893.51/4405: Telegram

The Minister in China (Schurman) to the Secretary of State

[Paraphrase]

319. My no. 316 of September 18 and telegram quoted therein resulted from three long conferences which met in the American Legation in one of which the four Ministers took part and in the other two the Consortium representatives in addition to the four Ministers.

It is my own opinion that there will not be set up in Peking in the near future any government strong enough to warrant loans for administrative uses. The long continued process of governmental disintegration I think will probably continue whether Tsao Kun becomes President as appears likely or the anomalous and futile existence of the present governing Cabinet is maintained. The general expectation is that the Presidential crisis will not be continued after the national fete day, October 10.

The Consortium representatives and the Ministers of the four Consortium Powers are very anxious to have the Peking Government cooperate in preparing a plan for the consolidation of the Chinese debt. The Peking Government has shown no interest in the subject as yet. It has appointed a Chinese financial adjustment commission of which Yen is President. This commission offered to appoint the Consortium representatives as advisers but without the same personal status as the other foreign experts. The commission had its first meeting September 19.

In case there is no opportunity for the Consortium to do anything prior to the meeting of the special tariff conference it is not unlikely that at that meeting the Chinese Government will present a plan of its own for debt consolidation using the additional security supplied by the new revenues from surtax customs and that such a plan would be accepted by banks in non-Consortium countries and even by independent banks within the Consortium countries, the result of which would be the practical elimination of the Consortium.

Should the disappearance of the Peking Government follow the elimination of the Consortium, a contingency which is not improbable, not the theory but the fact of spheres of influence in China would confront us. Whether this would be fortunate or unfortunate for other nations, it would be unfortunate for both America and China.

Schurman