893.51/6329: Telegram

The Secretary of State to the Ambassador in the United Kingdom (Bingham)46

82. Your telegram 57, February 10, 5 p.m., and despatch 2850 of February 1147 in regard to China Consortium.

It is the Department’s desire that Atherton, unless the Embassy perceives objection thereto, hand to Cadogan, as the reply of the American Government to the Foreign Office memorandum of February 10, a memorandum reading as follows:

“The American Ambassador has the honor to refer to the memorandum of February 10, 1937, on the subject of the China Consortium which on the date indicated was handed to the American Chargé d’Affaires by Sir Alexander Cadogan.

The American Government is appreciative of the frank expression of the views of the British Government as set forth in the memorandum under reference and has given most careful consideration thereto.

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The American Government desires not to place in the way of the British Group obstacles which might prevent the acceptance by British interests of the offer recently made by the Chinese Government of a contract for the construction of a railway from Canton to Meihsien. Therefore, and in view of the pertinence and importance of those factors in the existing situation, as set forth in the memorandum under reference, and in the light of the opinion expressed by the British Government that features in the existing situation render perseverance in adherence to the existing Agreement impracticable and that in the light of the attitude of the Chinese Government toward the Consortium no good purpose would be served by attempting to revise the Agreement, the American Government will, although with sincere regret, inform the American banking group party to the Consortium Agreement of the British Governments proposal that the Agreement be dissolved and will state that this Government will interpose no objection to participation by the American Group in negotiations, if and when proposed, among the banking groups, looking toward dissolution of the Consortium, as proposed.”

Atherton may add orally that his Government is sympathetically disposed in principle toward the suggestion made at one point in the British Government’s memorandum that effort should be made to “discover whether there is any method by which, while restoring to its individual members the required liberty of action as regards industrial enterprises, the major objects of the Consortium could be attained by keeping in being co-operation between the governments concerned (including the Chinese Government).”
Please also inform Cadogan orally that the Department will, in making known to the American Group the British Government’s proposal and the attitude of the American Government in regard thereto, ask the American Group to consider the entire matter as strictly confidential to itself and not for communication to any of the other banking groups until such time as one of those groups, presumably the British, approaches it.
Inform Department by telegram when you have delivered memorandum and at the same time report such comments as may be made by Cadogan.
  1. The Chief of the Division of Far Eastern Affairs in a letter of March 18 (not printed) informed Mr. Thomas W. Lamont, for the American Group, of the substance of this telegram.
  2. Latter not printed.