Finance has suggested that while he is ready to cooperate to the extent of his powers, pressure could be exerted most effectively and directly by the United States Government.

It will be suggested to the British Group that they should communicate with the American Group on the subject, and it is confidently hoped that the United States Government will be prepared to take effective action, so far as they are concerned, to prevent the issue of the proposed loan.