File No. 893.51/2176
The Secretary of State to Certain American Bankers
Gentlemen: Your letter of July 8, 1918, has had my very careful consideration. It contains several elements of an important nature which I will take up in order.
This war has brought the countries of Great Britain, France, Japan, the United States, and some others into a state of harmony and helpfulness, and has supplanted an intense spirit of competition by a spirit of mutuality and cooperation in matters relating to their interests abroad. Doubtless this situation is in a measure due to the absence of capital seeking foreign investment at the present time because of the demands upon it for war purposes.
If international cooperation is necessary, as seems to be the case, for the successful flotation of the proposed loan, I realize that the support of Great Britain and France would be desirable even if it should be necessary for the United States and Japan to carry for the time being their respective portions of the loan. All four powers are of course deeply interested in any measures taken to strengthen China and fit her for a more active part in the war against the Central European powers. Japan is already considering rendering financial assistance, while two of the loans that have been mentioned as desirable are loans by which the interests of British and French citizens would be directly affected and it would, of course, be unwise to undertake their negotiation without consulting parties so immediately concerned.
In these circumstances the formation of a four-power group, to consist of financial interests of the United States, Great Britain, France, and Japan, to deal with the Government of China for purposes of making loans to that Government seems advisable, and it is my hope that in this way the whole subject of finance in China can ultimately be treated in a broad way. If the terms and conditions of each loan are submitted to and approved by this Government, and the other cooperating Governments and by the Government of China, this Government would not only interpose no objection, but, on the contrary, would consider such an arrangement an assurance that the welfare of China and the proper interests of the other Governments were of such a mutual character as to permit of close and friendly intercourse for their common good. I think that I should say frankly that this Government would be opposed to any terms or conditions of a loan which sought to impair the political control of China or lessened the sovereign rights of that Republic.
In response to your inquiry, as to whether the Government would be willing at the time of its issue to state that the loan was being made at the suggestion of the Government, I will say that the Government has suggested that this loan be made and would have no hesitancy in formally stating that fact at the time of issue.
The question of relinquishment by the members of the American group of any options to make loans now existing in favor of any of them seems to be a reasonable condition of membership in that group. Such relinquishment by a member of a foreign group is a matter over which this Government would have no control. However, I may say [Page 175] that if the members of the American group come to the conclusion that they desire it, this Government will use its good offices, in so far as it can properly do so, to bring about such relinquishment.
The war has created a community of interest between certain Governments and their citizens and those of other Governments and has broken down barriers that once have existed and made easier the intercourse between them. With the consequent expansion of our interests abroad there must be considered also the element of risk which sometimes enters into the making of loans to foreign Governments and which is always inseparable from investments in foreign countries where reliance must be placed on the borrower’s good faith and ability to carry out the terms of the contract. This Government realizes fully that condition and in order to encourage and facilitate that free intercourse between American citizens and foreign states which is mutually advantageous is willing to aid in every proper way and to make prompt and vigorous representations and to take every possible step to insure the execution of equitable contracts made in good faith by its citizens in foreign lands.
Your suggestion that the members of the proposed American group may be representative of the whole country is one which is entirely satisfactory since it removes a possible ground of objection. Various sections of the country are interested in enterprises of this character and undoubtedly would be glad to join any constructive movement such as is proposed. As so much depends upon the proper organization of the American financial group I assume that in the event of its formation you will submit the names of the proposed members to the Government before a final organization is made.
The spirit of cooperation you manifest is very gratifying and you are assured of the interest of the Government and of all proper aid which it can render in bringing this matter to a satisfactory conclusion.
I am [etc.]