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nature probably directed against the President himself and having as their object his removal from the political arena.

In the meantime there are many who believe that Yuan is acting with patri: otic motives, that he really considers that the only force that can amalga mate the present mélée of warring factions, that can reconcile the modern extremists and the vast bulk of the nation caring “for none of these things," is a strong central power, centered in himself, a power that will ultimately be able to bring it about that, to quote his own words, “eternally there shall be good and friendly relationships and internally there shall be peace between the weak and the strong." Respectfully submitted to the Minister,

WILLYS R. PECK. AMERICAN LEGATION, Peking, December 19, 1913.

LOAN NEGOTIATIONS: 1 WITHDRAWAL OF THE UNITED STATES GROUP OF BANKERS FROM THE SEXTUPLE CONSORTIUM; CONCLUSION OF A REORGANIZATION-LOAN AGREEMENT BETWEEN CHINA AND THE QUINTUPLE GROUP - CURRENCY. BEFORM AND MANCHURIAN - INDUSTRIAL LOAN-STUDENT LOANS — MISCELLANEOUS LOANS.

INTRODUCTORY Note.-On August 30, 1912, the Chinese Government, unable to come to terms with the six-power groups, concluded an agreement with an independent financial group that became known later as the Crisp Group, for a loan of £10,000,000, secured on the unhypothecated revenues of the salt gabelle, and £5,000,000 of this amount was floated on the London market on September 26. This agreement gave the lenders until September 30 to issue the balance of £5,000,000 and, until such issue, conferred a preference for further loans on equal terms.?

On October 23 the six Ministers protested against the surplus revenues of the salt gabelle being applied to the service of the Crisp loan, and notified the Chinese Government that the advances made by the six groups on account of the reorganization loan, amounting to £1,800,000, constituted a prior charge on the revenues of the salt gabelle.

On October 25 the Chinese Government expressed to the representatives of the bankers its desire to cancel the Crisp loan contract and reopen negotiations with the six groups.

On November 4 the six powers directed the representatives of the bankers at Peking to consider, in consultation with their respective Ministers, what conditions for the new loan were in their opinion " indispensable and practicable.” The representatives reported on the 6th that negotiations with the Chinese authorities had been resumed.

On November 12 the bankers' representatives informed their principals that the Chinese Government had applied to Mr. Crisp for a further loan of £10,000,000; he had confessed his inability to comply, whereupon the Chinese Government informed him of their intention to apply elsewhere as they considered themselves released from their engagement to him. Three days later the representatives an

Continded from For. Rel. 1912, pp. 87-159,

This loan by the Crisp group is referred to, although not by that name, in For. Rel. 1912, pp. 150 (the Minister's telegram of September 11), 152 (telegrams of September 19 and 25), 153 (telegrams of September 20 and 28), 155 (last paragraph), and 158 (refer. ence to the “ London syndicate ").

nounced receipt of a joint letter from the Premier, the Minister for Foreign Affairs and the Minister of Finance, dated the 11th, expressing the desire of the Chinese Government to negotiate with the six groups and not with others; and reported an interview they had had on the 14th with the Minister of Finance at which the Minister was informed that an undertaking in writing from Mr. Crisp releasing the Chinese Government from their agreement with him would be a necessary condition of continuing negotiations with the six groups.

A conference of the bankers was called for December 13, and on December 9 their representatives were told that it would be necessary to know, before the conference, (1) what was the minimum amount that would satisfy the imperative needs of the Chinese Government up to December 31, and (2) during January, February and March; also (3) what objects the money was required for, and (4) what was the actual position as to the balance of the Crisp loan. These points were the subject of correspondence before, during and after the conference, resulting in the bankers offering, on December 21, to advance £2,000,000 in the second half of January, subject to force majeure, provided the Crisp loan agreement had previously been cancelled and the loan agreement with them had been signed. This latter agreement was to be for £25,000,000 for reorganization purposes, but the Chinese had thus far objected to several of its features. The six Ministers, furthermore, were not unanimous in regard to the terms of the agreement, as appears from the following telegram from Mr. Calhoun, the American Minister.

File No. 893.51/1204.

The American Minister to the Secretary of State.'

[Telegram--Paraphrase.)

AMERICAN LEGATION,

Peking, December 30, 1912. Two points that may prove obstructive have been raised in the loan negotiations, which were apparently progressing to agreement. The French have insisted that losses incurred by foreigners during the revolution shall be paid out of loan proceeds; otherwise the loan will not be listed in Paris. The Minister of Finance disclaims authority to negotiate on the subject, and also refuses to accept the provision in the contracts for foreign auditors and foreign supervisors for salt gabelle. The bankers referred both questions to their six Ministers, who met this afternoon. Suggestion was made at the meeting that the amount of the revolutionary clains was not known; that many were doubtless exaggerated or without merit; that the question of liability in many cases was involved; that the amount of the proposed loan was not sufficient for claims and other pressing necessities; therefore the Chinese cannot be expected to make commitment on the subject at this time. Finally the French and Japanese Ministers were

In this connection see "Claims of American citizens against China," telegram of December 31, 1912, p.

appointed a committee to discuss both questions with the Minister for Foreign Affairs with a view to making some arrangement for recognition of general principle of liability for claims and possibly for the appointment of an international commission to pass thereon and also for a commitment to the Ministers upon the subject of auditors and supervisors wherein their duties and authority will be specified. If this plan succeeds—which is doubtful—it is proposed to accept it in lieu of any provision therefor in the loan contract.

CALHOUN.

File No. 893.51/1220.

The American Chargé d'Affaires at London to the Secretary of State.

(Telegram--Paraphrase.)

AMERICAN EMBASSY,

London, January 1, 1913. The following urgent memorandum from the Minister for Foreign Affairs just received. I respectfully request an early expression of your views since I am informed that a meeting of the representatives of the six groups is to take place here in a few days.

LAUGHLIN.

(Memorandum.]

The British Foreign Office to the American Embassy.

The United States Government are aware that at a meeting of the representatives six international financial groups held in London December 13-14, 1912, a draft agreement for a loan to the Chinese Government of £25,000,000 for reorganization purposes was considered.

In connection with the preference as suggested by the Chinese Minister of Finance with respect to the price on definite industrial enterprises to be speci. fied for under Article 17, it was proposed by the groups to eliminate industrial Jeans from this clause of the draft agreement and to claim a preference merely for Government financial loans until the purposes contemplated under Article 2 of the agreement are completed. With this object in view it was further suggested that in addition to a general preference clause as in former agreements the following should be inserted :

After the issue of the present loan of £25,000,000 and for a period of two years. should the Chinese Government proceed to issue a supplementing. loan for the purposes specified in Article 2 of this agreement, or of other Government financial loans, a preferential right is granted to the six groups at blank per cent under the average price of the present loan, and this preference shall apply even for a further period as regards future loans secured on the salt gabelle. In any case, the Chinese Government will not, for a period of six months after the issue of the present loan, proceed with the issue of any other Goyernment loan, or industrial loan with the guarantee of the Chinese Government, without tbe consent of the six groups.

In reply to these proposals the groups' agents in Peking reported that the Minister of Finance objected to any time limit, but was prepared to accept the following article:

In the event of the Chinese Government desiring to issue further loans secured on the salt revenue or a supplementary loan for purposes of the nature specified in Article 2, preference will be given to the banks on the same terms of commission as those of the present agreement. The Chinese Government further undertake, for a period of six months after the issue of the present loan, not to issue any other loan concluded later tban December 1, 1912, without previous agreement with the banks.

This stipulation would, however, admit the issue of the loan provided for in the agreement signed at Peking on September 24, 1912, for the construction

140322- --FR 1913— 10

by a Belgian company of a railway from Lanchow to Haichow.' This loan was to be for an amount of £10,000,000, a sum which would doubtless not be forthcoming from Belgium and would therefore have to be obtained, at any rate in part, elsewhere. It would seem umfair that any one of the powers of the sextuple group should profit by the abstention of the rest, and it would seem l'easonable that there should be some understanding amongst the six allied powers with regard to a concession which was the direct outcome of the policy they have pursued in common since their declaration of the ninth July last year.

His Majesty's Government would therefore propose that the six Gorernments should pledge themselves to refuse their support to any of their nationals who might propose to finance this loan. This would probably in practice entail the cancellation of the contract and its internationalization by its being handed over to the groups on payment of compensation. FOREIGN OFFICE,

London, Jamary 7, 1913.

[blocks in formation]

The Secretary of State to the American Chargé d'Affaires at London.

(Telegram--Paraphrase.)

DEPARTMENT OF STATE,

Washington, January 9, 1913. Chinese loans; your telegram January 7. The Belgian railway concession was taken up last October with the French Embassy here, with the intimation that this was business which, under the intergroup agreement, should be offered for participation by the six groups because of the identity of the French interests concerned. The French representative appeared to take this as a matter of course. The Legation at Peking at the same time advised the Department that the local representative of the Russian group, with which it is understood the Belgian concessionaires are affiliated, had given out that the Belgian contract would result in no conflict with the six groups, but on the contrary all interests would be taken into the new venture. The Department is not aware that any independent American capital is interested in this loan and considers it extremely unlikely that any will be. It therefore prefers to reserve its opinion as to the understanding proposed by the British Government until the two power's still more directly interested have expressed themselves.

KNOX

File No. 893.51/1246.

The American Minister to the Secretary of State.

[Telegram---Paraphrase.)

AMERICAN LEGATION,

Peking, January 21, 1913. The President today informed me that China is in immediate urgent need of funds which the sextuple group will not advance and

" Officially known as “ The £10,000,000 sterling five per cent gold loan of 1913 of the Government of the Chinese Republic for the Lung-Tsing-ti-Hai Kailway": the construe. tion company is the Compagnie Générale de Chemins de Ter et de Tramways en Chine For text of agreement sce File No. 893.51/1419.

that therefore he must look elsewhere. The end of the Chinese year is approaching when accounts must be settled. The troops are largely unpaid. Provincial notes issued in large amounts are at heavy discount and there is considerable fear that the President may not be able to preserve order without funds.

CALHOUN.

File No. 893.51/1253.

The American Minister to the Secretary of State.

{Telegram-l'araphrase.]

AMERICAN LEGATION,

Peking, January 23, 1913. As reported in my telegram of December 31,' after the verbal agreement made by the Chinese Government with the French and Japanese Ministers in reference to liability for damages and appointment of foreign advisers, and while awaiting written confirmation of its terms by the Foreign Office, the Minister of Finance insisted that the groups make an advance of £2,000,000 this month to carry the Government over the Chinese New Year. The groups, under instructions from London, refused to make advances until the issue price was agreed upon and negotiations between the six Ministers were satisfactorily concluded. The Foreign Office then wrote the six Ministers a note saying that the accepted liability for damages was limited to such as were incurred in the zone of military operations; and as to appointment of advisers, when the time came the six Ministers would be privately informed as to their names, duties and powers. This was not satisfactory to the Ministers but the French Minister assumed a very aggressive attitude and said his Government would not approve the loan unless the contract was first submitted to it for its approval and the French advisers were named and their powers prescribed by the interested Powers. He also intimated that the nationality of the ap. pointees should be proportionate in number to the issue of bonds made in the respective countries. The Russian supported the French, and the Russian bankers reported that the issue price must be varied in the several countries and intimated that the loan would not be internationalized. The Minister of Finance then sent a note to the groups saying that as the latter would not agree to make the advance required he was compelled to get money elsewhere, and broke off the negotiations. The British and German Ministers thereupon both said their interests in the country were too great to be jeopardized either by the loan going to pieces, or by the intrusion of other finance elemenis, and their respective bankers have gone to the Chinese and notified them they will make the advance required and are prepared to accept the contract as it now stands, independently of the other members of the groups.

If this ends the consortium I suggest that our country recognize the Chinese Government at once.

CALHOUN.

1 See " Claims of American citizens against Cbina," p. 204,

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