File No. 893.51/2042e
The Secretary of State to
the French Ambassador (
Jusserand)1
No. 2249
Washington,
October 8, 1918.
Excellency: On July 10, 1918, I had the honor
to communicate to your excellency copies of confidential letters
exchanged between certain American bankers and myself on the subject of
the formation of an American group for the purpose of rendering
financial assistance to China.
As appeared from the correspondence above referred to, it was the thought
of this Government that the newly formed American group should be
representative of the whole country and should include in its membership
such banks as had a present interest in China as well as such banks as
might desire to join the group and were acceptable both to the other
members of the group and to this Government. Thirty-one banks have now
joined the American group and are representatives of all sections of the
country.
It was considered by all to be a reasonable condition of membership in
the American group that all preferences and options for loans to
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China held by any member of
this group should be shared by the American group as a whole, and that
all future loans in China which have any governmental guarantee should
be conducted in common as group business, whether it was for
administrative or for industrial purposes.
Such, in brief, were the principles underlying the formation of the
American group so far as its own organization was concerned. It was the
intention that all loans of the American group shall be automatically
shared with and conducted in common by the international group when
formed. It was frankly recognized that the war had created such a
mutuality of interests between certain Governments and peoples as to
render their cooperation essential to any constructive program of
financial assistance to China. It was, therefore, the earnest hope of
the Government of the United States that the other Governments which
were largely interested in China and in a position to render substantial
assistance at this time—namely, France, Great Britain and Japan—might
see fit to join with this Government in its proposed plan and consent to
the formation of similar national groups organized on the same basis to
cooperate with the American group; for it was and is the firm conviction
of this Government that only by such cooperation, and upon such
principle, can the best results be obtained for China and for the common
interests of the other powers concerned.
If each of the four Governments should form a group of its own which
should include all those who have made or would like to make loans to
China, and if each member should share with the other members of its
national group all future loans, including those to which it has a
preference or on which it has an option, there could be little or no
objection in the financial circles of the respective Governments to such
an arrangement.
Then if each of the four national groups should share with the other
national groups any loans to China, including those to which that
national group may have a preference or on which it may have an option,
and all such business arising in the future, it is felt that the best
interests of China would be served—a purpose which the Government of the
United States has, in all sincerity, felt would have the cordial support
of all the powers which have at heart the welfare of China.
The Government of the United States, in making its proposal was of course
not unaware of the so-called “five-power consortium.” It was not the
purpose, however, of this Government in suggesting the formation of a
new international group to interfere with any of the rights of that
consortium. It was hoped that, as in the case of the American group, the
new national groups to be formed might be made so broad as to include
the members of the former consortium as well as others who had
legitimate claims to such inclusion, so as to meet the larger needs and
opportunities of China in a spirit of harmony and of helpfulness rather
than of harmful competition and of self-interest.
The proposal as presented has given rise to various inquiries on the part
of the several Governments to which it was addressed and I have the
honor to hand your excellency herewith a memorandum covering the main
points as raised. I should be happy if you would be so good
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as to convey the information
therein contained to your Government and solicit its favorable
consideration and approval.
Accept [etc.]
[Enclosure]
MEMORANDUM
The Government of the United States is gratified at the cordial
reception given, in principle, to the general plan for loans to
China as recently presented to the respective interested
Governments.
This Government is now happy to reply, in the following sense, to the
several requests of those Governments for further information as to
certain features of the proposed plan:
1. It is not intended that the American group, recently formed,
should rejoin the existing consortium, but that there should be
organized a new international group, consisting of representative
financial institutions of the United States, Japan, Great Britain
and France.
The plan, as proposed by the Government of the United States, does
not contemplate that the former consortium should necessarily be
dissolved, but that each of the Governments concerned should arrange
for the formation of its own national group which it is hoped might
be made so comprehensive as to include all those parties interested
in the former consortium and such others, not so associated, who are
engaged, or might engage, in loans to China, as well as any others
whose participation might be desired.
Nor did the American Government, in making its proposal, have any
specific loan in mind, but was endeavoring to lay down some general
rule for future activities which might, in a broad way, meet the
financial needs and opportunities in China. It was for this reason
that no specific reference was made to the amount of the loan or
loans to be raised, the revenues to be pledged or to the precise
objects of the proposed loan. It was contemplated that these
questions would be determined in respect to each case as it might
arise.
With respect to the second or supplementary reorganization loan for
purposes of currency reform, this Government is prepared to state in
advance that it would be ready to recommend to the American group
that it should not only take a part in that loan but be prepared to
carry also, in conjunction with the Japanese group, the shares of
the British and French groups, not only in this particular loan
should it be included in the business of the new international
group, but in such other loans as may develop while circumstances
are such as to prevent their more active participation.
2. The reference to “a relinquishment by the members of the group
either to China or to the group of any options to make loans which
they now hold” applied primarily to the American group alone and to
an agreement between the banks and the United States Government,
whereby all preferences and options for future loans in China having
any governmental guarantee and held by the individual members of the
American group should be relinquished to the group which should, in
turn, share them with the international group. Such relinquishment
of options was considered by this Government to be a reasonable
condition of membership in the American group; and while it is
recognized that such [each] interested Government must necessarily
make its own arrangements with its own national group, it is
submitted that it is possible properly to conduct the business of
the international group only by similar relinquishment to the
respective national groups by the individual banks forming those
groups, without distinction as to the nature of the options
held.
3. The proposal of the Government of the United States contemplated
that industrial as well as administrative loans should be included
in the new arrangement for the reason that, in practice, the line of
demarcation between these various classes of loans is not easy to
draw. Both alike are essential fields for legitimate financial
enterprise and both alike should be removed from the sphere of
unsound speculation and of destructive competition. The intention of
this Government was to suggest, as a means to that end, that the
interested Governments should, by common consent, endeavor so to
broaden the membership in the newly formed national groups that all
financial firms of good standing interested in such loans might be
included in the respective groups, and should withhold their support
from independent financial operations without previous agreement of
the interested Governments.
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As regards the intergroup conference held in Paris, September 26,
1913, and the agreements to which the American group adhered,
stating they had no objection to the elimination of industrial
loans, it can only be said that the American group prior to that had
withdrawn from active participation in the consortium and was,
therefore, not in a position to object; but that it is now felt that
with the establishment of a new group, the question may properly be
reconsidered.
4. The expression “any terms or conditions of a loan which sought to
impair the political control of China or lessen the sovereign rights
of that Republic “had reference only to the future activities of the
American group and was not intended to call in question the
propriety of any specific arrangement in operation between the
former consortium and the Chinese Government, or between any other
Government and the Chinese. It can be definitely stated that the
United States Government did not mean to imply that foreign control
of the collection of revenues or other specific security pledged by
mutual consent would necessarily be objectionable, nor would the
appointment under the terms of some specific loan of a foreign
adviser, as, for instance, to supervise the introduction of currency
reform.
5. With respect to the Russian and Belgian groups and their rights in
the former consortium, no present action is contemplated either by
way of reservation as to the old or of participation in the new
group. As previously stated, it is not anticipated that the existing
consortium will necessarily be dissolved nor, on the other hand, do
present conditions warrant the expectation that effective Russian
and Belgian national groups could readily be formed at this
time.
It is not the intention, however, of this Government to ignore, much
less to exclude, any just claim of participation in the new
international group, but merely, for practical considerations
arising out of the war, to associate the interests of the
Governments now so closely and actively associated and most able to
finance the proposed loans to China, and to reserve for future
consideration the inclusion of any other groups of friendly powers
which may, at a later time, be in a position effectively to
cooperate.
