File No. 893.51/1083.
The British Chargé d’Affaires to the Secretary of State.
Kineo, Me., September 28, 1912.
Sir: With reference to previous correspondence on the subject of the Chinese loan I have the honor to inform you that my Government learns from His Majesty’s Minister at Peking that the Chinese Government have broken off negotiations with the six-power consortium. The issue of the prospectus of a loan of ten millions by a London financial house has immediately followed this action, subscriptions for half the loan having been invited in London on the 27th instant. * * *
In justification of their action the Chinese Government declare that the unbending attitude of the groups has made it impossible to arrive at any settlement; that they regard as unacceptable the original [Page 154] conditions demanded by the groups, and the latter categorically refuse to consider any modifications of their conditions. * * *
His Majesty’s Government are of opinion that a relaxation of conditions would be justified by (1) the indications of improvement in the general situation in China; (2) the evident determination of the Chinese Government at all costs to resist any proposal that the pledged security be subject to foreign administration; (3) the fact that it is already agreed to substitute a reduced loan for the £60,000,000 loan already contemplated, a circumstance which would justify a less stringent system of control.
His Majesty’s Government pledged themselves to give to the groups their exclusive support in and during the negotiations, the definite failure of which has completely changed the situation. In view of the altered circumstances the powers will no doubt continue to withhold their support from any loan floated by their respective subjects unless adequate security and suitable guaranties for the proper expenditure of the proceeds are given. As a condition of approving any such loan they will also insist upon the repayment to the groups of the advances already made. But if the possibility of an agreement with the groups be precluded there could be no question of forbidding China to obtain financial assistance on any terms from outside. His Majesty’s Government would find it difficult to defend such a prohibition even in theory, while it would, as is clearly demonstrated by the present regrettable experience, be ineffective in practice.
It is therefore for consideration whether the groups should not make a last effort to come to terms with the Chinese Government. The British group in London do not consider the latest Chinese proposals unreasonable and they are surprised and deeply regret that these proposals were summarily rejected at Peking without any reference home. The British group in London are now urging the other groups to reopen immediate negotiations at Peking on the basis of the proposals of the Chinese Government, and it is the hope of His Majesty’s Government that the Governments concerned will speedily approve this course, since unless an agreement is concluded without delay there will be no alternative but the final abandonment of the negotiations, with the consequences already indicated.
I have [etc.]