The Secretary of State to the Ambassador in France (Bullitt)
248. With reference to your 703, May 30, 11 a.m., the Department appreciates receiving the information contained therein.
1. For your confidential background information. The British Foreign Office handed to our Embassy at London on February 10 a memorandum which contained the statement that in the opinion of the British Government the China Consortium should be dissolved by mutual consent, and which made mention in connection with that suggestion of a proposal from the Chinese Government that British interests finance the construction of a railway from Canton to Meihsien near the Fukien border. (It is understood that the loan would amount to pounds 2,700,000 and that the loan contract would provide for the purchase of British materials.)
On March 12, the Department instructed our Embassy at London to hand to the British Foreign Office a memorandum in which the Department stated that the American Government did not desire to place any obstacle in the way of British acceptance of the contract referred to in the Foreign Office’s memorandum and that this Government would not object to participation by the American Group in negotiations looking toward dissolution of the Consortium. The Department instructed the Embassy to inform the British Foreign Office orally that this Government was sympathetically disposed in principle to a suggestion conveyed in the Foreign Office’s memorandum that an effort be made to discover whether or not the major objects of the Consortium could be attained by keeping in being cooperation between the governments concerned while restoring to individual members of the Consortium liberty of action as regards industrial enterprises.
The representatives of the various groups in the Consortium, meeting at London on May 6, adopted a conditional resolution to the effect that objection would not be raised to entrance by the British group into independent negotiations in regard to the Canton–Meihsien railway.
“He (Cadongan of the British Foreign Office) told me that Kung came here with very big ideas as to a loan of from 20 to 50 million pounds for internal purposes but that Leith-Ross ‘had watered him down heavily’ and intimated that the most he could hope for would be from 10 to 12 million pounds which Kung said he could not contemplate without loss of face. Cadogan said that he knew technical advisors of Kung were still talking finance in the city but without any results or he would have been advised.”
2. Although the Department does not wish that you initiate discussion in regard to either matter, Department suggests that in the course of your conversation with Kung you might endeavor discreetly to ascertain what he accomplished in London in regard to British financial assistance to China and related matters, and you might lead him to mention and to volunteer comments upon the possible character of Japanese-British conversations alleged to be going on in London with regard to Far Eastern matters.
3. In reporting on either or both points, repeat to London.