We celebrated Thanksgiving that afternoon in American fashion with a religious service, the American colony and many British and other Allied residents attending, as well as the ministers of the Associated Powers with their staffs. Premier Chien Neng-hsun dined the diplomatic corps and welcomed President Wilson's proposal for a league of nations. President Hsu invited us on November 30th, and then the French minister, who still was troubled with the question of the non-belligerents, objected to the neutral ministers being there at all. If they went, he said, he would not go. The British minister and I devised, as we thought, a way out. Would the neutral ministers view the Allied ministers as guests of honour on this occasion? The secretary to the Foreign Minister was chosen to ask them. Unfortunately, the neutrals took it as a demand rather than an inquiry. Then the fat was in the fire—the neutral ministers would not attend the dinner. This was the one discordant note in our celebrations.
In order to enable the Central Government to get along at all, the diplomatic corps agreed to the release of surplus salt revenues to the extent of $5,300,000. President Hsu on the 16th of November ordered immediate cessation of hostilities in the Chinese interior. The northern leaders were still war-like, but accepted his decision. The British, French, American, Japanese, and Italian representatives and myself met on the 22nd to uphold President Hsu's attitude. We took up the Japanese proposals, deciding that identical representations be made at Peking and Canton. My colleagues asked me to draft an aide mémoire which was to accompany the oral representations. Japan objected to including in it the American suggestion that no financial advances would be made now but that a reunited China would get support from the powers. The Japanese banks had bound themselves to make further payments to China, it was said. The aide mémoire deplored disunion, disavowed wishing to intervene, and hoped that, "while refraining from taking any steps which might obstruct peace, both parties would seek without delay, by frank confidence, the means of obtaining reconciliation." In the clause about obstructing peace I had in mind such acts as the election of a northern militarist as Vice-President. This, though in itself a peaceful act, would have raised an insurmountable obstacle to peace.
Five powers were represented in an audience before the President on December 2nd, the British minister speaking. The northern military leaders had held a conference at Tientsin. If, as reported, they wished to demand that Tuan be reinstalled as Premier, and that Tsao Kun, Military Governor of Chihli, be elected Vice-President, it would have embittered the south. The public therefore welcomed the representations of the powers. The American reference to loans was omitted; nevertheless, the situation produced made it no longer possible for any one country to lend money to either faction without putting itself in an equivocal position.
The Japanese felt moved on the 3rd of December to publish a statement about Chinese finance. Japan could not discourage financial and economic enterprises of its nationals in China, the statement read, "so long as these enterprises are the natural and legitimate outgrowth of special relations between the two neighbouring and friendly nations. At the same time they fully realize that under the existing conditions of domestic strife in China loans are liable to create misunderstandings and to interfere with peace in China. Accordingly, the Japanese Government has decided to withhold such financial assistance to China as is likely in their opinion to add to the complications of her internal situation."
This declaration left great latitude in the making of loans, yet it did, in fact, acknowledge the appropriateness of the American position. I asked Baron Hayashi about it. What exceptions would be made? The Baron was not very definite but said bona fide industrial loans were meant. "Most decidedly," he added in reply to my continued questioning, "I favour the strictest scrutiny of each loan, and mutual information among the governments about such transactions." He gave me plainly to understand that he did not approve, and had opposed, certain deals attempted by his countrymen in the semi-official group. I gathered his thorough disapproval of direct interference by the military in international affairs; but the military were in power in Japan, and its diplomats were helpless.
In accordance with its main suggestion, the American Government followed with a memorandum about financing China, sent to Great Britain, France, and Japan. It had already proposed a new consortium, including virtually all parties interested in each national group. The Currency Reform Loan should come first, with the shares of the British and French groups carried by the Americans and Japanese so long as the former could not furnish funds. Industrial as well as administrative loans should be included, and thus removed from the sphere of destructive competition.
The danger that industrial loans might be converted to political ends was patent. Yet in my recommendations I felt it difficult to avoid evils of monopoly, unless independent enterprises involving loans should be admitted.
The British and French banking representatives plainly wished to have America lead in the international financial reorganization of China. Japan, as its minister often said, desired the United States to reënter the Consortium—but he meant the old Consortium, in which Japan had the leadership. Japan did not readily take to the idea of the new Consortium. It declared that it favoured the proposal "on principle," but found it necessary to weigh every detail with considerable minuteness. This caused great delay.