The Secretary of State to the Minister in China ( Schurman )
291. The Chicago Continental Bank advises the Department that the Chinese Minister of Finance resigned October 28 and that the Chinese Government will default on the maturities of principal and interest due to it tomorrow, November 1, 1921.
This termination of the negotiations comes so late that the Department fears it may be impossible to save the credit of the Chinese Government in this country from impairment or complete destruction. You will, however, consult at once with Abbott and Stevens and at the earliest possible moment take means to give the appropriate Chinese authorities to understand clearly that only by an immediate promise to cure the default as quickly as negotiations can be carried through, will it be possible for the Chinese Government to preserve any degree of credit in the financial markets of this country. By such a promise and by prompt action thereupon it will be possible for China to minimize the discredit of the default which would in that case be partially condoned as merely technical.
If, on the other hand, the Chinese Government makes no effort to remedy the default, the result must inevitably be a practical closure of this money market to Chinese finance for an indefinite period.
You may further urge upon the authorities that the unwillingness of the Chinese Government to avail itself of the opportunity to redeem its maturing financial obligations must also inevitably create a conviction of such a lack of authority and responsibility on the part of the Chinese Government as can not but affect most adversely the position of China at the forthcoming Conference.