893.51/3825
The Secretary of State to the British Ambassador (Geddes)
Excellency: I have received and given careful consideration to your note of May 10th in which you ask the views of this Government with regard to the possibility of cooperation among the interested Governments in withholding support from loans made by their respective nationals to the Chinese Government upon the security of the salt revenues in excess of the amounts required for the service of the Reorganization Loan of 1913; and I regret that this Government would find difficulty in adhering to the policy which your note suggests.
As is remarked in your note, it appears doubtful whether the provisions of the Reorganization Loan Agreement could be held to sustain such an exclusive claim upon the use of surplus salt revenues, for the purpose of security for further loan operations, as would [Page 772] establish in behalf of the Consortium any legal right to restrict the Chinese Government in its disposition of that surplus.
In the absence of any such legal right, the question appears to resolve itself into one of policy with respect to the diplomatic support to be given to the Consortium by the several interested Governments, inasmuch as the effect of the policy suggested would be to confer upon the Consortium exclusive rights with respect to all financial transactions secured upon the surplus in question. On this subject of support, you will recall, there was considerable correspondence among the interested Governments, during the summer of 1919, arising out of the proposals originally made by this Government; and this correspondence developed the fact that the British Government, like the American and French Governments, found it impossible to give an assurance of exclusive support. The interpretation to be given to the Banker’s Agreement of May 12, 1919,32 was thereupon formulated by this Government in a note which it addressed on July 3, 1919,33 to the British and other interested Embassies in Washington, and which was thereafter approved by the respective Governments, in the following terms:
“The Governments of each of the four participating groups undertake to give their complete support to their respective national groups members of the Consortium in all operations undertaken pursuant to the resolutions and agreements of the 11th and 12th of May, 1919, respectively, entered into by the Bankers at Paris. In the event of competition in the obtaining of any specific loan contract the collective support of the diplomatic representatives in Peking of the four Governments will be assured to the Consortium for the purpose of obtaining such contract.”
The wording of this formula, carefully restricted as it is with a view to avoiding a discrimination against interests outside of the Consortium, would not seem to me to warrant this Government in taking the position that the support properly due to the Consortium, or to the American Group thereof, would justify a general refusal of support to such other interests as might seek hypothecation of surplus salt revenues as security for transactions not involving competition with the actual operations of the Consortium.
I have reached this conclusion the more regretfully because I am sensible of the spirit of loyal cooperation which has led the British Government to withhold its support from certain British companies in respect to the securing of their loans upon the salt surplus, and because of a consciousness that, as intimated in your note, the availability of this surplus revenue might prove a temptation to the Chinese Government to use it for the purpose of securing unsound [Page 773] and prodigal financial transactions. I have, however, felt that it is above all necessary that in pursuing the policy of international cooperation in matters of foreign financial assistance to China, care should be taken to avoid the creation of any exclusive or monopolistic position, either in favor of the Consortium in its dealings with the Chinese Government, or in favor of the several national groups as against other national interests which may propose to undertake with the Chinese Government financial operations which are not in fact in competition with the actual operations of the Consortium.
Accept [etc.]
- For draft agreement bearing this date, see Foreign Relations, 1919, vol. i, p. 439.↩
- Ibid., p. 463.↩