893.51/6829
The British Embassy to the Department of State
Aide-Mémoire
His Majesty’s Government have been informed by the British Banking Group on the China Consortium that the American Group have asked to be released from their China consortium obligations and have also asked that the twelve months’ notice should be waived. This proposal is put forward by the American Group for technical reasons but the State Department is aware from the exchange of notes in 193727 that His Majesty’s Government felt that the consortium in its present form should be dissolved and replaced by some broader form of international cooperation acceptable to the Chinese Government and appropriate to existing conditions. Hostilities in China have, however, altered the situation since the exchange of notes in 1937 and it would not be possible, so long as hostilities continue, to bring into being a new instrument to replace the consortium. Two alternatives are now possible: (a) the existing arrangement might be allowed to continue for the present on the grounds that the dissolution of the consortium now would make more difficult its reconstruction on a broader basis at a later stage with the support of the Chinese Government; (b) the alternative would be that the British and American Groups should jointly propose the immediate dissolution of the consortium and the waiver of the twelve months’ notice; in favour of this alternative it might be argued that it is unlikely that the goodwill of the Chinese Government could be obtained for any revision of the existing arrangement and it is therefore advisable to clear away the existing arrangement before attempting to negotiate a fresh combination.
Whichever alternative is adopted it is clearly desirable that His Majesty’s Government and United States Government should act in concert and that the American Group should not be released while the other groups are still bound by the consortium agreement.
His Majesty’s Government would be glad to know in the light of the above considerations which of the two alternative policies the United States Government think it desirable to adopt. If they are in favour of dissolving the consortium now His Majesty’s Government [Page 730] would agree for their part; and they would propose that the British and American Groups should keep in close contact with one another in regard to any proposals for new commercial financing in China and His Majesty’s Government would be prepared to consider a fresh attempt to secure an international arrangement with the Chinese Government when circumstances permit.
- For the Department’s attitude, see its telegram No. 82, March 12, 1937, 6 p.m., Foreign Relations, 1937, vol. iv, p. 576.↩