control in all departments. Advices received from German Minister at Peking indicate that the Chinese Government never definitely intimated its willingness to accept original French proposal and consequently not apt to accept extended form now under consideration. Reports have reached Foreign Office that the American group has recently decided not to issue their full quota as stated in Department's telegram February 10, 6 p. m. This if true would be very regrettable, as it would place the Government as well as American banking group in a position of inferiority. LEISHMAN. File No. 893.51/1340. The Secretary of State to the Russian Ambassador. [Aide Mémoire.] In the two memoranda handed to the Department of State on the 19th of February the Imperial Russian Government expressed a desire to know the views of the Government of the United States as to the proposal of the Ministers of the six powers at Peking with reference to the appointment of foreign advisers in connection with the reorganization loan. According to this proposed arrangement, the chief inspector of the salt revenue is to be an Englishman; the director of the national loan bureau, a German; and the advisers to the accounts and audit department, a Russian and a Frenchman. In expressing appreciation of the courtesy of the Imperial Russian Government in placing its views so fully and frankly before the Department, this Government is happy to state that on February 17 the American Minister at Peking was instructed to inform his interested colleagues of the readiness of this Government to accede, within certain limits due to a reluctance to overburden the Chinese Government with the employment of unnecessarily numerous persons, to the above-mentioned arrangement, should it be agreeable to China and acceptable to his colleagues. This Government also reserved in the premises all rights, notably those in relation to the appointment if its own nationals. As to the recommendation of the Imperial Russian Government that the powers should claim that the proceeds of any new loan contracted by China and not subject to the generally accepted conditions of control should be employed first of all to repay any unpaid balance of the Boxer indemnity, this Government could not but regret the injection into the situation at this juncture of any new considerations which might be fruitful of further delay in the consummation of the loan which is expected to result alike to the advantage of China and of all other powers commercially interested in that country and begs, therefore, to reserve an expression of opinion until apprised of the views of the other Governments and of the various financial groups. DEPARTMENT OF STATE, Washington, February 26, 1913. File No. 893.51/1309. The Secretary of State to the American Chargé d'Affaires. DEPARTMENT of State, Washington, February 27, 1913. SIR: The present situation in Peking as reflected in the Legation's telegram of February 21, 7 p. m., seems to the Department to call for a renewed expression of its views for your guidance. Your previous instructions will have made clear to you that the Department has greatly deprecated the apparent introduction of political issues into the loan negotiations. Its sole aim has been, in pursuance of the uniform policy of this Government toward China, to assist the latter in procuring, without undue embarrassment, the funds required at this critical period for reorganization and rehabilitation. As you are well aware, experience has shown the wisdom of surrounding such loans to China with adequate safeguards of supervision, not only as a reasonable measure of protection for the interests of the lenders and of the ultimate bondholders but also as a necessary means of upholding China's credit and avoiding the possible consequences of default in her financial obligations, which are already pressing. The Department has, however, consistently held that the Chinese Government must be left free to accept or decline a loan on the conditions proposed, and the American group of bankers interested in the loan negotiations have likewise held the same views. The Legation was accordingly instructed on February 17 to approve the proposal then under consideration as to foreign advisers connected with the loan on the understanding that, as represented in the Legation's telegram of the same date, the Chinese Government had already expressed its acceptance of the proposal and that the loan was of vital necessity to China. You should make it clear to your colleagues, as occasion may require, that this Government, while contiming to insist upon what it considers reasonable and general measures for the protection of the interests of all its nationals, including adequate guaranties for the lenders and efficient supervision of disbursements, is not prepared to join in any coercive steps designed to compel China's acceptance either of the present loan or of any particular proposal as to advisers. A careful review of the whole correspondence on this question leads. the Department to believe that the difficulties in the way of the loan negotiations may not be as serious as some of the reports, taken by themselves, would seem to indicate. As a matter of fact, the points still at issue so far as the Governments are concerned seem to be reduced to the one question of the chief adviser to the salt gabelle, which lies between Great Britain and Germany alone and which those two Governments are making serious effort to solve. The suggestion of ulterior motives and deliberate efforts to impede the negotiations, referred to in certain reports, do not seem to be borne out by an impartial examination of the correspondence as a whole. On the contrary, the statement of the position of the Governments as contained in the inclosed memorandum from Paris' seems eminently practical, candid, and convincing. Under the circumstances, therefore, while it 1 See ante, inclosure in Mr. Herrick's No. 273, February 14. is quite possible that the completion of these peculiarly intricate negotiations may yet require considerable time, the Department is convinced that the only consistent course just now open to this Government is to maintain the position it has so deliberately assumed and, while awaiting results, to make from time to time such opportune suggestions as may commend themselves or may be recommended by your Legation. I am [etc.] File No. 893.51/1326. P. C. KNOX. The American Chargé d'Affaires to the Secretary of State. [Telegram-Paraphrase.] AMERICAN LEGATION. Peking, February 28, 1913-4 p. m. Legation's telegram of February 17, 10 p. m., and your reply of February 17. 6 p. m. The British Minister yesterday informed me that the German Government had made suggestions which the British Government had definitely declined because they had no bearing on the loan. The Minister believes the British Government will not wait much longer but will conclude the loan in cooperation with such of the groups as are desirous of participation. He said that when the Chinese Government saw the money available they would accept; that Konovalof, already in the Chinese customs, would be the Russian appointee to whom China could not well object. Am I authorized, provided the Chinese Government accepts, to agree to appointment of German assistant inspector general of the salt gabelle and in proposal to make the post of German director of the bureau of loans permanent with added powers? WILLIAMS. File No. 893.51/1326. The Secretary of State to the American Chargé d'Affaires. [Telegram.] DEPARTMENT OF STATE, Washington, February 28, 1913. Your February 28, 4 p. m. Yes. ΚΝΟΣ. File No. 893.51/1336. The American Group to the Secretary of State. NEW YORK, March 5, 1913. SIR: Referring to the Chinese loan negotiations upon which this group entered originally at the request of the Department of State, and in which we have continued with its approval and under its direction, as indicated in letters of the Secretary of State dated February 20th and February 26th, 1913, we would respectfully request that you will let us know your wishes as to the future conduct of these negotiations. If a personal conference is desired, we shall arrange to meet any appointment which you may be pleased to make. We deem it our duty to call to your attention the fact that as shown by the records of the Department, the present condition of the negotiations for the reorganization loan is such as to require very early attention. Very respectfully yours, WILLARD STRAIGHT. File No. 893.51/1345. The American Ambassador to France to the Secretary of State. [Telegram-Paraphrase.] AMERICAN EMBASSY, It seems to me evident, on reviewing the history of the Chinese loan negotiations, that with the increase of the consortium from four to six powers began a persistent effort to disrupt the consortium, and that.China is excluded from making loans in the world's financial markets as long as the six powers hold together. The desire, the interest and the policy of the United States have been to maintain the integrity of China and further her rehabilitation. In order to extricate ourselves from the false position in which these dilatory negotiations place us and to continue that policy, does it not seem proper to attempt to relieve China from this embargo of financial exclusion? To obtain this relief, the loan should be concluded forthwith or the six-power group should be dissolved and China be given a free hand to borrow where she will. If the Department should find that a new group desirous of aiding China and of making an immediate loan could be formed, or that an adequate loan could be financed in America, would it not be a friendly act of great assistance to China and most gratefully appreciated by her, if the United States should announce to the five other powers that the loan must be immediately concluded or the United States would withdraw, reserving to itself all rights in the premises? It seems certain that such an action would force an issue one way or the other. File No. 893.51/1383. HERRICK. The American Chargé d'Affaires to the Secretary of State. No. 778.] AMERICAN LEGATION, Peking, March 17, 1913. SIR: I have the honor to enclose, for the information and files of the Department, copy in translation of a letter dated March 11, 1913, from the Minister of Finance to the sextuple group relative to the negotiations for the reorganization loan. I have [etc.] E. T. WILLIAMS. [Inclosure Translation.] The Minister of Finance of China to the Sextuple Group. MINISTRY OF FINANCE, Peking, March 11, 1913. SIR: For almost a year negotiations for a loan made necessary by China's financial requirements have been in progress with your groups. The terms of the agreement have been frequently discussed in Cabinet meetings and the controlling principles have been arranged satisfactorily. With the exception of the changes regarding the rate of interest and the discount, which I assumed responsibility for, all matters have been referred to the Advisory Council and have been approved. During the negotiations I endeavored by all possible means to preserve good relations with the groups. Adhering to this idea I gave way to the utmost in respect of the demands made by the groups in the hope that a settlement would be reached at an early date, that order would be maintained and lasting peace be secured. The period of negotiations included the end of the old and the new calendar years and on these two occasions I was placed in a position of great difficulty as there was most pressing need of funds. I would recall that at the end of last year, new style, believing that a method of meeting the urgent conditions would be approved by the Advisory Council, I succeeded in getting the Cabinet to take the responsibility for altering the rate of interest from 5% to 5%. Then again in your letter of January 26th you stated that with the exception of the issue price in London and the alterations to article 13, which were to be discussed, nothing else in the terms of the agreement would be different from the copy of the agreement sent on January 15th. You further said that prior to the signature of the agreement you should receive from your Ministers information that satisfactory foreign advisers had been engaged for the salt administration and the bureau of audit and a director for the loans bureau and that satisfactory agreement had been made with them et cetera. I at once took steps to engage able and intelligent men, three in number, to fill these positions. I expected that men who had been selected for the [their?] ability, irrespective of nationality, with such great care, would surely be accepted by the groups but on the 4th of February, when the agreement was all in order and the groups had agreed to sign the agreement at once and to make advances, suddenly other complications came up and you could not keep your word. On the 5th I wrote you declaring that prior to the signature of the agreement I reserved the right to borrow elsewhere. Subsequently a reply was received from you saying that so far as the groups were concerned everything was ready for signature and that the delay mentioned by me was clearly beyond your power to control and that you could not take the responsibility. I replied to this on the 6th declaring that I could not take the responsibility for anything outside the scope of the agreement and that, as it was difficult to see how the matter could be brought to a satisfactory conclusion, [I could not do otherwise than go elsewhere for the funds so urgently needed. But I still remained inactive, hoping that your statement that all was ready for signature would materialize at an early date. More than a month has passed since the date set for signature and on the 3rd of March my Government received the information that the six Governments had decided at a meeting that nationality was to be the controlling factor as regards the engagement of foreigners in connection with the loan agreement; that one Englishman with one German as vice should be appointed to the salt administration; that in the Toans department a German should be engaged as director; that as regards the number and functions of the foreigners in the audit department great changes had been made so that, instead of one foreigner, one Russian and one Frenchman were to be appointed. Such essential changes in the original understanding as these had not been calculated upon at any time during the negotiations. In the negotiations for this loan there were first frequent delays and secondly successive changes of the terms of the agreement and I have been forced into an unimaginably difficult position. The foreign press for the most part calumniates my country. Foreign nations blame us for not paying our debts but at the same time every move they make tends to stop our sources of supply and they do not allow us to pay our debts. Foreign Governments blame us because the new régime is not established but their actions are such as to prevent our raising the funds and they do not allow us to make progress. Our Government is subjected |