[This Document is the Property of His Britannic Majesty's Government.1.
106
[B]
AFFAIRS OF CHINA.
CONFIDENTIAL.
[11134]
No. 1.
13346
[March 27.] 257 II
SECTION 1.
Sir J. Jordan to Sir Edward Grey.-(Received March 27.)
(No. 104. Confidential.) Sir,
Peking, March 4, 1911. REFERRING to my telegrams Nos. 59 and 60 of the 23rd and 27th ultimo, I have the honour to transmit to you herewith copy of the preliminary agreement signed on the 27th October, 1910, between the Chinese Government and an American group for a loan of 50,000,000 gold dollars, together with copy of a final draft agreement in connection with the same transaction.
These two documents were submitted by Mr. Straight, the agent of the American group, to the representatives of the British, French, and German groups at a meeting which was held for the purpose of considering the question on the 26th February.
The preliminary agreement, of which so much has been heard during the last few months, is, it will be observed, a document drawn up in very general terms to serve merely as the basis for future negotiations. It specifies the amount of the loan, defines it as a direct obligation of the Chinese Government, and fixes the price of the bond issue and the rate of interest. All the other details are reserved for the final agreement, and this is the document which Mr. Straight has now submitted to the consideration of his colleagues.
The first point which arrests attention in reading it is that it is made out in the name of all four groups, and, in my opinion, this change removes the objectionable features which attached to the preliminary agreement. Quadruple signature was from the outset an essential condition of the participation of the other groups, and it has now been conceded both by the American group and the Chinese Government.
The loan remains a 5 per cent. gold one for 10,000,0007, and its term is fixed at forty-five years. Of the proceeds, 60,000,000 taels are to be applied to the establishment of a currency system and 20,000,000 taels are to be devoted to the promotion of industrial enterprises in Manchuria. The preparation of a programme for currency reform and of a statement showing the enterprises in Manchuria and the amounts required for them is a condition precedent to the issue of the loan, and elaborate arrangements are made for the inspection by the banks of the sums paid out for both purposes.
It is especially noteworthy that neither the preliminary nor the final agreement makes any mention of the appointment of a financial adviser, which was understood to be the main safeguard for the proper application of the loan funds. This part of the scheme will form the subject of a diplomatic arrangement, as to the nature of which the American Minister has until recently shown considerable reserve. It is understood that the American Government insisted upon the adviser being an American, but that Mr. Calhoun realised that insistence upon this point would wreck the whole transaction. Both the Russian and the Japanese Legatious had, Mr. Calhoun believes, lodged strong protests against an American adviser, and his advice was that these objections should be met by giving the appointment to the subject of some neutral Power not interested in the loan transaction. This view has eventually commended itself to the American Government, and has now been supplemented by a further suggestion emanating from the banks to the effect that the nomination of the adviser, instead of being vested in the four lending Powers, should be left to the four groups concerned. Mr. Calhoun seems to favour this suggestion as likely to ensure a better selection and to conciliate political jealousies.
There are of course obvious disadvantages in having a neutral adviser drawn from one of the minor Powers. He will naturally not possess the experience of financial problems which an American or a subject of one of the large European Powers
B [1918 dd-1]
May