893.51/2310: Telegram
The Minister in China (Reinsch) to the Acting Secretary of State
[Received July 14, 2.34 p.m.]
My telegram July 7, 1 p.m.38 I beg to request full information concerning status of consortium. Its early conclusion, and beginning of operations is essential if dangerous conditions here are to be removed.
Bona fide discussion in China has revealed apprehension of Chinese leaders on two points. They fear an attempt will be made to superimpose upon Chinese administration a foreign civil service such as exists in the customs, they also fear bad effects of monopoly. These fears will be assuaged if it can be stated that consortium demands will not go beyond requirements of security, namely, strict publicity of accounts and systematic civil service based on merit; that foreign interests will confine themselves to testing through inspectors, honest execution of these by the Chinese Government, insisting upon specific improvement where necessary; but that administration will remain Chinese.
As regards monopoly control the consortium would certainly be entitled to full information as to all financial transactions of the Chinese Government before any individual deal is consum[m]ated; I [Page 465] believe that this would be sufficient to assure sound finance, particularly if parliamentary sanction of loans is ready. It will after all be a question of influence and the influence created by the consortium will be sufficient to assure sound finance. If this influence does not exist, roundabout ways can always be found for financial deals though they may be expressly ruled out by the agreements. I believe therefore that the consortium would be safe and would at the same time avoid the imputation of monopoly by merely stipulating that as chief supporters of the credit of the Chinese Government they should have information of all domestic and foreign loans of the Chinese Government before consum[m]ation; at most the consortium might reserve to itself all administratives and possibly an option on industrials at a rate offered by others. Previous information concerning industrials and the balanced control, checking up the application of proceeds to purposes designated will be sufficient for sound finance. Influence created is the essential thing, without its exercise no agreement will give protection, with it the agreement itself may be liberal in terms.
It is reported Japan desires to exclude Manchuria, Mongolia, and possibly Shantung from the operation of the consortium. … The entire object of this reform would be defeated if in its very creation exclusive spheres were to be delimited. As America has not forfeited her right to deal directly with China we could at any time make an independent loan which would immediately solve the present troubles of China by putting into the hands of the President the means necessary for disbandment of troops and reorganization upon approval by a new national parliament. The mere announcement of such an intention would undoubtedly bring Japan into line. Other nations might be invited to join in the loan.
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