493.11/837: Telegram
The Minister in China (Schurman) to the Secretary of State
322. My 320, July 25, 2 p.m. At meeting of the four Ministers yesterday afternoon Japanese Minister read what he called an abstract of long telegram from his Government disapproving debt consolidation loan proposal. Abstract gave as reasons political instability obtaining in China and probability of military leaders extracting such cash advances from Peking treasury. Without mentioning consortium or other nations, abstract stated that when normal public conditions were established in China, Japan would be ready to lend financial assistance to China and give advice in regard to disbandment of troops.
Japanese Minister hinted that his Government which was well informed through newspapers of conditions in China had reached their decision independently of him adding that he did not know whether he could change their views and tentatively suggested delay till after meeting of Chinese Parliament.
Japanese position regarding debt consolidation and loan seemed to undergo rather sudden change. At any rate it was understood that [Page 782] throughout meetings of consortium representatives, Japanese representative was as keen as others.
In subsequent informal talk following expressed and generally agreed to: Debts consolidation and cash for six months’ current expenditures would strengthen hands of this or any other Peking Government and therefore improve prospects for unification, establishment constitutional government and resumption of flow revenues from provinces to Peking but in view of increasing brigandage and lawlessness in many provinces, fighting for control of provincial governments by tuchuns and military bosses in Szechuan, Kiangsi, Kwangtung and elsewhere, possible failure of Parliament and other causes it was recognized that with present or any other Peking Cabinet position in China might not be improved at the end of six months. Even in that event however the only loss, namely, $15,000,000 would fall on China while both China and foreign nations would be benefited by debt consolidation and our four Nations would have gained the advantage of China’s recognition of the consortium.
Ministers felt China could not get on her feet without some financial assistance given through the agency, though necessarily at the risk of outside powers. The proposal under consideration was a scheme to help China at her own expense. Refusal to grant such financial assistance, if continued, must necessarily lower vitality, already very weak, of any Peking government and ultimately bring about exhaustion. The eventuality of collapse and entire disappearance of any national government of China must be envisaged as one of the possibilities inherent in the situation.
Present Government has no power to execute its mandates and no money to meet its obligations. The minimum needed for bare subsistence is $3,500,000 a month and the utmost the Government can get together is one million. In connection with projects of financial relief Yen39 had recently said to me and other Ministers that without such relief Central Government might disappear and he added significantly that was not in the interest of foreign nations.
Ministers then considered Yen’s original proposal to postpone indemnity payments. It was pointed out that the reasoning of the Japanese Government as presented in the above-mentioned abstract was as fatal to proposal to give China indemnity moneys as any other moneys. Japanese Minister did not know whether his Government would draw that conclusion. French Minister said that he had already made arrangements with the Chinese Government with regard to use of indemnity payments which his Government would not willingly postpone. (The reference was doubtless to French plan for rehabilitation of Banque Industrielle.) British representative [Page 783] said that hands of his Government were not tied but postponement would require action by Parliament and lead to discussion. I gave it as my personal opinion that United States would consent to postponement if interested powers generally agreed to postpone.
Substitute of consortium representatives having been killed by action of Japanese Government it was the unanimous sentiment that we should ask our Governments for their decision on the question of postponement of indemnity payments as originally raised by Chinese Government and reported in my 299, July 19[10], 7 p.m. and 283, June 24, 5 p.m.40
On that subject I venture to recommend to the Department that the historic American policy of disinterested helpfulness to China be confirmed in the present instance. There are Americans here who, exasperated by China’s default on obligations to Americans and apparent indifference thereto, advocate a reversal or serious modification of our traditional national attitude toward China. But that magnanimity is often the best policy of nations is confirmed by the fact that our partial remission of Boxer indemnity years ago is now imitated by Great Britain and Japan. I recommend that the United States now take the lead in consenting to further postponement of indemnity payments for two years as requested by the Chinese Government. If the United States adopts that policy I should expect Great Britain to join us and not improbably Japan also. The annual payments on these three indemnity accounts will amount to about $4,000,000 gold upon the security of which the Chinese Government will be enabled to float a loan large enough to meet its minimum financial requirements for some months.