The Secretary of State to President Roosevelt

My Dear Mr. President: The matter of the China Consortium, dealt with in the proposed telegram hereto attached,38 is important. [Page 572] The existing Consortium Agreement came into existence in 1920 in consequence of an initiative taken by the American Government, in the Wilson administration, in 1918.39 The Agreement was concluded between banking groups of four countries, with the blessing of their governments (American, British, French and Japanese) respectively, providing for cooperation in and sharing of loans to China. The Consortium has never made any loans, but the existence of the Agreement has prevented the borrowing by China of money from independent and irresponsible sources.

In this administration, in response to inquiries from the American banking group, we have taken the position that we favor continuance in existence of the Agreement, with the thought that at sometime the Consortium might be able to do some business as originally intended and the further thought that any move toward termination of the Agreement might have a disturbing effect as regards the general Far Eastern situation (in other words, we favored letting the matter of the Consortium remain in status quo).

During the past few months representatives of the British banking group have been in correspondence with the American banking group, proposing that certain business in China available to British interests be excepted from provisions of the Consortium Agreement or regulations which have been adopted by the banking groups thereunder. To this, the American banking group, with the Department concurring, has not been able to give assent, for the reason that such action would strike at the very root of the principle on which the Consortium is based. Now, the British Government comes forward with a memorandum in which, after pointing out various facts in the situation and affirming, in effect, that they would welcome the devising of some method by which at the same time the Consortium would be preserved and the safeguarding specifications of the Consortium Agreement be modified, they in conclusion propose definitely that the Consortium Agreement be terminated. Their memorandum is attached hereto.40

We have given the matter very careful consideration. We talked with representatives of the American group. We would gladly offer suggestions whereby the Consortium might be kept in existence and at the same time the practical issues be satisfactorily met. But we do not see how this can be done: the Consortium Agreement has both negative and positive features; a dropping of the latter with retention of the former would produce a resultant possessed of little value; and it would probably lead to new perplexities in place of those which it might resolve. We remain, however, open to suggestions. We therefore have drafted a telegram in which we accept [Page 573] the British Government’s outline of the facts, express our confidence in the principle upon which the Consortium Agreement was based, and give assent, with expression of our regret, to a procedure on the part of the banking groups, if and when, directed toward termination of the Consortium Agreement; and, in connection with our formal reply, we instruct the Embassy in London to call attention to certain inconsistencies, as they appear to us, in the statements which the British have made in their approaches to us on the subject. A part of our effort is to make the record show clearly that the proposal that the Agreement be terminated did not originate in this country. We have informed representatives of the American Group of our position and of the substance of this draft and their views are in accord therewith.

I shall appreciate an indication from you whether the proposed telegram to our Embassy at London meets with your approval.

Faithfully yours,

Cordell Hull
  1. Not printed; see President Roosevelt’s comment on March 11, p. 576.
  2. See Foreign Relations, 1918, pp. 169 ff.
  3. Not printed; see telegram No. 57, February 10, 5 p.m., from the Chargé in the United Kingdom, p. 568.