China Consortium
In order to further link Hankou with Guangdong in the south and Sichuan in the west, the British and Chinese Corporation (a joint venture of HSBC and Jardine Matheson), the Pekin Syndicate (a British firm with many French investors), and a French grouping that included the Banque de l'Indochine created a joint investment vehicle, called Chinese Central Railways Ltd.[1]: 358 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.
[1]: 358 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.
By then, the U.S. administration led by president William Howard Taft had formulated a new understanding of the prior Open Door Policy, with more emphasis on commercial investment and thus dubbed the "Dollar diplomacy".
[4] 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.
[5] 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.
[1]: 359 Just as Chinese officials had feared, the conditions placed on China ignited protests that became the Railway Protection Movement, and contributed to triggering the 1911 Revolution and the demise of the Qing Empire in early 1912.
[1]: 360 The young republican regime's de facto strongman, Yuan Shikai, was unsuccessful in his efforts in January 1912 to raise domestic funding for the Beiyang Government, and thus had to seek further loans from the foreign powers.
[1]: 368–369 In early 1913, the U.S. administration led by newly elected President Woodrow Wilson aimed at a new formulation of the Open Door Policy that would abandon Taft's dollar diplomacy.
[1]: 356 Two days after the U.S. withdrawal, the assassination of Song Jiaoren 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.
The loan agreement was promptly signed at the HSBC building in the Beijing Legation Quarter on 26 April 1913, a day after Sun Yat-sen had denounced it in a public speech in Shanghai.
[1]: 355 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 in response to the Boxer Rebellion in 1900, and ended soon afterwards by the July 1914 Crisis and subsequent world war.
[6]: 42 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".
[6]: 43 On 30 January 1917, representatives of the Consortium's non-German members, namely France, Japan, Russia and the UK, met in London and petitioned their American peers to consider participation in a supplementary issue of the Reorganization Loan.
