Wilson Upsets China Loan Plan.

New York Times 100 years ago today, March 19, 1913:
Abandoning Six-Power Group, He Also Repudiates Knox's "Dollar Diplomacy."
PEKING DEAL "OBNOXIOUS"
Loan Conditions, He Says, Might Involve Us in Serious Meddling in Republic's Affairs.
WOULD HELP IN OTHER WAYS
New York Syndicate, Which Asked the Government's Position, Is Relieved by the Answer.
Special to The New York Times.
    WASHINGTON, March 18.— President Wilson officially announced late this afternoon that the United States Government, under his Administration, would no longer be a party to the "Six Power Group," which has been endeavoring to arrange a heavy loan to the Chinese Republic in behalf of banking interests of the countries concerned. Incidentally the President, in the statement prepared by him and given out at the White House, repudiates the "dollar diplomacy" of Philander C. Knox, Secretary of State under Taft.
    The President indorses the general policy of "no entangling foreign alliances," even in respect to arrangements for supervising the financial compacts of weaker Governments, and specifically asserts that the responsibility of the United States implied in the encouragement of a loan to be secured and administered under the conditions imposed by the Six Power Group is plain enough, and is obnoxious to the principles upon which this Government rests."
    These are the matters covered by the President's statement:
    A declaration of the Government's purpose to withdraw from co-operation with five other great powers in seeking to have China consent to specific conditions for the disbursement and repayment of a loan of $125,000,000, to be advanced by bankers who are subjects or citizens of these powers.
    An expression of disapproval of the conditions on which the loan was sought and refusal to assume responsibility of participation in the proposed loan which might involve interference in the political affairs of China.
    A declaration that this suggested responsibility is obnoxious to fundamental American principles.
    An expression of willingness to help develop Chinese resources.
    An expression of sympathy with the establishment of republican principles in China.
    A declaration of intention to urge legislation that will enable American bankers and business men to overcome present restrictions, mainly on account of laws affecting National banks, which hamper them in competing for Chinese trade with bankers and business men of other Governments.

Bryan Conferred with Wilson.
    The decision to follow this course, amounting practically to repudiation of the policy of the Taft Administration with respect to not only China but also certain Central American countries, was reached at a meeting of the Cabinet to-day. Secretary Bryan is in the West, but he discussed the subject with President Wilson Sunday prior to his departure.
    The statement announcing the new policy was written by President Wilson. It was the intention to withhold publication until to-morrow or Thursday, but an inkling of the Cabinet action leaked out, and the President directed that the statement be given to the press. It reads as follows :

    We are informed that at the request of the last Administration a certain group of American bankers undertook to participate in the loan, now desired by the Government of China (approximately $125,000,000).
    Our Government wished American bankers to participate along with the bankers of other nations, because it desired that the good-will of the United States toward China should be exhibited in this practical way, that American capital should have access to that great country, and that the United States should be in a position to share with the other powers any political responsibilities that might be associated with the development of the foreign relations of China in connection with her industrial and commercial enterprises. The present Administration has been asked by this group of bankers whether it would also request them to participate in the loan. The representatives of the bankers through whom the Administration was approached, 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. 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. 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 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.
    The Government of the United States is not only willing, but earnestly desirous, of aiding the great Chinese people in every way that is consistent with their untrammeled development and its own immemorial principles. The awakening of the people of China to a consciousness of their possibilities under free government is the most significant, if not the most momentous, event of our generation. With this movement and aspiration the American people are in profound sympathy. They certainly wish to participate, and participate very generously, in opening to the Chinese and to the use of the world the almost untouched and perhaps unrivaled resources of China.
    The Government of the United States is earnestly desirous of promoting the most extended and intimate trade relationships between this country and the Chinese Republic.
    The present Administration will urge and support the legislative measures necessary to give American merchants, manufacturers, contractors, and engineers the banking and other financial facilities which they now lack, and without which they are at a serious disadvantage as compared with their industrial and commercial rivals. This is its duty. This is the main material interest of its citizens in the development of China.
    Our interests are those of the open door — a door of friendship and mutual advantage. This is the only door we care to enter.

Bankers Asked Statement of Attitude
    This statement by President Wilson at this time is the direct result of a call received by Secretary Bryan on March 9 from Henry P. Davison and Willard D. Straight of J. P. Morgan & Co. and Paul M. Warburg of Kuhn, Loeb & Co., who wished to know whether the Administration desired their firms to participate in the pending loan, of which $25,000,000 of the $125,000,000 total was assigned to the American syndicate. Messrs. Davison, Straight, and Warburg told Secretary Bryan that they would not continue as parties to the loan unless expressly requested to do so by this Government.
    To-day's statement makes it certain that there will be no participation in the Six-Power loan by the New York bankers. There will be no embarrassment connected with the withdrawal of the American syndicate. Provision was made in the papers of agreement by which this could be done in certain contingencies, and one contingency was the withdrawal of Government backing.
    Under the agreement the powers were to appoint representatives to supervise the collection of Chinese revenues, to be applied to the payment of interest, and in addition agents of the powers were to supervise the expenditure of the borrowed money — that is, were to see that it was applied to the purposes for which it was obtained. China objected to some of these conditions as too harsh, and much of the delay in concluding the negotiations has been due to Chinese resentment.
    The discussion at the Cabinet meeting to-day indicated that it was the Administration's hope that the changed policy would result in opening the doors of opportunity in China to independent American bankers and business men, who wished to invest in Chinese enterprises. One of the main objections to the Knox policies, voiced at the meeting, was that it pledged the United States to establish a monopoly in loans for a limited group of American bankers.
    The promise, contained in President Wilson's statement, that his administration would urge legislative measures to give American merchants, manufacturers, contractors, and engineers "the banking and other financial facilities which they now lack," has especial reference to general complaint of American business men that they are obliged to do their business abroad through foreign bankers. The main complaint has direct application to conditions in Central America and South America, where German and British banks do most of the foreign banking business.
    Our banking laws do not permit National banks to establish branches in foreign countries, and the statement of the President means that he will seek to have Congress enact legislation that will enable big banks in the United States to maintain branches abroad. American business men having dealings with Latin-America assert that through the necessity of conducting their affairs through foreign banks the prices at which they sell as well as other trade secrets become known to their rivals.

End of "Dollar Diplomacy."
    The policy of the "Wilson Administration, as announced to-day, means the ending of the so-called "dollar diplomacy," at least for four years. This "dollar diplomacy" was based on the conviction that it was the duty of the Government to use its best efforts to obtain business opportunities for its manufacturers, merchants, contractors, bankers, and others in foreign lands. It was through the use of this Government's direct influence that American shipbuilding firms obtained contracts for building battleships for the Argentine Republic.
    The first exemplification of Mr. Knox's plan of helping American enterprise was found in the treaty arrangements with Nicaragua and Honduras, by which this Government was virtually to stand sponsor for the repayment by those countries of loans made to them by American bankers. These treaties were never ratified on account of opposition in the Senate to the obligation assumed by the United States to enforce the terms of an arrangement with private citizens of this country through assuming control of the collection of revenues of the Latin-American republics concerned.
    The same principle was involved, however, in the Santo Dominican treaty negotiated under the Roosevelt Administration and ultimately ratified by the Senate. The arrangement is still in force, and Dominican revenues are collected and disbursed under the direction of persons appointed by the Government of the United States. In the Roosevelt régime the term "dollar diplomacy" was not used, but what was done in the case of the Dominican Republic was really the entering wedge for the policy of Mr. Knox, which is now repudiated by the Wilson Administration.
    One paragraph in President Wilson's statement is interpreted here as foreshadowing an intention to grant early recognition to the new Chinese Republic. The President mentions the awakening of the people of China "to their possibilities under free Government." and then adds:
    "With this movement and aspiration the American people are in profound sympathy."
    It is not doubted here that steps for recognition will be taken soon, but no authoritative statement on the subject is forthcoming.