Therefore, on the day following the inauguration of President Wilson, the American group addressed a letter to the Secretary of State, 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," and respectfully requested that the Department let the group know its wishes as to the future conduct of the negotiations. On March 18, 1913, President Wilson issued to the press "a declaration of the policy of the United States with regard to China," in which, after reciting that the American bankers "declared that they would continue to seek their share of the loan under the proposed agreements only if expressly requested to do so by the government, he stated that "the administration has declined to make such request, because it did not approve the conditions of the loan or the implications of responsibility on its own part which it was plainly told would be involved in the request." President Wilson's statement continued:

The conditions of the loan seem to us to touch very nearly the administrative independence of China itself; and this administration does not feel that it ought, even by implication, to be a party to those conditions. The responsibility on its part which would be implied in requesting the bankers to undertake the loan might conceivably go to the length in some unhappy contingency of forcible interference in the financial, and even the political, affairs of that great oriental state, just now awakening to a consciousness of its power and of its obligations to its people. The conditions include not only the pledging of particular taxes, some of them antiquated and burdensome, to secure the loan, but also the administration of those taxes by foreign agents. The responsibility on the part of our government implied in the encouragement of a loan thus secured and administered is plain enough and is obnoxious to the principles upon which the government of our people rests.

President Wilson's statement was immediately communicated to the interested governments and the American group promptly announced its withdrawal from the loan.16 Thus through the action of President Taft's administration in urging China to admit the European bankers to the Currency Reform Loan which China had sought to place solely in the United States, and of President Wilson, in withdrawing American support after the loan had been negotiated with the Sextuple Consortium, China was thrown upon the very lenders whom she had sought to avoid and was being pressed with conditions of a foreign loan which the Peking Daily News of March 25, 1913 stated China would never accept unless under compulsion.17 A few days after the publication of President Wilson's statement, namely, March 25, 1913, the Chinese Minister called at the State Department and

16 The complete statement of President Wilson, together with the statement of the bankers announcing their withdrawal from the loan, is printed in an editorial in this JOURNAL, Vol. 7, 1913, pp. 335-341.

17 Foreign Relations, 1913, p. 175n.

informed the Acting Secretary of State that he "had received special instructions from President Yuan Shih Kai to make formal expression of the thanks of the people of China and of their appreciation of the just and magnanimous attitude of President Wilson indicated in the public statement recently issued by him which was accepted by the Chinese Government as an expression of sincere friendship toward the Republic and people of China. ''18

A few months later Mr. E. T. Williams, the American Chargé d'Affaires at Peking, in a despatch dated July 11, 1913, requested instructions as to the attitude to be taken by the Legation towards financial transactions between American capitalists and the Chinese Government. He stated that he had several times recently been approached by prominent Chinese officials and others with inquiries for American financiers who might be willing to make loans to the Chinese Government for industrial or administrative purposes, and that in discussing these problems with American business men he had been asked whether the American Government would give its support to these enterprises. Mr. Williams explained that many industrial enterprises in China are either wholly or partially owned by the government and that nearly all railway construction is carried or under contracts with the government. Participation in such enterprises, Mr. Williams said, concerns also the future of American trade "because concessions obtained now will secure for the nations obtaining them the Chinese market for the machinery and other supplies needed in the development of the concessions. Once supplies of a certain type are introduced they tend to become standard and the sale of other sorts becomes very difficult." The central and provincial governments are often in need of money for administrative purposes which can only be obtained by loans secured upon the national or local taxes. "It is evident," Mr. Williams stated, "that financial transactions between American citizens and the Chinese Government are altogether different from such transactions between individuals or business firms. When difficulties occur in connection with the latter, suits may be brought by American plaintiffs in Chinese courts in which our consular representatives have a right to sit as associates to see that justice is done and the treaty rights of their nationals protected; and in cases where Americans are defendants the American consular courts or the United States Court for China have jurisdiction. Should the Chinese Government, however, default in its engagements with

18 For this and other documents relating to the withdrawal of the American group from the loan, see Foreign Relations, 1913, pp. 167 et seq. For an official Chinese criticism of the terms of this loan, see translation of the letter of the Chinese Minister of Finance to the Sextuple Group, dated March 11, 1913, p. 169; see especially also the despatch of Mr. Williams, American Chargé at Peking, Oct. 21, 1913, regarding the reluctance of China to place a further loan with the quintuple group and her desire to place such a loan with American capitalists, p. 189.

American financiers, it might become necessary to take possession of the revenues pledged as security for the loans made and this, as the President points out, might require 'forcible interference in the financial and even the political affairs of China.' ''19

In response to Mr. William's request for instructions, Secretary of State Bryan replied on September 11, 1913, that the Department "is extremely interested in promoting, in every proper way, the legitimate enterprises of American citizens in China and in developing to the fullest extent the commercial relations between the two countries." "This Government," he said, "expects that American enterprise should have opportunity everywhere abroad to compete for contractual favors on the same footing as any foreign competitors;" but, he added, "this Government is not the endorser of the American competitor, and is not an accountable party to the undertaking. If wrong be done toward an American citizen in his business relations with a foreign government, this government stands ready to use all proper effort toward securing just treatment for its citizens. This rule applies as well to financial contracts as to industrial engagements." The Secretary reaffirmed the Department's instructions of October 21, 1905, above referred to, and referred the legation to Mr. Olney's instructions of December 19, 1896, above quoted, as a clear statement of the general principle which the Department considered still generally applicable.

Although the President of China thanked President Wilson for withdrawing his support from the Six-Power Loan, this was not an indication that the Chinese Government did not desire the investment of American capital. "The withdrawal of the United States left China without a disinterested friend to help her in her dealings with other powers," says M. Joshua Bau, a recent Chinese writer. "With the absence of the United States there was no moral leader among the Powers who could uphold the doctrine of equal opportunity of trade and the integrity of China. As a result, the other Powers fell into their old practice of international struggle for concessions.''20

On October 21, 1913, the American Chargé reported that he had been approached by the Premier and three other cabinet ministers on the sub

19 Foreign Relations, 1913, p. 183.

There is another element in the foreign loan situation in China which, though disagreeable to mention, has to be taken into consideration. In a despatch of Sept. 25, 1913, the American Chargé at Peking referred to the extravagance and corruption of the government. "The opinion generally expressed by foreigners in Peking," he said, "is that there is far more corruption under the Republic than under the Manchu régime. There are many more officials to be satisfied now, and the commissions upon contracts that are approved are necessarily much larger. In one instance it is credibly stated to have been thirty-five per cent.'' (Foreign Relations, 1913, p. 188.)

20 The Foreign Relations of China, by M. Joshua Bau, pp. 67 and 171. Co., New York.)

(Revell

ject of a loan by American capitalists to the Chinese Central Government. "The Premier regretted," he said, "that the American bankers had withdrawn from participation in the currency loan, that the currency of the country was in a very bad condition, and that its reform was urgently needed. He said the Chinese Government would be glad if the American Government would give such assurances to American capitalists as would induce them to resume the lending of money to China. The American Chargé expressed the opinion that "undoubtedly, the Chinese would like competition between American financiers and those of the quintuple group, since the latter might in such case be induced to moderate their demands. ''21

No official notice, however, appears to have been given to these appeals, and in 1916, when a Chicago banking house advanced to China $5,000,000 for administrative purposes and sent a copy of the contract to the State Department for a statement of its policy respecting such loans, Mr. Lansing simply replied "that the Department of State is always gratified to see the Republic of China receive financial assistance from the citizens of the United States, and that it is the policy of the Department, now as in the past, to give all proper diplomatic support and protection to the legitimate enterprises abroad of American citizens.''22

The entry of the United States into the war, however, produced a radical change in the attitude of the State Department upon the subject. Feeling that proper means should be placed at the disposal of China to equip herself so as to be of more assistance in the war, says a statement issued by the Department on July 30, 1918, "a number of American bankers, who had been interested in the past in making loans to China and who had had experience in the Orient, were called to Washington and asked to become interested in the matter. The bankers responded very promptly and an agreement has been reached between them and the Department of State which has the following salient features:

"First, the formation of a group of American bankers to make a loan or loans and to consist of representatives from different parts of the country.

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'Second, an assurance on the part of the bankers that they will cooperate with the Government and follow the policies outlined by the Department of State.

"Third, submission of the names of the banks who will compose the group for approval by the Department of State.

"Fourth, submission of the terms and conditions of any loan or loans for approval by the Department of State.

"Fifth, assurances that, if the terms and conditions of the loan are accepted by this Government and by the Government to which the loan is made, in order to encourage and facilitate the free intercourse between

21 Foreign Relations, 1913, p. 191.

22 New York Times, Nov. 17, 1916.

American citizens and foreign States which is mutually advantageous, the Government will be willing to aid in every way possible and to make prompt and vigorous representations and to take every possible step to insure the execution of equitable contracts made in good faith by its citizens in foreign lands."

The Department stated that negotiations were in progress with the governments of Great Britain, Japan and France to secure their cooperation and the participation by bankers of their countries in equal parts in any loan which may be made.23

In the correspondence, which has now been published, leading up to the agreement between the State Department and the bankers, 24 it appears that the latter informed Secretary Lansing that it would be necessary "if now and after the war we are successfully to carry out the responsibilities imposed upon us by our new international position, that our Government should be prepared in principle to recognize the change in our international relations, both diplomatic and commercial, brought about by the war," and they expressed the conviction that no Chinese loan could be placed in this country "unless the Government would be willing at the time of issue to make it clear to the public that the loan is made at the suggestion of the Government." Mr. Lansing replied, on July 9, 1918, that "with the consequent expansion of our interests abroad there must be considered also the element of risk which sometimes enters into the making of loans to foreign governments and which is always inseparable from investments in foreign countries where reliance must be placed on the borrowers' good faith and ability to carry out the terms of the contract. This Government realizes fully that condition." In the same letter, however, Mr. Lansing said that "this Government would be opposed to any terms or conditions of a loan which sought to impair the political control of China or lessened the sovereign rights of that Republic." Later, in response to a specific request of the British Foreign Office as to the meaning of this statement, Mr. Lansing explained, in a memorandum of October 8, 1918, that it "had reference only to the future activities of the American group" and "that the United States Government did not mean to imply that foreign control of the collection of revenues or other specific security by mutual consent would necessarily be objectionable, nor would the appointment under the terms of some specific loan of a foreign adviser."

23 New York Times, July 30, 1918, p. 13.

24 The documents were made public by the State Departemnt on March 30, last, but their bulkiness forbade their textual reprinting. They have now been issued by the Carnegie Endowment for International Peace in a pamphlet of 78 printed pages, in an information series published upon questions relating to the Conference on the Limitation of Armament and Problems of the Pacific. Pamphlet No. 40, Division of International Law.