File No. 893.51/1951
The Chargé in China ( MacMurray) to the Secretary of State
Supplementing my telegram of August 4, 7 p.m. In view of the meagerness of my information in regard to the plans of the newly constituted American group and of the Department in relation thereto it is with considerable diffidence that I venture to submit any observations concerning the Department’s telegrams July 11, 4 p.m., July 30, 8 p.m. But I feel very intensely that only by the most judicious and firm action can American financial assistance be made really helpful to China or even avoid hurrying this unhappy country into economic, royalist, political dependence and moral stagnation. In the first place, I believe that in the present circumstances only a momentary catchpenny advantage could result from an independent effort of American interests to make loans in competition with the Japanese, unless wholly and genuinely for the purpose of productive industrial enterprise. A constructive policy can be followed only in cooperation with the other national groups [Page 187] acting with the support and guidance of their respective governments. If, in order to obtain admission to that consortium on fair terms, our Government would require to have actual vested rights in hand I would suggest its arranging to take over the existing rights and options of other American interests rather than incur long delay and the risk of conflict with the claims of other nationalities as a preliminary to call for admission to the international organization.
It should be, if possible, arranged with the governments concerned that both political and industrial loans to the Central Government or to the provinces should all be made through the consortium: but if in practice it be found necessary to maintain a distinction in treatment between political and industrial loans it should be possible, at least, to effect an agreement that none of the four Governments would countenance or protect its nationals in respect to independent industrial loans unless the agreement therefor had been examined and approved by the interested government in advance with particular reference to the bona fides of the real significance of the loan and unless the exact terms of the agreement were made public both in China and in the other countries within a brief fixed period after the conclusion of negotiations. There is some reason in the hope that the British and French Governments and groups would support at least that much control and safeguard against the pitfalls of secret agreements in future.
Reuter telegram dated Washington July 24, stated: “The Government has agreed that American bankers should loan to China provided China cancels all outstanding loans and all loans be shared by American, British, French, and Japanese bankers.” This has been generally construed as meaning that our Government contemplates having the consortium take up the essentially political loans recently made under the guise of industrial loans by certain Japanese interests in evasion of the restrictions imposed upon the official banking groups. …