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[This Document is the Property of His Britannic Majesty's Government.]
AFFAIRS OF CHINA,
CONFIDENTIAL.
[9835]
No. 1.
97A
[March 171346
SECTION 1.
Dear Sir Francis,
Mr. Addis to Foreign Office.~~(Received March 17.)
Hong Kong and Shanghai Banking Corporation,
31, Lombard Street, London, March 17, 1911.
I ENCLOSE copies of the latest telegrams with regard to the American currency loan.
The criticisms in the first of them express, I understand, the views of the United States Secretary of State.
We are all agreed as to the desirability of securing a more effective control of the expenditure of Chinese loan funds. but to demand additional guarantees in the present temper of the Young China party would, in our opinion, arouse such opposition in the provinces as to paralyse the action of the Central Government, and the object aimed at, namely, the reform of the Chinese currency, is of such supreme importance to international trade as to justify the substitution of the power of veto for a positive check on the expenditure of loan funds.
Yours truly,
I am leaving for Brussels this afternoon. My address will be "Hôtel de Flandre."
C. S. ADDIS,
Vay
Enclosure in No. 1.
Copies of Telegrams communicated by Mr. Addis.
(1.)
J. P. Morgan and Co., New York, to London, March 16, 1911. CHINA currency loan. American group are content abide by decision their representative and European banks in conference. Nevertheless, we think if high price suggested is to be paid China without compensating commissions or rebates proceeds loan should be retained Europe and America as long as possible. That weekly transfer to China, therefore, should not be beyond minimum suggested by representatives in Peking, and that no interest should be paid on loan funds while held Europe and America or by our banks in China.
Suggestion our representatives regarding mixed 5-4 per cent. loan at 94 3 per cent. per annum paid on deposited proceeds obviously unacceptable.
Our opinion is price 95 5 per cent. bonds too high, present unsettled conditions China being considered.
We can see no reason why a price so much higher than in any previous loans should be paid in this instance, and, while not insisting, we should be glad have conference consider carefully as to whether we should not stand together in asking for price more in accordance with Chinese credit.
For your information and that you may be fully informed our attitude towards agreement, we confess to some disappointment on several other points, but we leave it to your judgment whether or not to express our feeling to our colleagues :-
1. Have bankers right issue before expiration of six months if currency reform programme and statements expenditure approved earlier? If not, should not crisis clause be altered give us right decline purchase then at our own option?
2. Should not expenditure of advances for Manchuria and for currency reform, if made, be supervised in some way? We assume there will be satisfactory security for these advances.
3. Depositing loan funds with China Bank is new feature. Is it wise agree? 4. Principle of control is not admitted in loan agreement, nor is any connection shown in agreement between adviser and loan. Will these omissions not affect price
[1918 r-1]