800.503193/17
The Counselor of Legation in China (Peck) to the Minister in China (Johnson)86
Sir: I have the honor to state that in the course of a visit paid this morning to Mr. Y. Suma, Secretary of the Japanese Legation residing in Nanking, Mr. Suma asked me whether I had been following negotiations which he said are in progress between representatives of the British and Chinese Corporation and the China Development Finance Corporation, the object being a loan of approximately Yuan $60,000,000 for the purpose of completing the Shanghai–Hangchow–Ningpo Railway.
I told him that I had merely noted casually in the press the statement that the Chinese were trying to complete this line.
Mr. Suma said that his information was to the effect that the British and Chinese Corporation, basing their position on their old contract [Page 406] for the Shanghai–Hangchow–Ningpo Railway of 1908, were trying to arrange in concert with the Chinese a plan whereby a third organization, to be called something like “China Development Investment Company”, a purely Chinese concern, should be created to serve as the ostensible borrower of the British funds, but actually to be a dummy for the China Development Finance Corporation, which Mr. Suma referred to as “T. V. Soong’s Corporation”.
Mr. Suma said that he understood that Sir Charles Addis, of the International Consortium, was interested in reviving foreign investments in China and was awaiting a report from Mr. Monnet, who has recently been in China, before initiating some moves in that direction. Mr. Suma inquired whether the American group of the International Consortium of 1920 did not feel that this proposed method of investment of British funds in the Shanghai–Hangchow–Ningpo Railway was contrary to the spirit, if not to the letter, of the Consortium?
I said that of late I had not received any information regarding the attitude of the Consortium in regard to investments in China and I supposed that if the Japanese group in the Consortium felt that its principles were being violated, the natural course would be for the Japanese group to take the matter up with the other groups.
Mr. Suma said that he had lately seen a report from the manager of the Yokohama Specie Bank in New York giving an account of a conversation with Mr. Thomas W. Lamont of the American group, during which Mr. Lamont had expressed great impatience with the failure of the Chinese Government to take any steps to settle its outstanding indebtedness and had expressed the opinion that there should be no foreign investments in China until China had shown a disposition to do so.
Mr. Suma said he felt that foreign investments in China at this time were injudicious, partly because such investments might diminish the pressure on China to start adjusting its old indebtedness, and partly because such investments might contribute to the internal dissension. He said that the Powers concerned should carefully supervise such activities and he said that the Japanese Government had even forbidden Japanese creditors to make individual attempts to obtain settlement of their claims. The invariable tendency of the Chinese is, he said, to play off one creditor against another and thus not only postpone a general settlement, but force very unfavorable terms on individual creditors. He referred to a current transaction whereby the Oriental Development Company and Mitsui are endeavoring to adjust sums owed to them by the Peiping–Suiyuan Railway, the Railway attempting to force on them terms no more advantageous, and less advantageous if it is possible to obtain them, than the General American Car Company debt settlement terms.
[Page 407]Mr. Suma asked whether the United States was making any progress in its effort to obtain a settlement of American claims. I replied that there seemed to be no prospect of success.
Mr. Suma referred to recent newspaper reports that a British firm was prepared to lend a considerable sum to General Liu Hsiang of Szechuan and said that he thought no important British firm was concerned in this and that the proposal would not eventuate successfully. He said that the origin of the whole thing had been a project cooked up between General Liu Hsiang and the Chinese tobacco and banking company of Young Brothers, in accordance with which Young Brothers would lend money to Liu Hsiang and have as security a lart [large?] part of the profit from the opium traffic from Szechuan down the Yangtze River to the coast. This project provided for the setting up of mints in Szechuan to coin provincial currency. Naturally, the National Government was opposed to this violation of the currency laws of the country and Dr. H. H. Kung, Minister of Finance, frustrated the plan by diverting the opium traffic, with the aid of militarists, from the Yangtze River to an overland route through Kweichow. The security for the loans to be made by Young Brothers thus disappeared.
In connection with the subject of the Shanghai–Hangchow–Ningpo Railway, I asked Mr. Suma whether his opposition to the plan was not partly caused by his opposition to the China Development Finance Corporation and he replied that it was his opposition to the ambition of that organization to serve as a medium for foreign investments in China; he felt no opposition to the Corporation functioning in its purely domestic capacity. He remarked, however, that the Japanese Government was intensely interested in the particular geographical area concerned and was interested in keeping alive the principle of supervision of foreign investments in China as embodied in the Consortium Agreement.
Respectfully yours,
- Copy transmitted to the Department by the Minister in China in his despatch No. 2944, August 28; received September 24.↩