Page images

The American Government desires not to place in the way of the British Group obstacles which might prevent the acceptance by British interests of the offer recently made by the Chinese Government of a contract for the construction of a railway from Canton to Meihsien. Therefore, and in view of the pertinence and importance of those factors in the existing situation, as set forth in the memorandum_under reference, and in the light of the opinion expressed by the British Government that features in the existing situation render perseverance in adherence to the existing Agreement impracticable and that in the light of the attitude of the Chinese Government toward the Consortium no good purpose would be served by attempting to revise the Agreement, the American Government will, although with sincere regret, inform the American banking group party to the Consortium Agreement of the British Government's proposal that the Agreement be dissolved and will state that this Government will interpose no objection to participation by the American Group in negotiations, if and when proposed, among the banking groups, looking toward dissolution of the Consortium, as proposed.

2. Atherton may add orally that his Government is sympathetically disposed in principle toward the suggestion made at one point in the British Government's memorandum that effort should be made to "discover whether there is any method by which, while restoring to its individual members the required liberty of action as regards industrial enterprises, the major objects of the Consortium could be attained by keeping in being co-operation between the governments concerned (including the Chinese Government).”

3. Please also inform Cadogan orally that the Department will, in making known to the American Group the British Government's proposal and the attitude of the American Government in regard thereto, ask the American Group to consider the entire matter as strictly confidential to itself and not for communication to any of the other banking groups until such time as one of those groups, presumably the British, approaches it.

4. Inform Department by telegram when you have delivered memorandum and at the same time report such comments as may be made by Cadogan.


893.51/6330 : Telegram

The Ambassador in the United Kingdom (Bingham) to the Secretary

of State

LONDON, March 15, 1937—5 p. m.

Received March 15—1:45 p. m.] 143. Department's 82, March 12, 8 [6] p. m. I presented memorandum this afternoon. After reading it Cadogan said he hoped it did not mean the United States Government was unsympathetic to the views of his Government but from the language of it felt encouraged to believe this was not the case. As regards paragraph 2 he stated his Government was also in sympathy with the suggestion and later would want to "explore the question further with you.” Before that, however, he would have to consult with the Treasury and Leith-Ross * and possibly after that Sir Charles Addis. In any event he felt sure that his Government considered favorably retaining such major objects of the Consortium as might prove possible.

In conclusion he again defended the British position in detail and was obviously satisfied that, according to his interpretation, the American Government had not taken any exception.


793.94/8543 : Telegram

The Ambassador in China (Johnson) to the Secretary of State

NANKING, March 18, 1937–9 a. m.

[Received 9:20 a. m.] 121. Our 119, March 16, 1:00 [3:00] p. m.49

1. Japanese Economic Commission yesterday morning ended 2-day visit here and proceeded to Shanghai. How long it will remain there and whether it will visit North China and other places has not been announced although press reports quote Peiping Japanese Embassy as stating that one important member, president of bank of Chosen, Kato, will shortly visit Peiping.

2. Additional entertainment in Nanking included luncheon by Japanese Ambassador first day and second day luncheon by Minister for Foreign Affairs, reception by Chiang Kai Shek 50 at the Office Moral Endeavor Association and dinner by Kung. 51 At his reception Chiang likened the "gigantic reconstruction movement” which China is undertaking to the transformation of Japan during the Meiji era, asserted that China desires the friendly help and advice of Japan, expressed hope that the Mission would unreservedly point out fault of Chinese economic and other reconstruction projects, and stated "Chinese industrial circles will unquestionably accept their advice and will follow their footsteps so that China's culture and economy may rise on the same plane with Japan for the stability of oriental peace and welfare”. He added that oriental nations should have oriental



Sir Frederick William Leith-Ross, Chief Economic Adviser to the British Government.

Vol. III, p. 46. 5° President of the Chinese Executive Yuan (Premier).

H. H. Kung, Vice President of the Chinese Executive Yuan (Vice Premier) and Minister of Finance.

[ocr errors]

culture as basis for work in order to coexist with other nations and that characteristics of oriental culture are magnanimity and morals. He asked the gathering to stand and observe a 1-minute silence in honor of the late Viscount Shibusawa, an industrial magnate whom Chiang had met in Japan in 1928.

3. Leading articles in this morning's Central Daily News states (1) economic cooperation must be carried out within framework of Chinese laws and administrative decisions, (2) Japan can render only technical assistance in regard to railway and mining enterprises and in no way should such assistance entail infringement of China's sovereign rights, (3) in connection with Japanese and in improving Chinese farm products such as cotton, attention should be paid to increasing output and under no circumstances should there be any conditions aiming at squeezing raw materials out of China, (4) in regard to all questioning of Sino-Japanese trade in general, Japan must respect existing of Chinese national industries, and should not demand as a return for its assistance the downward readjustment of Chinese tariff duties on Japanese imports. The Journal adds that these conditions "represent the Chinese people's unanimous conception of the matter of economic cooperation with Japan.”

4. Central Daily News is semi-official publication.

5. We learn on good authority that the mission's activities in Nanking were purely social and no proposals were suggested by the Mission to Government officials or others. Comment in this respect by one prominent Chinese party official was that the Mission "is still hiding its tricks in its sleeve.” 6. Sent to the Department, by mail to Peiping, Shanghai, Tokyo.



The Chief of the Division of Far Eastern Affairs (Hornbeck) to

Mr. Thomas W. Lamont of New York

WASHINGTON, March 24, 1937. DEAR MR. LAMONT: We have received and wish to thank you for your letter of March 19, with enclosures,52 on the subject of recent purchases by the Chinese Government of railway materials.

We of course are endeavoring to follow closely developments relating to the rehabilitation and extension of Chinese Government railways and are therefore appreciative of your cooperation in making available to us a copy of Mr. Scott's 53 letter addressed to you under date February 20.

52 None printed. 6 George C. Scott, president of the United States Steel Products Corporation.

In this connection we note with interest Mr. Scott's comment to the effect that, “because of the problem of financing”, American firms are not in position to participate more substantially in the supplying of railway and other equipment desired by various agencies of the Chinese Government. Apparently your and our reactions to this statement were similar as you mention—in your reply to Mr. Scott-the Export-Import Bank. We of course are not in position to speak in any way for the Export-Import Bank, but it has been and is our understanding that the Bank is prepared to consider sympathetically approaches made to it provided the transactions under contemplation are practicable and the concerned American interests show themselves ready to shoulder at least a reasonable share of such risks as may be involved. Sincerely yours,


033.1190 Pierson, Warren Lee/2: Telegram The Secretary of State to the Consul General at Shanghai (Gauss)



WASHINGTON, April 3, 1937—1 p. m. 87. Department has received from the President of the ExportImport Bank a statement reading as follows:

"Mr. Warren Lee Pierson, President of the Export-Import Bank of Washington, is sailing from San Francisco on the S. S. President Hoover, April 3, for a brief visit to China and Japan. He will be accompanied by Mrs. Pierson.

The main purpose of the trip is to study existing economic conditions in the Far East and to obtain a first-hand impression of recent developments in that part of the world. Particular attention will be paid to the railway and highway expansion program now in progress in China.

No unusual significance is to be attached to Mr. Pierson's journey to the Orient because it is pursuant to an established plan whereby the head of the Government's export credit agency can keep informed on matters of particular interest to that institution. Last year Mr. Pierson visited Great Britain, France, Germany and Sweden on a similar mission.

A considerable number of applications from American firms desiring financial assistance in connection with sales to China have been received by the Export-Import Bank. It is believed that these will be given further study by Mr. Pierson while he is on the ground but no immediate action thereon is contemplated. It will be recalled that the credits previously extended to the Government of China by the Grain Stabilization Corporation and by the Reconstruction Finance Corporation were acquired by the Export-Import Bank last year. The Bank, therefore, has a substantial investment in China at the present time.”

Department is not aware of Mr. Pierson's itinerary in China and Japan but understands that he will proceed directly to Shanghai and that he desires at all times no publicity.

Department desires that American diplomatic and consular officers render to Mr. Pierson appropriate cooperation and assistance.

Inform Nanking and Tokyo promptly by mail of the foregoing and of the Department's desire that this information be communicated to consular offices in Japan and China and Hong Kong.


033.1190 Pierson, Warren Lee/4: Telegram

The Ambassador in China (Johnson) to the Secretary of State

NANKING, April 16, 1937—2 p. m.

[Received April 16–10:50 a. m.] 164. Department's April 3, 1 p. m. to Shanghai.

1. It happens that McNutt, High Commissioner at Manila, is likewise traveling on the President Hoover and since I have already determined to be in Shanghai in order to have a conversation with the High Commissioner it will be possible for me to see Pierson shortly after his arrival. It is perhaps a significant coincidence that K. C. Li of the Wah Chang Trading Corporation, New York, is likewise on the Hoover. I am reliably informed that the Minister of Finance is trying to persuade him to become Director of the Central Trust, an official agency for the handling of credit purchases by the Chinese Government.

2. Arnold and Calder, Commercial and Assistant Commercial Attachés, were in Nanking April 14 and 15 and I discussed with them and Peck 54 the whole field of American economic enterprises in China, present and future, as affected by (1) unprecedented action of other countries principally Great Britain, Germany and France in extending long term credits for railway materials, (2) policy of the Chinese Government to monopolize and control certain lines of industry and trade and (3) the possible revival by the Chinese Government at any time of the demand made in 1934 65 for the negotiation of a new commercial treaty.

3. It was observed in these discussions that an era of economic development under National Government leadership has begun in China and that other nations already mentioned have recognized this fact. While the United States may not be under the same necessity as those nations to seek foreign markets for manufactures and therefore may

[ocr errors]

64 Willys R. Peck, Counselor of Embassy in China at Nanking. See Foreign Relations, 1934, vol. III, pp. 523 ff.

« PreviousContinue »