CO129-362 - Public Offices - 1909 — Page 74

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Inclosure 2 in No. 1.

Extract from the New York Herald" of June 14, 1909.

GOVERNMENT WILL HELP SYNDICATE IN LOAN TO CHINA: STATE DEPARTMENT FORMALLY ENDORSES PARTICIPATION IN RAILWAY ENTERPRISE.

THROWING off its reserve in regard to plans of American financiers to participate in Chinese railroad development loans,' the State Department to-day made public an official statement endorsing the plan. The statement is considered of first importance, ushering in a new era of American diplomatic and commercial activity in the Far East. Here is the slatement :---

"The Government of the United States is much gratified at the formation of a powerful and responsible American financial group to enter the important field of investment in China, and is giving to their enterprise that cordial support which the Department of State stands ready to give all legitimate and beneficial American commercial and financial undertakings in foreign countries. Such undertakings are to be encouraged because of their direct benefit to American commerce and to international relations.

"Since the Russo-Japanese war there has been great activity in railway building in China. A number of preliminary contracts were negotiated prior to the Boxer trouble and now have been reaffirmed in final form and the work of construction commenced. Not only has China granted to the British, French, and German financial interests concessions to build railway lines, but the Government has already borrowed abroad to repurchase the line now running between Peking and Hankow from the financiers with whom the railway was jointly operated.

"In 1904 the American Minister at Peking, on behalf of American capitalists who desired a concession to construct the Hankow-Szechuan Railway, approached the Chinese Foreign Office. In reply he received the assurance that if China herself could not furnish the funds American and British capitalists would be notified and be given the prior right to supply the sum needed,

"In 1905 the American Government was twice approached by the British Ambassador, who stated that British capitalists desired to open negotiations for furnishing a loan to construct this railway. No American capitalist happened to find it convenient at that time to co-operate with the British interests in their preliminary negotiations, and the British Ambassador was so informed.

"On the 2nd October, 1905, French and British financial groups signed an agree- ment to co-operate in securing various loans in China. In this agreement provision was made for American participation, and a period of twelve months from the date of signature was named as the time within which American capitalists might notify the British and French groups of their desire to share in the activities. The preliminary contract, which was initialled at Peking on the 6th June, provides that the British, French, and German groups shall furnish China with funds to construct the Canton- Hankow line and the Hupei section of the proposed Hankow-Szechuan Railway.

"British, German, and French co-operation in this enterprise was arranged as the result of the dispute regarding the rights of the British and French groups as opposed to those of the German financiers, who in March last secured a preliminary contract to float a loan for the construction of the Canton-Hankow Railway.

Although American capitalists did not, owing to financial conditions in this country, find it convenient to accept the British invitation to co-operate with the British and French groups in endeavouring to persuade China to make a foreign loan for the construction of the Hankow-Szechuan line, it is fortunate that before negotiations were terminated the organisation of this powerful American syndicate has made it possible for China to fulfil her agreement and graut to the United States participation in this loan in accordance with the Wai-wu Pu's promise of 1904. The Chinese Government was notified of the formation of the American group prior to the recent tentative initialling of the loan contract.

"Although American capitalists did not take up this matter in its formative state, it is not felt that the interested parties will contend that one of two joint concessionnaries can determine the period of time within which the right of the other may elapse, nor is it believed that, having been notified of the readiness of American capitalists to

participate in this loan, the Chinese Government would attempt to avoid fulfilling its clear obligation to the United States.

"The Department is following this situation with great interest, and looks forward with confidence to a satisfactory arrangement between the American group and the German, British, and French financiers.'

In view of the action of the American syndicate, special interest attaches to a report just made by the Bureau of Statistics on American trade in Japan, the country which is the most formidable commercial rival in the Far East. The figures are from the "Annual Return of the Foreign Trade of the Empire of Japan, 1908." The unit of currency in Japan is the yen, equivalent to 50 cents gold.

Comparison of the figures of this document," the report says, "with those of similar official publications for earlier years shows that the value of merchandise from the United States imported into Japan in 1908 exceeded that of any earlier years except 1907 and 1905, having been in 1908 about 3,000,000 yen below the figures of 1907 and 27,000,000 yen below 1905, when imports from the United States in the closing year of the Russo-Japanese war were abnormally heavy. The percentage which merchandise from the United States formed of the total imports was larger in 1908 than in 1907, despite the slight falling off in the total, this increase in percentage in the face of a decline in total being due to the fact that Japan's total imports were materially less in 1908 than in 1907, having been in 1908 436,000,000 yen and in 1907 494,000,000 yen.

"In iron and steel manufactures Great Britain, Germany, and Belgium are active competitors of the United States, and in many cases supply greater quantities than does this country,

Under the general head of pigs, ingots, slabs, and blooms,' Great Britain supplied 2,115,261 yen in value; Sweden, 512,774 yen; Germany, 259,344 yen; China, 861,104 yen; and the United States but 66,530 yen in value."

There is but one opinion in official and diplomatic circles here to-day regarding the dismay which the "Herald" correspondent in Peking describes prevailing among European financiers, caused by the plans of American financiers to participate in Chinese railroad development loans. That is, that the dismay is justified.

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