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Financing Imperialism: British and American Bankers as Vectors of Imperial Expansion in China, 1908–1920

Published online by Cambridge University Press:  11 June 2012

Clarence B. Davis
Clarence B. Davis
Affiliation:
Associate Professor of History, The College of Charleston
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Abstract

Few would deny that British and American bankers played a large and often controversial role in the western imperialism that reached its zenith in China during the early years of the twentieth century. China had always seemed to be a country where large investments would bring handsome returns; many individuals hoped to take advantage of the situation; and capital invested there did indeed have far-reaching, unforeseen ramifications. Among the many contentious issues in the bankers' story, however, is the question of intent and motivation. Reduced to its simplest terms, did the bankers seek to manipulate national policy in an unbridled quest for profit? Or were they the willing, even altruistic agents of governments bent upon imperial ventures? Professor Davis assesses this question from the western perspective. Having based his research on financial, diplomatic, and personal records, he suggests that the objectives and activities of the bankers, vis-à-vis govenment policymakers, were far more shifting and complex than has been generally perceived.

Type
Research Article
Information
Business History Review , Volume 56 , Issue 2: East Asian Business History , Summer 1982 , pp. 236 - 264
Copyright
Copyright © The President and Fellows of Harvard College 1982

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References

1 National Archives RG 59 State Department 5315/295. Alston Papers FO 800/248, Mitchel Innes to Campbell, November 2, 1910. Sir Charles Addis served as Chief London Manager of the Hong Kong and Shanghai Banking Corporation from 1911 to 1921. He was also a director of the British and Chinese Corporation and the Chinese Central Railways, Ltd. Thomas W. Lamont was a partner in J. P. Morgan and Co., serving as its “public face.” Sir Charles Addis Papers, Memorandum to Foreign Office, June 24, 1913; and Cohen, Warren I., The Chinese Connection: Roger S. Greene, Thomas W. Lamont, George E. Sokolsky and American-East Asian Relations (New York, 1978), 47, 111Google Scholar; also, SD 893.51/3788, MacMurray to Hughes, April 11, 1922.

2 See, for example, Chan, Anthony B., “The Consortium System in Republican China, 1912–1913,” Journal of European Economic History, VI (1977), 597–640.Google ScholarParrini, Carl Philip, Heir to Empire: United States Economic Diplomacy, 1916–1923 (Pittsburgh, 1969)Google Scholar, and Israel, Jerome Michael, Progressivism and the Open Door: America and China, 1905–1921 (Pittsburgh, 1971).Google Scholar Cohen, the Chinese Connection, 108–117. I am indebted to Professor Noel Pugach of the University of New Mexico for pointing out the similarity of Cohen's ideas to those of the Progressives and for other helpful comments on this article. Also see the historiographical summary of the “realist” position in Hunt, Michael H., “Americans in the China Market: Economic Opportunities and Economic Nationalism, 1890s-1931,” Business History Review, LI (Autumn, 1977), 277–307.Google Scholar

3 The 1920–21 China Yearbook lists twenty-one loan agreements made between 1908 and 1920 involving British or American capital, exclusive of multiple advances for the same loan.

4 For American loans, see Walter, V. and Scholes, Marie V., The Foreign Policies of the Taft Administration (Columbia, Mo., 1970)Google Scholar; Vevier, Charles, The United States and China, 1906–1913: A Study of Finance and Diplomacy (New Brunswick, N.J., 1955)Google Scholar; Field, Frederick V., American Participation in the China Consortiums (Chicago, 1931)Google Scholar; and Scheiber, Harry N., “World War I as Entrepreneurial Opportunity: Willard Straight and the American International Corporation,” Political Science Quarterly, LXXXIV (1969), 486–511.CrossRefGoogle Scholar On the role of Paul Reinsch, see Pugach, Noel H., Paul S. Reinsch: Open Door Diplomat in Action, (Millwood, N.Y., 1979).Google Scholar For British loan negotiations, see Sun, E-Tu Zen, Chinese Railways and British Interests, 1898–1911 (New York, 1954)Google Scholar; Edwards, E. W., “Great Britain and the Manchurian Railways Question, 1909–1910,” English Historical Review, LXXXI (1966), 740–7691CrossRefGoogle Scholar; Edwards, E. W., “British Policy in China, 1913–1914: Rivalry with France in the Yangtze Valley,” Journal of Oriental Studies, (1977), 20–36Google Scholar; and Chan, K. C., “British Policy in the Reorganization Loan to China, 1912–1913,” Modern Asian Studies, V (1971), 355–372.CrossRefGoogle Scholar See also Anthony B. Chan, “The Consortium System in Republican China, 1912–1913,” 597–640.

5 The French group included nine major French banks, and the German group, most inclusive in the Consortium, linked fifteen different banks. The American group included J. P. Morgan and Co., Kuhn, Loeb, and Co., Guaranty Trust, First National Bank, and National City Bank.

6 Great Britain. FO 371/1323 44817/15/10, Addis to F.O., October 23, 1912, minute by Alston; FO 371/ 1234 49494/15/10, November 19, 1912, minute by Langley. Crown copyright records in the Public Record Office are used by permission of the Controller of H. M. Stationery Office. On the French bank, see Edwards, “British Policy in China,” 23–25.

7 Part of the correspondence relating to the Crisp Loan was published as a Parliamentary Paper: Cmd 6446, China No. 2 (1912), v. 121 Correspondence respecting Chinese Loan Negotiations. On the Pacific Development Corporation loan, see Foreign Relations of the United States 1919, I. 529ff; FRUS 1920, I, 606–616; Documents on British Foreign Policy, Series I, Vol. VI, Nos. 541, 551, 552, 556, 560, 564, 575, 604, 605, 608, 609, 626, 651, 661; and FO 371/6666 4391/3465/10, M. W. Lampson Memorandum respecting Americans loans to China, November 17, 1921.

8 Alston Papers, FO 800/246 Jordan to Langley, November 4, 1912. Cohen, The Chinese Connection, 103–105.

9 Jardine Matheson handled contracting, construction, and supply of materials, while the Hong Kong Bank was responsible for financing the operation. The agreement was made in 1898. See Collis, Maurice, Wayfoong: the Hong Kong and Shanghai Banking Corporation: A Study of East Asia's Transformation, Political, Financial, and Economic, during the Last Hundred Years (London, 1965), 118.Google Scholar FO 371/1342 1754/ 1754/10, Jordan to F. O., January 13, 1912; 16135/1754/10 Memorandum by Board of Trade re Circumstances of Jardine Matheson & Co., April 16, 1912. Lansdowne Papers, FO 800–120, Satow to Lansdowne, September 10, 1903; FO 371/1629 57655/576/55/10, minute by J. D. Gregory, December 8, 1913; 58186/57655/10, Jordan to F. O., December 13, 1913.

10 Frank A. Vanderlip Papers, Vanderlip to Frank Stillman, August 27, 1915 and October 29, 1915; Charles A. Stone to Vanderlip, March 13, 1916; Wilson, Joan Hoff, American Business and Foreign Policy, 1920–1933 (Lexington, Kentucky, 1971), 14–16.Google Scholar Straight's earlier experience as Consul in Mukden and representative of the American Group of the Consortium fitted him perfectly for the job. Straight had, however, come to favor international cooperation as the best path to expand American enterprise. Yet he remained unwilling to take a back seat to the British. Vanderlip Papers, Memo from Straight, September 19, 1916. Pugach, Noel, “Making the Open Door Work: Paul S. Reinsch in China, 1913–1919,” Pacific Historical Review, XXXVIII (1969), 157–175CrossRefGoogle Scholar; and Mazuzan, George T., “Our New Gold Goes Adventuring: The American International Corporation in China,” Pacific Historical Review, XLIII (1974), 212–232.CrossRefGoogle Scholar Vanderlip Papers, Memo from Straight re Baron Sibusawa, November 25, 1915; Paul Reinsch Papers, Straight to Reinsch, February 28 and June 21, 1916; Willard Straight Papers, Straight to Reinsch, February 5, 1917; Mazuzan, “Our New Gold,” 228–231.

11 FO 371/3691 177334/8369/10, Jordan to Curzon, December 5, 1919.

12 Fred Dearing was given a one-year leave by the State Department to join Straight at A.I.C. “and thus be associated with work similar in character to that being carried on by the State Department.” He remained with the corporation from 1917 until he returned to the Foreign Service in 1921. House Papers, Series I, Box 37, f. 1144, Dearing to House, March 12 and April 14, 1917. On Reinsch's support of A.I.C., see Pugach, “Making the Open Door Work,” and 893.77/1616, Reinsch to Lansing, July 14, 1917.

13 Alston Papers, FO 800/244, Jordan to Campbell, June 7, 1909; Langley Papers, FO 800/31, Jordan to Langley, June 1, 1914; Woodrow Wilson Papers, Series II, Reel 69, Reinsch to Wilson, March 5, 1915, and Reinsch to Bryan, July 3, 1914. On the shortcomings of American agents, see J. V. A. McMurray Papers, Memo on the failure of Standard Oil of New York to obtain a concession, August 1915. Langley Papers, FO 800/31, Jordan to Langley, December 29, 1913; Alston Papers, FO 800/247, Jordan to Langley, July 27, 1914.

14 Alston Papers, FO 800/244, Jordan to Campbell, October 15, 1908; J. O. P. Bland Papers, W. Keswick (Chairman of British and Chinese Corporation) to Bland, March 26, 1909. Bland Papers, G. Jamieson (CCR) to Bland, December 23, 1908; Bland to Addis, August 9, 1907; Keswick to Bland, March 26, 1909; Bland to Keswick, April 17, 1909; FO 371/625 26165 /1669/10; Jordan to F.O., June 23, 1909. Sir Charles Addis Papers, Addis to Colonel Dudley Mills, March 6, 1909 and March 12, 1909: Sun, Chinese Railways, 102–105. J. O. P. Bland, “Lombard Street & Downing Street: An Object Lesson,” National Review. March 1917, 59–70.

15 Bland Papers, Bland to Directors of British and Chinese Corporation, May 29, 1909.

16 Collis, Wayfoong, 125; Author's interview with Sir Charles Addis' daughter, Robina Addis's May 14, 1978.

17 Addis Papers, Diary, September 23, 24, and 28, 1912.

18 Langley Paper, FO 800/31, Jordan to Langley, December 14, 1913; Lowe, Peter, Great Britain and Japan, 1911–1915: A Study of British Far Eastern Policy (London, 1969), 147–176CrossRefGoogle Scholar, deals in detail with Japanese efforts to gain a share of the Yangtze railway concessions.

19 Jonathan Spence, Review of Hermit of Peking, TLS, October 29, 1976: John K. Fairbank, “The Confidence Man,” New York Review of Books, April 14, 1977.

20 Trevor-Roper, Hugh, Hermit of Peking: The Hidden Life of Sir Edmund Backhouse (New York, 1977).Google Scholar On the Railway in Southern Manchuria, see pp. 44–45.

21 The correspondence between Bland and Lord ffrench, preserved in the Bland Papers, contains numerous worries about personal finances and salaries. On Willard Straight, see Kahn, Helen D., “The Great Game of Empire: Willard Straight and American Far Eastern Policy,” (Ph.D. dissertation, Cornell University, 1968)Google Scholar; also, J. O. P. Bland Papers, typescript of an article, “Willard Straight,” for Asia Magazine.

22 FO 371/2656 201923/79845/10, Jordan to Grey, October 9, 1916, minute by J. H. Lyons. The best accounts of the political struggles over American railway concessions in Manchuria are those in Vevier, The U.S. and China, Scholes, Foreign Policies, and Edwards, “Manchurian Railways.” On the feasibility of completing the railway concessions granted by China, Lord Lansdowne commented: “China is hatched all over with railway lines, for one quarter of which captial could probably not be provided if the whole of the concessions were to be sealed tomorrow.” Lansdowne Papers, FO 800/121, Lansdowne to Satow, October 2, 1905.

23 Bland Papers, Bland to Braham (Times), February 24, 1909. Addis Papers, Diary, February 25, 1913. “I am having a fagging time over the Chinese Hukuang loan negotiations. It is no easy job to get the Chinese on one side and the British, American, French, and German groups into line on the other.” August 18, 1909. “… Of all the negotiators with whom I have had to deal the Americans are the worst.” May 17, 1910. The most detailed account of negotiations for one of the first Consortium loans, based on exhaustive research in published sources, is Shu, Pu, “The Consortium Reorganization Loan to China, 1911–1914: An Episode in Pre-war Diplomacy and International Finance,” (Ph.D. dissertation, University of Michigan, 1950).Google Scholar

24 FO 371/1590, Addis to F.O., January 23, 1913; FO 371/1933 3720/335/10, Addis to F. O., January 24, 1914. E. W. Edwards discounts the effects of these loans on the amount of French capital available for China. See Edwards, “British Policy in China, 1913–1914,” 24, n. 23, but there are recurring references in Foreign Office records to a decline in French activity observed by British diplomats throughout 1913. The French position had dearly improved by 1914. Jordan Papers, FO 350/11, Langley to Jordan, March 25, 1914.

25 FO 371/873 40866/38346/10, Grey to Max Müller, November 9, 1910; 41245/38346/10, Addis to F.O. November 11, 1910; Die Grosse Politik der Europäischen Kabinette, 1871–1914, XXXII, No. 11743, Bernstorff to Austwärtiges Amt. received November 27, 1910, 166; Croly, Herbert, Willard Straight (New York, 1924), 350.Google ScholarVagts, Alfred, “Ein Bankhaus in der deutschen Weltpolitik, 1905–1933,” Vierteljahrsschrift für Sozial und Wirtschaftgeschichte, XLV (1958), 336–337.Google Scholar Balfour Papers (British Library), 49748, R. H. Brand Memo on Finances and USA, October 1916. For an example of how British bankers used the weakness of the American Securities market to pressure their opposite numbers, see Straight Papers, Diary of European Trip, March 29, 1916, recording a conversation with Sir Charles Addis.

26 Vevier, The United States and China, 49. Addis Papers, Diary, October 8, 13, and 14, 1908. See also above, note 25, The Balfour Papers. FO 371/1938 3468672502/10, Jordan to F.O., July 29, 1914, July 30 minute by J. D. Gregory.

27 Jordan Papers, FO 350, Campbell to Jordan, December 8, 1911.

28 The battle over Manchurian railway concessions provides the best example of confrontation between powers. Speech by Lamont to the Academy of Political Science, December 9, 1920, Lamont Papers, 139–6. Bland Papers, Bland to Chirol (Times), June 19, 1908; W. Keswick to Bland, March 26, 1909. This letter was probably drafted by Sir Charles Addis. Ibid. “[The] only result has been to frighten bondholders out of a safe investment.”

29 J. O. P. Bland Papers, Addis to Bland, March 13, 1908. Panmure, Gordon, Hill & Co. arranged the bank's underwriting as sole broker for the Bank. Bland Papers, Addis to Bland, March 13, 1908. Bland Papers, Addis to Bland, January 11, 1907; Addis to Bland, March 13, 1908; Addis Papers, Diary, May 21, 1913.

30 Bland Papers, Addis to Bland, March 13, 1908. The profit for the C.C.R. on the Tientsin-Pukow Loan was 1½ per cent, but this was regarded as a sacrifice to facilitate further business. See Chen, C. S., “Profits of British Bankers from Chinese Loans, 1895–1914,” Tsinghua Journal of Chinese Studies (Chinghua hsueh pao), New Series, V, (1965).Google Scholar

31 FO 371/1324 47798/10, Jordan to F.O., November 11, 1912; 48331/15/10, Hong Kong Bank to F.O., November 12, 1912; 49643/15/10, Hong Kong Bank to F.O., November 21, 1912; 50025/15/10, Jordan to F.O., November 24, 1912. FRUS 1913, 143. Protest by Consortium Powers Foreign ministers against use of gabelle as security for the Crisp loan; FO 371/1594 35486/5/10, Addis Memo Respecting Reorganization Loan, July 30, 1913; 38600/5/10, Gregory Memo, August 19, 1913. FO 371/1594 35486/5/10, Addis Memo Respecting Reorganization Loan, July 30, 1913. Grey held out as long as he could: “The Charybdis of indiscriminate borrowing is worse than the Scylla of the groups.” Grey Papers, FO 800/44, Grey to Jordan, October 31, 1912.

32 For correspondence with the Eastern Bank, see Cmd. 6446: China No. 2 (1912). Jordan Papers, FO 350.1, Langley to Jordan, November 9, 1912. Cmd. 6446: China No. 2 (1912); FRUS 1913, 143; Jordan Papers, FO 350/1, Langley to Jordan, November 22, 1912. Crisp was held in disrepute by some London banks for cutting into Rothschild's business in Brazil and the Baring interests in Russia. Jordan Papers, FO 350/2, Alston to Jordan, October 4, 1912.

33 McLean, David, “Chinese Railways and the Townley Agreement of 1903,” Modern Asian Studies, VII (1973), 145–164CrossRefGoogle Scholar; Edwards, E. W., “The Origins of British Financial Cooperation with France in China, 1903–6,” English Historical Review, LXXXVI (1971), 285–317CrossRefGoogle Scholar; FO 371/1937 2056/2056/10, British and Chinese Corporation to F.O., January 14, 1914, including minutes. “Shall I crown my ignorance of Weltpolitik by remarking that when Grey entered upon an alliance with France he seems to me to have put his money on the wrong horse. Germany ought to have been our ally, not France.” Addis Papers, Addis to Mills, April 25, 1909; Addis to Mills, April 7, 1914.

34 The first agreement to share loans was signed in 1895. Addis Papers, Memo for Board of Trade, May 4, 1915; J. O. P. Bland, “Lombard Street and Downing Street;” FO 371/1950 81331/10.

35 Bland Paper, Bland to Hoss (CCR), July 7, 1908; FO 371/418 1647/1647/10, Memo on Railways in China, January 16, 1908.

36 Addis Papers, Addis to Mills, March 28, 1909.

37 FO 371/1935 1509/687/10, Jordan to F.O., December 26, 1913, minute by Gregory; FO 371/1941 4690/ 4690/10, Jordan to F.O., January 11, 1914; FO 371/1938 11587/2963/10, Jordan to F.O., February 21, 1914; DBFP, Second Series, VIII, No. 96, Memorandum Respecting the China Consortium, August 21, 1929, 155.

38 Addis Papers, Memorandum for Board of Trade, May 4, 1915. Sir Carl Meyer, a German, remained on the Hong Kong Bank's London Committee until 1916, four other Germans, of a total often members, resigned from the Court of Directors in August, 1914. H&S B. C. 98th Report of Court of Directors, August 22, 1914. Charles F. Whigham of Morgan, Grenfell, sat on the Hong Kong Bank's board. On Morgan's European connections, see also Roberta A. Dayer, “Strange Bedfellows: J. P. Morgan & Co., Whitehall and the Wilson administration during World War I,” Business History (1976), 127–151. On German connections with Kuhn, Loeb, see Grosse Politik, XXXII, No. 11956, Max Warburg to Zimmerman, March 20, 1913, 380–382.

39 The Chicago Bank's loan was described as a “Banknote Guarantee Fund” in order to evade the Consortium agreement's bar against independent “political” loans by signatory banks.

40 “China is virtually being put up to auction and we must be in at the bidding.” Alston Papers, FO 800/247, Jordan to Langley, February 23, 1914; 893.51/2042e, Lansing to Jusserand, October 8, 1918. For an example of post-Consortium agreement competition, see Noel Pugach, “Anglo-American Aircraft Competition and the China Arms Embargo, 1919–1921,” Diplomatic History, II (1978), 351–371.

41 Field, American Participation, 136–137; Frank Polk Papers, Straight to Polk, March 26, 1917; Breck-enridge Long Papers, MacMurray to Long, September 9, 1919. 893.51/2089, U.S. group to Lansing, January 3, 1919; Breckinridge Long Papers, Memo by E. T. Williams, January 31, 1917; Plan for reorganizing the Consortium, July 30, 1917; Abbott to Long, June 13, 1918; Memorandum of Recommendations on Currency Reform, November 21, 1917; Abbot to Long, September 27, 1919; Long to Lamont, October 16, 1919; Long to Lamont, October 30, 1919. Lamonťs negotiations with the Japanese are described in his book, Across World Frontiers (New York, 1951). See also, Cohen, The Chinese Connection, 59–60, and Lamont Papers, 117–120, Lamont to Rollo Ogden, August 8, 1918; FRUS 1920, 1, Morris to Polk, March 11, 1920, 508–511; 893.51/12738, Morris to Polk, March 26, 1920. Lamont Papers, 183–3, Guy Walker to Lamont, January 30, 1919; Lamont to Walker, July 19, 1919; Cohen, The Chinese Connection, 56–57; Breckinridge Long Papers, Memo of Telephone conversation with Lamont, October 14, 1919.

42 FO 371/2656 243512/79845/10, British and Chinese Corporation to F.O., December 1, 1916, including minute by Gregory; FO 371/2914 40151/10360/10, Pauling Co., to F.O. transmitting correspondence with A.I.C., Feburary 21, 1917; Straight Papers, Straight to Reinsch, February 28, 1916.

43 Alston Papers, FO 800–246, Jordan to Langley, October 22 and December 8, 1912; FO 371/2914 10360/ 10360/10, Alston to Balfour, January 12, 1917, minute by Jordan; FO 371/1594 39907/5/10, Grey to Addis, September 2, 1913; FO 371/1594 42643/5/10, Hong Kong Bank to F.O., September 16, 1913, including minute by Gregory, September 17, 1913.

44 Langley Papers, FO 800/31, Jordan to Langley, February 8, 1914. FO 371/1325 53762/15710, Hong Kong Bank to F.O., December 16, 1912. Banks admitted to the British group included Baring, London County Westminster, Parr's, and Henry Schroeder. Each received a 14 per cent share. Alston Papers, FO 800/247, Alston to Langley, June 2, 1913; Jordan to Langley, February 23, 1914; FO 371/1943 6664/6472/10, Jordan to F.O., February 13, 1914, including minute by Gregory; Langley Papers, FO 800/13, Jordan to Langley March 23, 1914.

45 The Hong Kong Bank offered a place in the group to the Chartered Bank in 1912 at government behest, but Addis demanded that only the HK & S Bank should be listed as an “issuing” bank, and the Chartered Bank declined to join on those terms at that time. It entered the British group in 1916.

46 Woodrow Wilson Papers, Series 11, Reel 69, Reinsch to Wilson, March 5, 1915: Reel 70, Reinsch to Lansing, December 30, 1915; Alston papers, FO 800/246, Jordan to Alston, February 24, 1913.

47 Breckinridge Long Papers, Lansing to Frank A. Vanderlip, June 22, 1918. Apart from the five New York houses, J. P. Morgan & Co., Guaranty Trust, First National Bank, Chase National Bank, and National City Bank, only the Chicago Bank and the Boston firm of Lee Higginson were invited to discuss formation of a new American group. Lee Higginson sent no representative to the meeting.

48 FO 371/3690, Foreign Office to Hong Kong and Shanghai Banking Corporation, March 17, 1919, N. M. Rothschild & Sons and the British Trade Corporation were added to the group. FO 371/3690, Hong Kong Bank to F.O., March 21, 1919. FO 371/3690, Hong Kong Bank to F.O., March 21, 1919, minute by Max Müller, April 2, 1919. The exclusion of the clearing banks had been expressly suggested by the Foreign Office. FO 371/3690 Memorandum by W. G. Max Müller on Proposed New Four-Power Consortium for providing Loans to China, February 21, 1919. FO 371/3690, F.O. to Hong Kong Bank, July 17, 1919.