893.51/4019
The Department of State to the Japanese Embassy
Memorandum
The Department of State has given the most careful consideration to the memorandum of October 19 last in which the Japanese Chargé d’Affaires communicated the opinion of his Government that, by reason of the instability of political conditions in China, it would be premature for the Consortium to extend to the Chinese Government the proposed financial assistance for immediate administrative purposes and for the consolidation of the floating debts of that Government, inasmuch as the granting of such assistance to the Peking Government would, in the opinion of the Japanese Government, amount to an extension of aid to the faction which happened to be behind the Peking Government at the moment. And while deploring the occasion for any divergence of views in regard to a question so closely affecting the policy towards China in which it is confidently believed that the Governments of the United States and Japan are in fundamental accord, this Government finds itself unable to share the opinion of the Japanese Government in this matter.
The American Government is, of course, not unaware of the weakness of the governmental entity functioning at Peking, nor of the possibly precarious situation of the administration through which the functions of government are now exercised. It considers, however, that quite apart from the question of the personalities that compose it or that are adjudged to exercise an influence over it, that governmental entity is in fact the sole agency of government in China which the United States and other Powers have recognized and which they continue to hold answerable for the protection of foreign rights and interests and responsible for the financial obligations of the Chinese Government; and that, moreover, there exists at the present time no other political organism which even attempts [Page 795] to hold itself forth to be the Government of China. There are indeed regions in which the authority of the Central Government in matters of local administration is with greater or less effectiveness repudiated or ignored, and in which revenues locally collected for the account of the Central Government are detained for local purposes: but it is not understood that in repudiating the political authority of the Peking Government these local separatist movements have placed themselves in a position to assume the international obligations of China under the terms of the treaties and international law, or that in sequestering the locally collected revenues of the Central Government they have assumed any of its financial obligations even with respect to debts secured upon the revenues in question. There is, therefore, no Government in China, other than that functioning at Peking, to which the foreign Powers can look for political or financial responsibility. It may be admitted that the authority of that Government is greatly weakened: it is confronted not only with separatist movements which challenge its exercise of political control in certain regions, but by a financial stringency which prevents the payment of the regular salaries of its officials, paralyzes its administrative activities, makes it unable to meet many of its pressing foreign financial commitments, and compels it to desperate shifts which threaten to be ruinous to its political prestige, its economic development, and its credit in foreign money markets. This situation is today even more acute than on July 10 last when, in the identic telegram57 to which the Japanese Chargé’s note refers, the Ministers of the United States, France, Great Britain and Japan joined in advising their respective Governments of their opinion that the Consortium banks should be authorized to give certain financial assistance to the Chinese Government, adding the statement of their belief that without such assistance it was doubtful whether the existing provisional government could carry on or if any other Government likely to be formed would be more successful, and that “no reconstruction programme can be put through without financial assistance from outside.”
The loan now sought by the Chinese Government is for the purpose of meeting immediate administrative necessities and funding at least a portion of the floating debt which constitutes a grave impediment to any financial rehabilitation of China: and it is the understanding of this Government that such a loan, if made, would be so safeguarded as to assure that its proceeds would be devoted not to partisan or factional uses but to the urgent administrative and fiscal requirements of the Government. If it were to be considered that assistance must be withheld because the present administration of that Government is unstable, and its authority ignored in certain [Page 796] regions, it is to be feared that no time could be foreseen within which it might hopefully be anticipated that such conditions would prevail as would warrant the Consortium in undertaking the cooperative action contemplated as the object of that association of American, British, French and Japanese banking interests in respect to Chinese financial business.
The question at issue, as this Government envisages it, is not one of giving financial support to a particular group or faction in Chinese politics, but one of giving or withholding assent to the nego-tiation by the Consortium of financial arrangements sought by the sole recognized and responsible governmental entity in China for the purpose of enabling it to escape administrative disintegration and fiscal chaos. Since it is the Peking Government alone which the Powers hold politically and financially responsible, it appears to the American Government that it could not for its own part, while insisting upon those responsibilities, intervene with the American Group of the Consortium to discountenance the undertaking of negotiations with the Chinese Government with a view to a loan sought for purposes which that Government deems necessary to the fulfilment of its political and financial obligations.
This Government would, on the other hand, welcome the negotiation of such a loan as the American, British, French and Japanese Ministers in China have recommended as essential to any plan of reconstruction in China, upon terms mutually satisfactory to the Chinese Government and to the banking interests constituting the Consortium: and in the event of negotiations to that end being undertaken by the Consortium, the Government of the United States would be prepared, for its part, to give to the American Group and to the Consortium such support as was contemplated by its identic note of July 3, 1919, to the British, French and Japanese embassies in Washington,58 and embodied by the several national groups in a paragraph of the preamble to the Consortium Agreement of October 15, 1920,59 to the effect that
“… their respective Governments have undertaken to give their complete support to their respective national groups the parties hereto in all operations undertaken pursuant to the agreement hereinafter contained and have further undertaken that 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 parties hereto for the purpose of obtaining such contract”.
- See telegram no. 290, July 10, from the Minister in China, p. 779.↩
- Foreign Relations, 1919, vol. i, p. 463.↩
- Ibid., 1920, vol. i, p. 576.↩