893.51/4129
The Japanese Embassy to the Department of State
Memorandum
In its memorandum of November 23, delivered by the State Department to the Japanese Chargé d’Affaires at Washington, the American Government stated on the question of the proposed financial assistance to the Chinese Government, that it could not find itself able to share the opinion of the Japanese Government in this matter but that, inasmuch as the governmental entity functioning at Peking was the sole agency of government which had been recognized by the Powers and which could be held answerable for the protection of foreign rights and interests and responsible for the international obligations of the Chinese Government, it considered it advisable, for the purpose of meeting immediate administrative [Page 798] needs and furnishing protection and consolidation of the floating debt owed by China to the Powers concerned, that favorable consideration should be given to the Chinese request for a loan, and that, welcoming as it would, the negotiation of such a loan as was recommended by the ministers at Peking of the Powers interested in their identic telegram of July 10th of this year, it would be prepared, in the event of such negotiations being undertaken, to give to the American Group such support as was contemplated under the Consortium.
The Japanese Government after a careful study of the American memorandum, regret to be unable to associate themselves with the view that, in the present political situation in China, negotiations for a loan to the Peking Government might with wisdom be undertaken.
The Japanese Government fully agree with the Government of the United States that the Government at Peking is the sole governmental agency in China which has been recognized by the Powers and that there is no other political body which the Powers might hold responsible for the protection of foreign rights and interests and for the political and financial obligations of China. What, however, the Japanese Government has in view in regard to the question now under discussion, is a more practical consideration, that is to say, whether the granting of a loan to the Chinese Government under the existing political conditions may or may not prove conducive, as desired by the Japanese Government as well as by the other Governments interested, to the benefit and welfare of the Chinese people in general. It is indeed an established policy of the nations interested in China that they should, to as great a degree as possible, extend assistance to the Chinese people so as to help their awakening and development and to promote their general well-being, a policy which is very fully and distinctly represented in the various treaties and resolutions of the Washington Conference.
The intent of such policy is not, in the understanding of the Japanese Government, that assistance should be given to the Chinese Government simply because it is the Government recognized by the Powers, but that assistance to be given to the Peking Government should be such as to insure the general welfare of the Chinese people. The outlook in China is most discouraging. Apart from the question whether the legislative body now assembled in Peking may fairly be regarded as representative of the Chinese people in the sense in which it is generally understood, it appears that the relations between that body and the government are far from being normal. The extraordinary performance has been witnessed in the recent arrest of the Minister of Finance which is something that [Page 799] might happen very seldom in any orderly government. These quarrels, apparently political, are in fact nothing but mere struggles for personal ascendency among the various military factions who under the guise of legislature and administration are actually waging private feuds. As a result of all this the prestige of the Peking Government has steadily been on the wane, and the local governments openly repudiate the authority of the central administration, so that not only does the writ of the government not carry far beyond the walls of Peking, but the very life of the Chinese Government has come to be largely at the mercy of local militarists. In a situation like this, to extend financial aid to the Government at Peking solely because it is the recognized government would, it is gravely to be feared, end in benefiting only a small group of individuals who have no interest in common with the general public of China. The Chinese people in general would without doubt be deeply disappointed should the Powers concerned take such a step, and the anti-foreign tendency of Chinese public opinion would thereby be greatly enhanced, which, as may easily be perceived, would prove no small impediment to all future activities of the Powers in China.
It may be pointed out in this connection that the Powers agreed some time ago upon an embargo on the import of arms into China, pending political stabilization, and applied it equally, irrespective of whether the Chinese party concerned was the Peking Government, local governments or private individuals. The important point is that the supply of arms to the Peking Government itself is prohibited, even though the latter should give assurance as to the use to which such arms would be devoted. The Japanese Government are persuaded that the supply of a loan would influence the political situation in China no less, if not more, than the supply of arms, and that it would, therefore, be a grave departure from the policy so far pursued by the Powers interested, to undertake under the present circumstances negotiations with a view to the grant of a loan to the Chinese Government, a course which, they must confess, they hesitate to follow without a stronger reason than that the Peking Government happen to be the only governmental agency recognized by the Powers.
The Japanese Government are not unmindful of the fact that the loan now sought by the Chinese Government is ostensibly for the purpose of meeting immediate administrative necessities and that the financial stringency affecting that Government is very great. But if the principle were to be recognized that simply because the Chinese Government stands sadly in need of administrative funds and because it so earnestly seeks outside assistance, loans should be [Page 800] granted to it without waiting for the Chinese people themselves to put forth efforts to stabilize their national credit and establish a sound financial system for the future, it is to be apprehended that the time will never come when China will cease to seek fresh loans for administrative purposes, even if the proposed loan were to be granted. Unless there be a fair prospect that Chinese governmental finance will be improved in future, the Powers would have to be prepared for a fresh demand for assistance within six months. The apparent result would be that China’s debt would be simply accumulated in that way and her financial rehabilitation would be rendered more hopeless than ever. These considerations confirm the Japanese Government in the belief that in undertaking any loan to the Chinese Government for the purpose of meeting administrative necessities, the foreign governments concerned should first pay the most careful attention to the possible effects such loans might have upon the future finance of that Government. To put into effect a scheme so devoid of plans for the future, as the proposed administrative loan, would, in the opinion of the Japanese Government, not only have no beneficial results on the political situation of China, but would on the contrary tend to aggravate conditions already chaotic. The wisest course to be adopted in this situation would then seem to be to remedy the immediate difficulty by her own efforts, thus gaining time for the Powers interested to decide deliberately upon the policy they should follow.
The Japanese Government believe that this attitude, in view of the present economic condition of China, would in the long run prove to be most beneficial to the Chinese people. Furthermore, even though the proposed loan might be made on the condition that its proceeds should be devoted exclusively to administrative use, it would not be practicable in the present situation to secure the strict observance of such a condition. It is more than possible that such funds will be used for purposes other than strictly administrative as has been experienced repeatedly since the time of the first Reorganization Loan. Before consenting to grant the loan now sought by China, therefore, it would be well for the Powers interested to study thoroughly the general financial condition of China, with special regard to the method of consolidating the foreign loans, and also to the possible effects of the increase of revenues to be realized by the application of the new tariff rates. It would not be too late then to decide upon whether the loan should be made or not.
The Japanese Government are well aware that the consolidation of the loans of the Chinese Government, both foreign and domestic, is a matter of prime importance for the strengthening of the fiscal foundation of that Government, and they have felt it to be their duty [Page 801] to insist strongly upon the consolidation of all the loans furnished to China by Japanese bankers. But it would seem to the Japanese Government that what the Chinese Government is principally concerned about in seeking the proposed loan is merely to acquire the advance and it is not at all clear to what extent that Government is prepared sincerely to carry out the consolidation of foreign loans.
In this regard, also, it would be necessary, if satisfactory results are to be obtained, for the Powers interested to consider previously the ways and means of consolidating those loans and to approach the Chinese Government with a definite plan on that point. The Japanese Government do not consider the question of furnishing financial assistance to China simply as one which arises between the Consortium and the Chinese Government, but rather as an important question of general policy toward China upon which any discord among the Powers concerned would be accompanied with grave results. The Japanese Government are perfectly willing, in the spirit of the treaties and resolutions of the Washington Conference, to extend friendly assistance to China; but, as explained at length hereinbefore, assistance to China, in their understanding, is not synonymous with immediate material assistance to the Government at Peking; it consists rather in taking such measures as will be conducive to the general welfare of the Chinese people.
Upon the question now under discussion, the Japanese Government have no other desire than to adhere to the policy which they have consistently pursued heretofore, and they are not unprepared, under that policy, to continue the consideration, in common with the other Powers concerned, of the probable effects of further loans to China, and of the time and method of furnishing them. They are moreover inclined to believe that the special tariff conference soon to be convened might well provide a fit occasion for the Powers interested to consider in concert the general question of the financial reorganization of China. They hesitate, however, for the reasons enunciated above, to change their view that it would be premature to extend immediate financial assistance to the Peking Government. It is therefore hoped that the Japanese view as set forth above may commend itself to the favorable reception of the Government of the United States and that no step that would involve a grave departure from the policy previously agreed upon among the Powers concerned may be taken at this time.