[Enclosure]
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
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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.
