Chinese nationalists The Kuomintang (KMT), also referred to as the Guomindang (GMD), the Nationalist Party of China (NPC) or the Chinese Nationalist Party (CNP), is a major political party in the Republic of China, initially on the Chinese mainland and in Taiw ...

Chinese Communists The Chinese Communist Party (CCP), officially the Communist Party of China (CPC), is the founding and sole ruling party of the People's Republic of China (PRC). Under the leadership of Mao Zedong, the CCP emerged victorious in the Chinese Ci ...

colonialism Colonialism is a practice or policy of control by one people or power over other people or areas, often by establishing colonies and generally with the aim of economic dominance. In the process of colonisation, colonisers may impose their relig ...

Qing dynasty The Qing dynasty ( ), officially the Great Qing,, was a Manchu-led imperial dynasty of China and the last orthodox dynasty in Chinese history. It emerged from the Later Jin dynasty founded by the Jianzhou Jurchens, a Tungusic-speak ...

Treaty of Shimonoseki The , also known as the Treaty of Maguan () in China and in the period before and during World War II in Japan, was a treaty signed at the , Shimonoseki, Japan on April 17, 1895, between the Empire of Japan and Qing China, ending the Firs ...

tael Tael (),"Tael" entry
at the

Boxer Protocol The Boxer Protocol was signed on September 7, 1901, between the Qing Empire of China and the Eight-Nation Alliance that had provided military forces (including Austria-Hungary, France, Germany, United Kingdom, Italy, Japan, Russia, and the Unit ...

of 1901 (450 million taels), and with the scramble for railway concessions in the late 19th and early 20th centuries. The context was further framed by the British-French

Entente Cordiale The Entente Cordiale (; ) comprised a series of agreements signed on 8 April 1904 between the United Kingdom and the French Republic which saw a significant improvement in Anglo-French relations. Beyond the immediate concerns of colonial de ...

, concluded in April 1904, and by the Japanese victory in the

Russo-Japanese War The Russo-Japanese War ( ja, 日露戦争, Nichiro sensō, Japanese-Russian War; russian: Ру́сско-япóнская войнá, Rússko-yapónskaya voyná) was fought between the Empire of Japan and the Russian Empire during 1904 and 1 ...

of 1904–1905, which stimulated nationalist sentiment in China. The Consortium's origins can be traced to a joint British-French initiative in 1904 for joint funding of railway lines in the central area of China. By then,

Hankou Hankou, alternately romanized as Hankow (), was one of the three towns (the other two were Wuchang and Hanyang) merged to become modern-day Wuhan city, the capital of the Hubei province, China. It stands north of the Han and Yangtze Rivers wher ...

(now part of

Wuhan Wuhan (, ; ; ) is the capital of Hubei, Hubei Province in the China, People's Republic of China. It is the largest city in Hubei and the most populous city in Central China, with a population of over eleven million, the List of cities in China ...

, near the center of

China proper China proper, Inner China, or the Eighteen Provinces is a term used by some Western writers in reference to the "core" regions of the Manchu-led Qing dynasty of China. This term is used to express a distinction between the "core" regions popu ...

) was being linked to the northern capital of

Beijing } Beijing ( ; ; ), alternatively romanized as Peking ( ), is the capital of the People's Republic of China. It is the center of power and development of the country. Beijing is the world's most populous national capital city, with over 21 ...

with funding by Belgian and French investors. In order to further link Hankou with

Guangdong Guangdong (, ), alternatively romanized as Canton or Kwangtung, is a coastal province in South China on the north shore of the South China Sea. The capital of the province is Guangzhou. With a population of 126.01 million (as of 2020) ...

in the south and

Sichuan Sichuan (; zh, c=, labels=no, ; zh, p=Sìchuān; alternatively romanized as Szechuan or Szechwan; formerly also referred to as "West China" or "Western China" by Protestant missions) is a province in Southwest China occupying most of the ...

in the west, the

British and Chinese Corporation Jardine, Matheson & Co., later Jardine, Matheson & Co., Ltd., forerunner of today's Jardine Matheson Holdings, was a Far Eastern company founded in 1832 by Scotsmen William Jardine and James Matheson as senior partners. Trafficking opium in ...

(a joint venture of

HSBC HSBC Holdings plc is a British multinational universal bank and financial services holding company. It is the largest bank in Europe by total assets ahead of BNP Paribas, with US$2.953 trillion as of December 2021. In 2021, HSBC had $10.8 tri ...

and

Jardine Matheson Jardine Matheson Holdings Limited (also known as Jardines) is a Hong Kong-based Bermuda-domiciled British multinational conglomerate. It has a primary listing on the London Stock Exchange and secondary listings on the Singapore Exchange and ...

), the Pekin Syndicate (a British firm with many French investors), and a French grouping that included the

Banque de l'Indochine The Banque de l'Indochine (), originally Banque de l'Indo-Chine ("Bank of Indochina"), was a bank created in 1875 in Paris to finance French colonial development in Asia. As a bank of issue in Indochina until 1952 (and in French Paci ...

created a joint investment vehicle, called Chinese Central Railways Ltd. The British-French arrangement of 1904 was explicitly open to future American and also Belgian participation, even though no American participant firmly committed at the time. In subsequent years, Chinese official

Zhang Zhidong Zhang Zhidong () (4 September 18375 October 1909) was a Chinese politician who lived during the late Qing dynasty. Along with Zeng Guofan, Li Hongzhang and Zuo Zongtang, Zhang Zhidong was one of the four most famous officials of the late Qing ...

played Western powers against each other to secure better borrowing conditions, and offered the opportunity to finance the central Chinese railway network, by then known as the Hukuang Railway (with reference to an ancient name for much of the area between the

Yangtze The Yangtze or Yangzi ( or ; ) is the longest river in Asia, the third-longest in the world, and the longest in the world to flow entirely within one country. It rises at Jari Hill in the Tanggula Mountains (Tibetan Plateau) and flows ...

and the Southern Chinese coastline), to German financiers instead. Zhang's move in turn prompted the British and French bankers to adopt a more inclusive approach vis-à-vis their German peers.

Establishment of the consortium

In the spring of 1909, an agreement crystallized between the British, French and German bankers, who decided to go ahead despite reminders from American counterparts about the pledge back in 1904 to include them in the deal. A formal agreement to form the three-nation banking consortium was finalized in

Beijing } Beijing ( ; ; ), alternatively romanized as Peking ( ), is the capital of the People's Republic of China. It is the center of power and development of the country. Beijing is the world's most populous national capital city, with over 21 ...

on by

HSBC HSBC Holdings plc is a British multinational universal bank and financial services holding company. It is the largest bank in Europe by total assets ahead of BNP Paribas, with US$2.953 trillion as of December 2021. In 2021, HSBC had $10.8 tri ...

, the

Deutsch-Asiatische Bank Deutsch-Asiatische Bank (DAB) () was a foreign bank in China. Its principal activity was trade financing, but together with English and French banks, it also played a role in the underwriting of bonds for the Chinese government and in the fina ...

and

Banque de l'Indochine The Banque de l'Indochine (), originally Banque de l'Indo-Chine ("Bank of Indochina"), was a bank created in 1875 in Paris to finance French colonial development in Asia. As a bank of issue in Indochina until 1952 (and in French Paci ...

, for a loan of £5.5 million subject to Chinese government approval. The British government, however, soon again adopted the American view that the 1904 arrangements were binding, and thus advocated inclusion of American partners. By then, the U.S. administration led by president

William Howard Taft William Howard Taft (September 15, 1857March 8, 1930) was the 27th president of the United States (1909–1913) and the tenth chief justice of the United States (1921–1930), the only person to have held both offices. Taft was elected pr ...

had formulated a new understanding of the prior

Open Door Policy The Open Door Policy () is the United States diplomatic policy established in the late 19th and early 20th century that called for a system of equal trade and investment and to guarantee the territorial integrity of Qing China. The policy wa ...

, with more emphasis on commercial investment and thus dubbed the "

Dollar diplomacy Dollar diplomacy of the United States, particularly during the presidency of William Howard Taft (1909–1913) was a form of American foreign policy to minimize the use or threat of military force and instead further its aims in Latin America and ...

". This reversal opened a new sequence of protracted negotiations to include American bankers led by J.P. Morgan & Co. Eventually, an agreement was found at a meeting in Paris at the Banque de l'Indochine head office, on . The contracting parties were, for the UK, the

British and Chinese Corporation Jardine, Matheson & Co., later Jardine, Matheson & Co., Ltd., forerunner of today's Jardine Matheson Holdings, was a Far Eastern company founded in 1832 by Scotsmen William Jardine and James Matheson as senior partners. Trafficking opium in ...

and Chinese Central Railways Ltd, with Carl Meyer, C. S. Addis, and G. Jameson as signatories; for Germany, the Deutsch-Asiatische Bank, with

Franz Urbig Franz Urbig (23 January 1864 – 28 September 1944) was a German banker. He joined the Disconto-Gesellschaft as a trainee on 15 July 1884 and built much of his career and reputation within this bank in Southeast Asia during the final part of the ...

and Emil Rehders; for France, the Banque de l'Indochine, with politician

Joseph Caillaux Joseph-Marie–Auguste Caillaux (; 30 March 1863 Le Mans – 22 November 1944 Mamers) was a French politician of the Third Republic. He was a leader of the French Radical Party and Minister of Finance, but his progressive views in opposition ...

, Stanislas Simon and Maurice Casenave (Banque de l'Indochine), and Émile Ullmann (Comptoir National d'Escompte de Paris); and for the U.S., Morgan's UK affiliate Morgan, Grenfell & Co., with Edward Grenfell,

Henry P. Davison Henry Pomeroy Davison Sr. (June 12, 1867 – May 6, 1922) was an American banker and philanthropist. Biography Henry Pomeroy Davison was born on June 12, 1867 in Troy, Pennsylvania, the oldest of the four children of Henrietta and George B. Davis ...

,

Max Warburg Max Moritz Warburg (5 June 1867 – 26 December 1946) was a German banker and scion of the wealthy Warburg family based in Hamburg, Germany. Early life Max Warburg was one of seven children born to Moritz Warburg, the director of the family's Ha ...

, Henry H. Harjes, and Willard D. Straight as signatories.

Hukuang Railway loan and 1911 Revolution

The consortium bankers then started discussing the lending terms with the Chinese authorities, which were hesitant to accept the demanding conditions, a valid concern as subsequent events would demonstrate. Finally, on , the four-nation Consortium granted a loan of £6 million to finance the Hukuang Railway, by then defined as the tracks from the northern border of Guangdong to Hankou and from there to the eastern border of Sichuan. In April 1911, the Consortium had separately granted a loan of £10 million for Chinese currency reform, establishing its relevance beyond its original scope of financing railway investment. Just as Chinese officials had feared, the conditions placed on China ignited protests that became the

Railway Protection Movement The Railway Protection Movement (), also known as the "Railway Rights Protection Movement", was a political protest movement that erupted in 1911 in late Qing China against the Qing government's plan to nationalize local railway development proje ...

, and contributed to triggering the

1911 Revolution The 1911 Revolution, also known as the Xinhai Revolution or Hsinhai Revolution, ended China's last imperial dynasty, the Manchu-led Qing dynasty, and led to the establishment of the Republic of China. The revolution was the culmination of a d ...

and the demise of the Qing Empire in early 1912. The Consortium opted for a stance of neutrality during the revolutionary turmoil, and rejected desperate requests of the Manchu regime for emergency funding during that period. The young republican regime's ''de facto'' strongman,

Yuan Shikai Yuan Shikai (; 16 September 1859 – 6 June 1916) was a Chinese military and government official who rose to power during the late Qing dynasty and eventually ended the Qing dynasty rule of China in 1912, later becoming the Emperor of China. H ...

, was unsuccessful in his efforts in January 1912 to raise domestic funding for the

Beiyang Government The Beiyang government (), officially the Republic of China (), sometimes spelled Peiyang Government, refers to the government of the Republic of China which sat in its capital Peking (Beijing) between 1912 and 1928. It was internationally r ...

, and thus had to seek further loans from the foreign powers. As soon as , the

Hongkong and Shanghai Bank The Hongkong and Shanghai Banking Corporation Limited (), commonly known as HSBC (), was the parent entity of the multinational HSBC banking group until 1991, and is now its Hong Kong-based Asia-Pacific subsidiary. The largest bank in Hong ...

made an advance of two million

taels Tael (),"Tael" entry
at the

Tang Shaoyi Tang Shaoyi (; 2 January 1862 – 30 September 1938), also spelled Tong Shao Yi, courtesy name Shaochuan (), was a Chinese statesman who briefly served as the first Premier of the Republic of China in 1912. In 1938, he was assassinated by the ...

, Republican China's first Prime Minister, aimed at a £60 million loan from the Consortium to support the fledgling new regime. The Consortium, however, soon found out that Tang was separately seeking funding from a competing Belgian-British syndicate, and suspended its advances to the government in response; Tang had to officially cancel the Belgian-British deal on , which further entrenched the Consortium's position. John Jordan, a British diplomat who had initially been skeptical of the entire consortium approach, established a strict scheme to control Chinese expenditure as part of the loan negotiations, to be overseen by the foreign commissioners of the

Chinese Maritime Customs Service The Chinese Maritime Customs Service was a Chinese governmental tax collection agency and information service from its founding in 1854 until it split in 1949 into services operating in the Republic of China on Taiwan, and in the People's Republ ...

.

Consortium expansion to Japan and Russia

Japan and Russia subsequently asked to join the consortium which was thus enlarged and became known as the "six-power consortium", by agreement of , scheduled to expire five years later in June 1917. The consortium was thus composed of six national groups: * a British group led by the

Hongkong and Shanghai Bank The Hongkong and Shanghai Banking Corporation Limited (), commonly known as HSBC (), was the parent entity of the multinational HSBC banking group until 1991, and is now its Hong Kong-based Asia-Pacific subsidiary. The largest bank in Hong ...

, joined by late 1912 by

Barings Bank Barings Bank was a British merchant bank based in London, and one of England's List of oldest banks in continuous operation, oldest merchant banks after Berenberg Bank, Barings' close collaborator and German representative. It was founded in 1762 ...

,

London County and Westminster Bank Westminster Bank was a British retail bank which operated in England and Wales from 1834 until its merger into the National Westminster Bank in 1970; it continued to exist as a dormant registered non-trading company until 4 July 2017 when it ...

,

Parr's Bank Parr's Bank Limited was a bank that existed from 1782 to 1918. It was founded as Parr & Co. in Warrington, then in the county of Lancashire in the United Kingdom. In 1918 it was acquired by London County and Westminster Bank, and it was thus one ...

, and

Schroders Schroders plc is a British multinational asset management company, founded in 1804. The company employs over 5,000 people worldwide in 32 locations around Europe, America, Asia, Africa and the Middle East. Headquartered in the City of London, it ...

; * a German group led by the

Deutsch-Asiatische Bank Deutsch-Asiatische Bank (DAB) () was a foreign bank in China. Its principal activity was trade financing, but together with English and French banks, it also played a role in the underwriting of bonds for the Chinese government and in the fina ...

and including 14 other institutions, among which the

Deutsche Bank Deutsche Bank AG (), sometimes referred to simply as Deutsche, is a German multinational investment bank and financial services company headquartered in Frankfurt, Germany, and dual-listed on the Frankfurt Stock Exchange and the New York Sto ...

and

Dresdner Bank Dresdner Bank AG was a German bank and was based in Frankfurt. It was one of Germany's largest banking corporations and was acquired by competitor Commerzbank in May 2009. History 19th century The Dresdner Bank was established on 12 Novemb ...

: * a French group led by the

Banque de l'Indochine The Banque de l'Indochine (), originally Banque de l'Indo-Chine ("Bank of Indochina"), was a bank created in 1875 in Paris to finance French colonial development in Asia. As a bank of issue in Indochina until 1952 (and in French Paci ...

and including the

Comptoir National d’Escompte de Paris The Comptoir national d'escompte de Paris (CNEP), from 1854 to 1889 Comptoir d'escompte de Paris (CEP), was a major French bank active from 1848 to 1966. The CEP was created by decree on 10 March 1848 by the French Provisional Government, in res ...

,

Crédit Industriel et Commercial The Crédit Industriel et Commercial (CIC, "Industrial and Commercial Credit Company") is a bank and financial services group in France, founded in 1859. It has been majority owned by Crédit Mutuel, one of the country's top five banking groups, s ...

,

Banque de Paris et des Pays-Bas The Banque de Paris et des Pays-Bas (“Bank of Paris and the Netherlands”), generally referred to from 1982 as Paribas, was a French investment bank based in Paris. In May 2000, it merged with the Banque Nationale de Paris to form BNP Paribas. ...

,

Société Générale Société Générale S.A. (), colloquially known in English as SocGen (), is a French-based multinational financial services company founded in 1864, registered in downtown Paris and headquartered nearby in La Défense. Société Générale ...

, ,

Banque de l'Union Parisienne The Banque de l'Union Parisienne (BUP) was a French investment bank, created in 1904 and merged into Crédit du Nord in 1973. History Société Française et Belge de Banque et d'Escompte From its inception, the Société Générale de Belgique ...

, and

Crédit Lyonnais The Crédit Lyonnais (, "Lyon Credit ompany) was a major French bank, created in 1863 and absorbed by former rival Crédit Agricole in 2003. Its head office was initially in Lyon but moved to Paris in 1882. In the early years of the 20th cent ...

; * an American group led by J.P. Morgan & Co. and also including Kuhn, Loeb & Co., the

International Banking Corporation Citibank, N. A. (N. A. stands for " National Association") is the primary U.S. banking subsidiary of financial services multinational Citigroup. Citibank was founded in 1812 as the City Bank of New York, and later became First National City Ba ...

(a vehicle set up by

National City Bank of New York Citibank, N. A. (N. A. stands for " National Association") is the primary U.S. banking subsidiary of financial services multinational Citigroup. Citibank was founded in 1812 as the City Bank of New York, and later became First National City ...

for its international investments), and First National Bank of New York; * a Russian-led group with the Russo-Asiatic Bank but also non-Russian participants such as the

Société Générale de Belgique The ' ( nl, Generale Maatschappij van België; literally "General Company of Belgium") was a large Belgian bank and later holdings company which existed between 1822 and 2003. The ''Société générale'' was originally founded as an investme ...

; * a Japanese group consisting solely of the

Yokohama Specie Bank was a Japanese bank founded in Yokohama, Japan in the year 1880. Its assets were transferred to The Bank of Tokyo (now MUFG Bank) in 1946. The bank played a significant role in Japanese overseas trade, especially with China. The original b ...

.

Competing lending arrangements and U.S. withdrawal

Meanwhile, the unpopularity of the consortium led the Republican government to explore alternative financing options. It agreed later in 1912 to sponsor the

Banque Industrielle de Chine The Banque Industrielle de Chine (BIC, "Industrial Bank of China"; zh, 中法實業銀行) was a French bank with its main activities in China and French Indochina. It was created in 1913, expanded rapidly, but collapsed in 1921, causing major ...

, and sought funding from a British syndicate assembled by financier Birch Crisp, and separately from Belgian and French investors (including the

Société Générale de Belgique The ' ( nl, Generale Maatschappij van België; literally "General Company of Belgium") was a large Belgian bank and later holdings company which existed between 1822 and 2003. The ''Société générale'' was originally founded as an investme ...

, the

Empain group The Empain group was a loose grouping of companies founded by Édouard Empain (1852–1929) of Belgium and controlled by the Empain family. From 1881 until merging with Schneider & Cie in 1969, the companies engaged in a broad range of activities ...

, the Banque Sino-Belge and their French partners) for a railway line in western China. This was not enough, however, to meet China's financing needs and did not deprive the Consortium of its relevance. By the end of 1912, an agreement of principle was reached between the Beiyang Government and the Consortium for a $25 million loan backed by revenue from the Chinese salt tax. The finalization of the loan, however, was further delayed by disputes among the foreign powers about the loan's governance arrangements. In early 1913, the U.S. administration led by newly elected President

Woodrow Wilson Thomas Woodrow Wilson (December 28, 1856February 3, 1924) was an American politician and academic who served as the 28th president of the United States from 1913 to 1921. A member of the Democratic Party, Wilson served as the president of ...

aimed at a new formulation of the Open Door Policy that would abandon Taft's dollar diplomacy. On , it decided to terminate American participation in the consortium, which was therefore reduced to five participating powers and banks. The American withdrawal was popular in China, just as the Consortium and the loan were controversial.

Reorganization Loan of 1913

Two days after the U.S. withdrawal, the assassination of

Song Jiaoren Song Jiaoren (, ; Given name at birth: Liàn 鍊; Courtesy name: Dùnchū 鈍初) (5 April 1882 – 22 March 1913) was a Chinese republican revolutionary, political leader and a founder of the Kuomintang (KMT). Song Jiaoren led the KMT to elec ...

triggered a dramatic escalation of political tension in Beijing, and led Yuan Shikai to reduce his demands in the negotiation with the now five-power consortium in order to have rapid access to fresh funds. Yuan persuaded the bankers to skip ratification of the loan by the

National Assembly In politics, a national assembly is either a unicameral legislature, the lower house of a bicameral legislature, or both houses of a bicameral legislature together. In the English language it generally means "an assembly composed of the repre ...

. The loan agreement was promptly signed at the HSBC building in the

Beijing Legation Quarter The Peking Legation Quarter was the area in Peking (Beijing), China where a number of foreign legations were located between 1861 and 1959. In the Chinese language, the area is known as ''Dong Jiaomin Xiang'' (), which is the name of the ''huto ...

on , a day after

Sun Yat-sen Sun Yat-sen (; also known by several other names; 12 November 1866 – 12 March 1925)Singtao daily. Saturday edition. 23 October 2010. section A18. Sun Yat-sen Xinhai revolution 100th anniversary edition . was a Chinese politician who serve ...

had denounced it in a public speech in Shanghai. The loan, of £25 million including repayment of the departed American bankers, became known as the Reorganization Loan, or in Chinese historiography, the Grand Loan of the Second Year of the Republic of China. It was widely criticized for giving

Yuan Shikai Yuan Shikai (; 16 September 1859 – 6 June 1916) was a Chinese military and government official who rose to power during the late Qing dynasty and eventually ended the Qing dynasty rule of China in 1912, later becoming the Emperor of China. H ...

the means to defeat the opposition to his rule that is often referred to as China's Second Revolution. The reorganization loan capped a 13-year period of broad unity of action of the foreign powers in China, opened by the

Eight-Nation Alliance The Eight-Nation Alliance was a multinational military coalition that invaded northern China in 1900 with the stated aim of relieving the foreign legations in Beijing, then besieged by the popular Boxer militia, who were determined to remove fo ...

in response to the

Boxer Rebellion The Boxer Rebellion, also known as the Boxer Uprising, the Boxer Insurrection, or the Yihetuan Movement, was an anti-foreign, anti-colonial, and anti-Christian uprising in China between 1899 and 1901, towards the end of the Qing dynasty, by ...

in 1900, and ended soon afterwards by the July 1914 Crisis and subsequent world war.

World War I

During

World War I World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, the United States, and the Ottoman Empire, with fightin ...

, the China Consortium was hobbled by the fact that Germany was at war with the other members, and the other European belligerents also faced increasing financial distress. Japan stepped up its bilateral lending to China, which provided the bulk of the country's external financing during that period. In the U.S., the Wilson administration gradually changed its stance as it sought to defend the fledgling Chinese republic against increasingly aggressive Japanese encroachments, including the

Twenty-One Demands The Twenty-One Demands ( ja, 対華21ヶ条要求, Taika Nijūikkajō Yōkyū; ) was a set of demands made during the First World War by the Empire of Japan under Prime Minister Ōkuma Shigenobu to the government of the Republic of China on 18 ...

formulated by the Imperial Japanese government in early 1915. But throughout his first term, Wilson's preference was to only encourage private lending by U.S. banks in China without any government guarantee, and that did not happen given the high risks involved and the more attractive opportunities for American banks to lend elsewhere, particularly in wartime Europe. Conditions changed in late 1916 after Wilson's reelection and the arrival in October of a new Japanese government led by Seiki Terauchi, which adopted a policy of "no coercion in China". On , representatives of the Consortium's non-German members, namely France, Japan, Russia and the UK, met in

London London is the capital and largest city of England and the United Kingdom, with a population of just under 9 million. It stands on the River Thames in south-east England at the head of a estuary down to the North Sea, and has been a majo ...

and petitioned their American peers to consider participation in a supplementary issue of the Reorganization Loan. The State Department, however, was reluctant to endorse the plan. That effectively put an end to the First Consortium's activity, whose agreement in the five-power format had expired anyway in June 1917. In August 1917, the Yokohama Specie Bank provided a bilateral loan of 10 million yen to the Chinese government, which it called the Second Reorganization Loan.

Second China Consortium

Formation

By late November 1917, Wilson was persuaded that a new consortium should be organized with France and the UK despite their financial weakness, Japan, and an expanded group of American banks. (Russia had left the Chinese scene following the

October Revolution The October Revolution,. officially known as the Great October Socialist Revolution. in the Soviet Union, also known as the Bolshevik Revolution, was a revolution in Russia led by the Bolshevik Party of Vladimir Lenin that was a key moment ...

.) Throughout the first months of 1918, however, the U.S. delayed decision, leaving the Japanese to lend not only to the government in Beijing but also to other Chinese warring factions. Eventually, on , Wilson approved a proposal by Secretary of State

Robert Lansing Robert Lansing (; October 17, 1864 – October 30, 1928) was an American lawyer and diplomat who served as Counselor to the State Department at the outbreak of World War I, and then as United States Secretary of State under President Woodrow Wils ...

to start negotiations on a new consortium. The

United States Department of State The United States Department of State (DOS), or State Department, is an executive department of the U.S. federal government responsible for the country's foreign policy and relations. Equivalent to the ministry of foreign affairs of other n ...

aimed both at limiting if not eliminating foreign spheres of influence in China, and at securing equal access to the Chinese market for American capital. The U.S. subsequently invited France, Japan and the UK to negotiate a new agreement, and the four countries' delegates eventually adopted a draft agreement on as they were meeting for the Paris Peace Conference. The Japanese government accepted the draft agreement on , but with a reservation with regard to the

Liaodong Peninsula The Liaodong Peninsula (also Liaotung Peninsula, ) is a peninsula in southern Liaoning province in Northeast China, and makes up the southwestern coastal half of the Liaodong region. It is located between the mouths of the Daliao River (the ...

(then referred to as South Manchuria) and

Mongolia Mongolia; Mongolian script: , , ; lit. "Mongol Nation" or "State of Mongolia" () is a landlocked country in East Asia, bordered by Russia to the north and China to the south. It covers an area of , with a population of just 3.3 million, ...

. Compromise language was subsequently agreed to that effect between British and Japanese diplomats, ignoring Chinese objections. The agreement on the new consortium was eventually finalized by negotiators from the four countries and signed on by representatives of the

Hongkong and Shanghai Banking Corporation The Hongkong and Shanghai Banking Corporation Limited (), commonly known as HSBC (), was the parent entity of the multinational HSBC banking group until 1991, and is now its Hong Kong-based Asia-Pacific subsidiary. The largest bank in Hong K ...

, the

Banque de l'Indochine The Banque de l'Indochine (), originally Banque de l'Indo-Chine ("Bank of Indochina"), was a bank created in 1875 in Paris to finance French colonial development in Asia. As a bank of issue in Indochina until 1952 (and in French Paci ...

,

Yokohama Specie Bank was a Japanese bank founded in Yokohama, Japan in the year 1880. Its assets were transferred to The Bank of Tokyo (now MUFG Bank) in 1946. The bank played a significant role in Japanese overseas trade, especially with China. The original b ...

, and the participating American banks: J.P. Morgan & Co., Kuhn, Loeb & Co.,

National City Bank of New York Citibank, N. A. (N. A. stands for " National Association") is the primary U.S. banking subsidiary of financial services multinational Citigroup. Citibank was founded in 1812 as the City Bank of New York, and later became First National City ...

,

Guaranty Trust Company of New York J.P. Morgan & Co. is a commercial and investment banking institution founded by J. P. Morgan in 1871. Through a series of mergers and acquisitions, the company is now a subsidiary of JPMorgan Chase, one of the largest banking institutions in t ...

, Continental and Commercial Trust and Savings Bank of Chicago,

Chase National Bank JPMorgan Chase Bank, N.A., Trade name, doing business as Chase Bank or often as Chase, is an American national bank headquartered in New York City, that constitutes the retail banking, consumer and commercial bank, commercial banking subsidiar ...

, and Lee, Higginson & Co. It was notified to the Chinese government in

Beijing } Beijing ( ; ; ), alternatively romanized as Peking ( ), is the capital of the People's Republic of China. It is the center of power and development of the country. Beijing is the world's most populous national capital city, with over 21 ...

on . Belgium joined the consortium soon afterwards.

Operation

The new consortium was unable to make loans, because of the political turmoil within China and of the divergent interests of its member countries. It kept existing formally until 1939, however, with regular meetings of bankers forming its council until 1925. By March 1922, its British members included

HSBC HSBC Holdings plc is a British multinational universal bank and financial services holding company. It is the largest bank in Europe by total assets ahead of BNP Paribas, with US$2.953 trillion as of December 2021. In 2021, HSBC had $10.8 tri ...

,

Barings Bank Barings Bank was a British merchant bank based in London, and one of England's List of oldest banks in continuous operation, oldest merchant banks after Berenberg Bank, Barings' close collaborator and German representative. It was founded in 1762 ...

,

London County and Westminster Bank Westminster Bank was a British retail bank which operated in England and Wales from 1834 until its merger into the National Westminster Bank in 1970; it continued to exist as a dormant registered non-trading company until 4 July 2017 when it ...

,

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, N.M. Rothschild & Sons, and British Trade Corporation. In 1934, Japanese ambassador to China referred to the consortium agreement of October 1920 to object to the creation of the

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, but his argument was rejected by the American authorities.

Notes

{{reflist Financial history of China History of banking

First China Consortium

Background

Establishment of the consortium

Hukuang Railway loan and 1911 Revolution

Consortium expansion to Japan and Russia

Competing lending arrangements and U.S. withdrawal

Reorganization Loan of 1913

World War I

Second China Consortium

Formation

Operation

See also

Notes