File No. 893.51/1857
The Ambassador in Great Britain ( Page) to the Secretary of State
8116. My 8038, December 21, 11 p.m.2 I have just received the following note:
Foreign Office, December 31, 1917.
I have the honour to inform you that His Majesty’s Government have given their careful and sympathetic consideration to note which you were good enough to address to me on 24th November stating that the United States Government were contemplating formation of American group to participate in projected loan of twenty million pounds to China for currency reform purposes and urging participation of British group in proposed initial advance of two million pounds which existing international consortium has agreed should be made to Chinese Government by Japanese group. The Lords Commissioners of His Majesty’s Treasury whose consent is required under existing enactments to all financial operations by British subjects involving new issues of capital and to whom question of participation of British groups in above-mentioned initial advance was, therefore, referred, have arrived at decision that in considering distribution of financial resources of country, it is incumbent on them to give precedence to immediate demands occasioned by war over post-bellum interests. As represented by proposed participation, they state that in their opinion effect on these resources of proposed participation would be to weaken pro tanto the capacity of country to meet immediate war demands and accordingly they regret that they are unable to give their consent to such participation by British groups.
His Majesty’s Government are nevertheless very anxious to facilitate in every way reentry of an American group into international consortium and [Page 138] eventual participation of group when organised in definite loan. As I understand, however, from your excellency that the United States Government would wish to make eventual participation of American group in loan conditional upon participation of British group in advance and as decision of His Majesty’s Treasury unfortunately renders course suggested in your excellency’s note impracticable, I have the honour to suggest that nominal participation of British group in advance, if desired by the United States Government for political reasons, might be assured by an arrangement between American and British groups whereby former would agree to carry latter’s share of advance till after war. It is suggested as a practical means for giving effect to this proposal that American groups should be informed that if they are prepared to advance two thirds, the Japanese advancing the remaining third of two million pounds, namely, £1,333,333 6s. 8d., in exchange for Chinese Treasury bills for an equivalent amount, British groups would be prepared to accept nominal participation of half of that amount, namely, £666,666 13s. 4d., and to guarantee repayment of that share if not already repaid by Chinese Government within one year after war.
I have to request your excellency to be so good as to submit foregoing proposal to the United States Government and to suggest that if it meets with their approval, the most convenient method of ensuring its adoption would be for them to put it forward as their own and to address it officially to His Majesty’s Government for communication to the British group. I may remind your excellency that in view of fact that British group declined participation in proposed advance when question was originally raised, consent of Japanese groups will have to be obtained to participation now contemplated and I should be greatly obliged if you would enquire whether the United States Government consider that British group should approach Japanese group in matter or whether it would in their opinion be preferable that they should themselves inform Japanese Government of arrangement come to, having regard to their decision to constitute an American group with view to eventual participation in loan.
In connexion with suggestion contained in your note, that in event of British participation in initial advance being found practical, American group when organized might entertain a proposition to carry temporarily British group’s future participation in loan, I desire to point out to your excellency that if American group is readmitted to consortium, it will necessarily be bound by all existing bankers’ agreements in respect to Chinese loan transactions and that terms of Article 4 of sextuple group agreement of 18th June 1912, governing question of so-called residuary participation in reorganisation loan, of which projected loan may be considered to be supplementary issue, would appear to preclude British and American groups from coming to any private arrangement between themselves such as is suggested in your note. It is laid down in that agreement that groups which actually take part in issue of loan are entitled to decide among themselves and without reference to group or groups which do not participate in issue as to which one or more of them shall issue residuary participation and that in default of any such decision they shall issue same equally between them. While therefore His Majesty’s Government are grateful for suggestion of which they will avail themselves in case of necessity, it is evident that question of residuary participation will necessitate a preliminary discussion with Japanese group. Finally, it may be of interest to United States Government to know that according to our last advices from Peking, Japanese group has decided to defer making proposed advance on account of uncertainty of political situation in China and until a stable government is in sight. It is not anticipated, however, that project will be abandoned altogether.
I have [etc.]
- Op. cit., p. 159.↩