894.51 So 8/8: Telegram

The Chargé in China (Mayer) to the Secretary of State


1029. My telegram 1028 of November 25, noon.57

I regret the delay in answering your telegram 385 of November 21, noon, which was due to the desirability of reviewing the subject in light of the facts presented in your telegram 385, namely, that the proposed loan would be made directly to the South Manchuria Railway and that the Japanese Government would guarantee it. This offers a more serious problem with respect to Chinese reaction with probably sharper and more extended repercussion than expected in the circumstances of my telegram No. 1019 of November 22, 9 a.m.,57 which was written with the assumption that the loan would be to private Japanese interests like the Oriental Development Company. I think the Department should assume, for purposes of the present discussion, that the South Manchuria Railway is in the popular conception here an official Japanese instrument for exploiting Manchuria and that the feeling of the Chinese would be that the American Government was favoring a direct loan to the Japanese Government for the purpose of developing Manchuria in a way calculated to be subversive of the sovereignty and territorial integrity of China unless there is some contravening clause of which I do not know. The closer American capital is associated with Japanese exploitation of Manchuria the more likely is the reaction here to be serious and comprehensive.
A number of uncertain factors make it difficult if not impossible to foretell what may be the reaction. Such factors are, for example, the happenings in China when the publicity breaks which might distract attention from the actual provisions of the loan arrangement; the specific uses, if there are any, to which the advances are to be put; whether the Japanese would be fair or try to place on us the odium attaching to their position in Manchuria, etc.
There are immediate and ultimate types of reaction to consider. I think that the Department should assume that the immediate reaction all over China would be unfavorable. The Chinese would probably regard the loan as indirect intervention by the American Government, and propaganda would be provided against Americans as imperialists. It is possible, though not probable, that some form of boycott of American goods would result. Conceivably there might be in both the South and North a press campaign and student demonstrations. There is no doubt that Chang Tso-lin would be furious, [Page 488] General Dzau has again called on me to say that Chang is much exercised over the question and considers that assistance to Japan in her efforts to dominate Manchuria would be an unfriendly act against a weak and struggling people and that should the loan go through, Chang will have nothing more to do with us. …
The above represents to my mind the most serious results likely. I think that not all I have suggested will ever occur and there is no certainty of any of it.
To a great degree the ultimate reaction and the immediate reaction also in a large measure, I believe, would depend on the attitude of the American Government regarding the loan, the resolution with which a decision in its favor might be made and the determination to go through with it; for upon these factors would depend Chinese opinion as to whether or not we are in earnest or can be bullied, frightened, or swamped sentimentally. The Chinese have an uncanny way of divining whether one is in earnest and would at once be aware if we are so, with correspondingly beneficial results.
The loan would probably bring considerable disillusionment throughout China regarding the United States. …
It seems necessary in the actual circumstances of the loan proposal to consider on the one hand the advantages of creditor control and the desire not to give offense to the Japanese by disapproving such a loan, and on the other hand the disadvantages to the United States resulting from the unfavorable reaction among the Chinese. I rather feel that in the circumstances the balance of advantage is against approving the loan unless approval of it means a more positive policy by our Government in relation to China to be demonstrated by evident determination to no longer allow our rights in China to be disregarded. It would be better to give the first indication of this policy in a matter directly concerning American interests, but the loan question has been put up to us and we must face it.
The matter under discussion is so important that I suggest the advisability of giving Minister MacMurray an opportunity to present his views before the Department comes to a decision. He should reach Tokyo in 2 days and I shall repeat to him the present telegram and your 385 of November 21, noon, if the Department approves.
The Legation does not have any more information regarding discrimination in Manchuria against American commerce. Consul at Mukden has been instructed by me to telegraph to the Department any evidence in his possession regarding such discrimination.
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