to make it in the amount of 50,000,000 taels was communicated to the Department of State on August 17, 1910, by the American Minister at Peking, who at the same time reported that his excellency Na-t'ung, by direction of the Prince Regent, had informed him that China proposed to take immediate steps for currency reform, make a large national loan, and engage a financial adviser who should be an American selected by the Chinese Ministry of Finance. On September 3 the Minister again called upon his excellency Na-t'ung with regard to the proposed loan of 20,000,000 taels for Manchuria, and was told by Na-t'ung that a loan for that amount for a bank and colonization purposes had been proposed and was likely to be sanctioned, and would be negotiated with the American group, who, however, would be asked to admit to participation the capital of other nations, notably British and German. On October 2, 1910, the Chinese Government, through the American Minister, requested that if American bankers were willing to make the loan they increase the amount from 50,000,000 taels to $50,000,000, in order to include the above proposed loan of 20,000,000 taels for Manchuria. The Chinese Government again voluntarily promised that if the loan were made in the United States an American would be appointed as financial adviser to assist in the currency reform. The American bankers agreed to undertake the business of floating the loan for 50,000,000 taels, and subsequently agreed to increase it to $50,000,000, so as to include the desired 20,000,000 taels for Manchurian development. Before the preliminary agreement for the loan was signed the American bankers, through the Department of State, informed the Chinese Government that their representative was authorized to sign "with the full understanding that the group must have an absolutely free hand in marketing the bonds and in associating with it such European interests in the final agreement as it might desire." To this Duke Tse replied that "the group might have as many associates as they pleased, but that he would sign the final agreement with Americans only and expect them to hold the majority of the bonds." The Chinese Government could hardly have been surprised, therefore, had it found bankers of other nations participating in the loan as reported in the memorandum,1 but as a matter of fact no capitalists of other nationality than American are participating; the agreement to which the memorandum evidently refers2 expressly provides for China's consent to such participation, and the American Government is not without hope that this consent will be given. In the negotiations to secure for American financiers participation in the Hukuang loan, and in the proposals for the neutralization of the Manchurian railways, the aim of American policy has been to secure a sympathetic and practical cooperation of the great powers in maintaining the political integrity of China by making it to the interest of each to support such a policy. Where the nations invest their capital, there they are intent on preserving peace and promoting the development of natural resources and the prosperity of the people. For this reason the American Government has looked with favor upon the desire of the American bankers to obtain China's consent to a participation by the capitalists of other nations in the proposed loan for currency reform. Moreover, the success of this reform will depend in a large measure upon the sympathetic cooperation of the great powers. With any number of these powers hostile or indifferent to the proposed reform it is doubtful that China can accomplish it. What the American Government has to suggest, therefore, is that China shall cooperate with it in its efforts to interest the other powers in the success of this needed reform. The importance of this reform, however, in the view of the American Government, is secondary to that of fiscal reform. To carry out the numerous reforms that China has undertaken it is necessary to secure a great increase of revenue, and with this end in view the American Government has steadily supported China in its desire to secure a revision of the tariff; but in its earnest endeavors, especially in the past two years, to secure the consent of other interested powers to a revision of the Chinese tariff this Government found that such other powers were inclined to make their consent to the discussion of such a revision contingent upon the prior inauguration by China of certain other reforms pledged by treaty, of which the currency reform was the chief. The active interest of the United States, therefore, in the recent request of the Chinese Government for its assistance in securing funds for currency reform was inspired not so much by the importance, though great, of the pro posed reform in itself as by the fact that such reform was a step to the greater end. It is obvious that China cannot reach the ultimate goal of tariff revision without the concurrence of the treaty powers, and it is with regret that the American Government notes that China seems disposed to oppose the only practicable measures which have been proposed to secure that sympathetic cooperation of the powers which will give security to China and promote the ends which it has in view. NOTE.-On February 11, 1911, the American Minister notified the Department of State of the willingness of the Chinese Government to have quadruple signatories, and a financial adviser; the adviser to be an American if unanimous consent was given, otherwise to be of neutral nationality, Dutch preferred. (File No. 893.51/299.) The following note verbale was then directed to the interested powers. File No. 893.51/305. The Department of State to the British Embassy.1 [Note verbale.] On the general principle that China should not disregard its international undertakings, this Government has insisted upon the carrying out by the Chinese Government of its promise to ask the United States to nominate a financial adviser. In urging the Chinese Government to consent to the joint signature of the pending currency loan by the four financial groups, the United States attaches importance most of all to the firm establishment thereby of the principle of present and future cooperation between the four interested Governments. It regards as also of great importance such provision for the adequate control of expenditures under the pending or any future loans to China. In regard to China's promise to ask the United States to nominate a financial adviser, who should be an American, this Government wishes it to be understood that when the Chinese Government shall have carried out its undertaking as to the adviser, and when the four Governments shall be agreed as to cooperation and control as above indicated, then should objection be expressed by the tripartite Governments to the selection of an American for that post, and should that objection not be met by some understanding as to similar appointments in connection with future loans, the American Government would be disposed to consult with the three other interested Governments and appoint an adviser of some nationality which is not interested in loans to China. An early agreement in principle between the quadripartite Governments with respect to these questions of the adviser and of control of loans to China is believed by the American Government to be highly desirable for the speedy closing of the pending loan negotiations. DEPARTMENT OF STATE, Washington, February 24, 1911. 1 The same, mutatis mutandis, to the embassies of France and Germany. NOTE. The other interested Governments accepted the suggestions contained in the foregoing note verbale and on April 13, 1911, the contract (or agreement, as it is also called) for the Currency Reform and Industrial Development Loan was initialed; on the 15th it was signed and the edict of authorization was issued the same day. (File No. 893.51/384.) The complete text of this contract or agreement was inclosed with the following despatch from the American Minister; a summary of it here follows the despatch. File 893.51/470.] No. 230.] The American Minister to the Secretary of State. [Extract.] AMERICAN LEGATION, Peking, April 27, 1911. SIR: I have the honor to inclose herewith a copy in duplicate of the loan agreement for national currency reform and industrial development in Manchuria, which was signed on the 15th instant by the local representatives of the quadruple banks, on the one part, and Duke Tsai-tse, President of the Board of Finance, on the other. I have [etc.] W. J. CALHOUN. [Inclosure.-Summary.] Currency Reform and Industrial Development Loan Agreement of April 15, 1911, between the Chinese Government and the quadruple group of bankers. In pursuance of the tripartite group's preliminary agreement of October 27, 1910, and the supplementary agreement admitting the American bankers, the Chinese Government agreed on April 15, 1911, with the resultant quadruple group: To authorize the banks to issue what should be called the “Imperial Chinese Government Five-per-cent Currency-reform and Industrial-development Sinking-fund Gold Loan of 1911," the proceeds to be used for Chinese currency reform and industrial development in Manchuria. The loan to be a direct charge or liability of the Chinese Government; all advances, interest, and repayments of principal to be a first charge on the following revenues to the annual amount mentioned in Kuping taels (a) Tobacco and spirits in Manchuria, 1,000,000; (b) production tax in Manchuria, 700,000; (c) consumption tax in Manchuria, 800,000; (d) newly added surtax on salt in all China, 2,500,000; total revenues pledged, 5,000,000 taels per annum, all free from other incumbrances; if these prove insufficient China to supply the deficit from other sources. The revenues not to be interfered with as long as payments are regularly made, but upon default sufficient revenues to satisfy it to be transferred to and administered by the Maritime Customs for the account of the bondholders. On the date of signing the agreement the Chinese Board of Finance to hand to the banks: (a) "The Regulations for the Unification of the Currency on a Silver Basis" authorized by Imperial edict and otherwise known as "the program of currency reform"; (b) a statement showing in what amounts the proceeds of the loan are to be applied to the various expenditures incident to the operation of said program; (c) a statement specifying the nature of the proposed enterprises in Manchuria and showing in what amounts the allotted portion of the proceeds of the loan is to be applied thereto. The banks to have six months to study the regulations and statements and to plan all matters pertaining to them; upon acceptance thereof as the bases for the bonds, said acceptance to be conveyed to the Board of Finance and the bonds to be issued as soon as possible. The price to the Chinese Government to be 95% of the face of the bonds, that Government to be the preferred applicant; subscriptions to be next invited on equal terms in China, the United States, and Europe. An advance of £1,000,000 for industrial developments in Manchuria to be made, if desired, upon execution of the agreement and satisfaction given the bankers as to the nature of such industrial developments. A further sum of £1,000,000 for the preliminary expenses of currency reform to be held by the banks in America and Europe at the disposal of China. The rate of interest for the loan to be five per cent, payable semiannually. The term of the loan to be 45 years; repayment to begin with the eleventh year by yearly amortization in half-yearly payments. Article 16 provides that if China should desire to borrow in foreign parts, in addition to this loan, funds for continuing or completing the operations contemplated in the agreement, the banks are to be the first to be invited to furnish such funds; but if China and the banks fail to agree on the terms, other financial groups may be invited. File No. 893.51/415. The Secretary of State of the American Ambassador to Japan. [Telegram.-Extract.-Paraphrase.] DEPARTMENT OF STATE, Washington, May 11, 1911. Referring to Department's April 29,1 in which it was stated that the question of Japanese participation finally rests with the financial groups, it may be added that in case Japan should apply for par ticipation on an equal footing with others not now parties to the London agreement of April 15, the Department would be prepared to support such an application. ΚΝΟΣ. File No. 893.51/416. The American Ambassador to Japan to the Secretary of State. [Telegram.-Extract.-Paraphrase.] AMERICAN EMBASSY, The Minister for Foreign Affairs today inquired whether participation if granted would place Japan in a position superior to an ordinary bondholder. He said that Japan is greatly concerned in the Chinese currency reform, especially as to the purposes of the Manchurian allotment. File No. 893.51/418. O'BRIEN. The American Ambassador to Russia to the Secretary of State. [Telegram.-Extract.-Paraphrase.] AMERICAN EMBASSY, The Acting Minister for Foreign Affairs told me today that the Russian and Japanese Governments are exchanging views on the Not printed. currency loan to China which might result in presenting observations relating to the use of the loan and the guaranty for it insofar as they related to China. ROCKHILL, File No. 893.51/427. The American Minister to the Secretary of State. [Telegram.-Extract.-Paraphrase.] AMERICAN LEGATION, Peking, May 18, 1911. The French are reported to be holding back advances for Manchuria because of Russian pressure. CALHOUN. File No. 893.51/437. The Secretary of State to the American Ambassador to Great Britain. [Telegram.-Extract.-Paraphrase.] DEPARTMENT OF STATE, The Department is unable to see any reasonable objection to Manchuria allotment for specific industrial purposes. KNOX. File No. 893.51/448. The American Ambassador to Great Britain to the Secretary of State. [Telegram.-Paraphrase.] AMERICAN EMBASSY, London, May 24, 1911. The French delay, which ended yesterday, was due, according to the foreign office, to consideration for some Russian apprehension about their recognized interests in Manchuria. REID. File No. 893.51/436. The Secretary of State to the American Ambassador to Japan. [Telegram.-Extract.-Paraphrase.] DEPARTMENT OF STATE, You may at your discretion make public a statement to the effect that the Governments having important commercial relations with. China were early notified of the general features of the currency 1 1 See telegram of Oct. 31, 1910, above, p. 91. 67106- -FB 1912-7 |