861.77/2184
Messrs. J. P. Morgan & Company to the Secretary of State
[Received August 3.]
Sir: We beg to acknowledge receipt of your letter of the 2nd ult.,18 enclosing paraphrase of a recent memorandum from the British Ambassador19 regarding the possibility of a Consortium loan to the Chinese Eastern Railway. This is of great interest by reason of the fact that this memorandum indicates that the attitude of the Japanese Government has materially changed since October last when, if its views were represented by the representatives of the Japanese banking group, it was made plain that the cooperation of Japan in any loan for financing the Chinese Eastern was more than problematical. In this connection, we have just received from Messrs. Morgan, Grenfell & Co., London, copy of a letter addressed to them by Sir Charles Addis20 dated June 29th, a copy of which,18 together with our reply,18 is enclosed herewith.
We feel that for the long future it would be altogether appropriate for the Consortium, provided China finally determines that it wishes the Consortium to function, to undertake a financial operation covering the Chinese Eastern Railway; but until such time, and until the financial position of the railway itself makes a better exhibit, we think there is little immediate possibility of offering in the United States a loan to this railway. The American Group, in offering any Far Eastern loan to American investors, must exercise [Page 596] the greatest caution and assure itself that such a loan shall be based upon sound operation and adequate security. In these two respects unfortunately at the present time the Chinese Eastern Railway does not come up to specifications. It is true that in a situation of this kind Japanese bankers are sometimes able to proceed, but only under a guaranty on the part of their Government which the American Group would deem entirely unfitting to suggest to the American Government.
Earnestly trusting, however, that you will keep us fully informed of any further developments in this matter, we are
Respectfully,
For the American Group