CHAPTER XVIII

AMERICAN ENTREPRENEURS IN PEKING

As the second year of the Hwai River conservancy option was about to expire, something positive had to be done in order to make an actual beginning on this work. Mr. W.F. Carey, whose various enterprises have already been referred to, had arrived in Peking in December, 1915, with his family and a large staff. He brought over his whole organization, for his firm's arrangements with the New York capitalists made him feel ready, not only to negotiate, but to start work. He had completed extensive railway construction work in Canada and the United States; his organization was ready for China. He was a man accustomed to attacking his work with full force and getting it out of the way. He knew there was plenty of work to do in China, and he was ready to start doing it without delay.

Tested and highly recommended as the conservancy undertaking had been by the engineering commission under Colonel Sibert, the financiers associated with the Siems-Carey Company yet hesitated. It was then suggested that they do part of the work and reserve an option on the entire enterprise. The negotiations with Mr. Chow Tsu-chi, Minister of Finance, developed that the only part which might be dissociated from the whole was the restoration of the Grand Canal. But it would hardly be profitable to undertake this unless at least the whole portion from the Yangtse River to Techow were to be made navigable. Enough traffic might then be counted upon to afford by means of tolls security for the loan, together with certain tracts of land which would be drained. A period of four months was given to investigate the feasibility and cost of this work, while the option on the more extensive enterprise of the Hwai River conservancy was extended.

The men representing American firms who came with Mr. Carey created in Peking the impression of an onslaught of American enterprise. The International Banking Corporation and the American International Corporation had sent a new representative. The firm of Anderson, Meyer & Company, hitherto Danish, had been acquired by American capital, and a representative had been sent to Peking. Social life in the American colony was visibly enlivened by this influx. It was amusing to see how large groups of people from St. Paul, Kansas City, Chicago, and various Eastern towns, suddenly planted in these entirely foreign surroundings, could in an incredibly short time make themselves thoroughly comfortable, and establish intimate relations with their new neighbours. The various American representatives took large houses in the city outside of the Legation Quarter, where they entertained a great deal.

But by the legal talent mustered for the negotiations the Chinese were rather taken aback. Not much given to legal refinements, nor to setting down in the written contract detailed provisions for every imaginable contingency, the meticulous care of the American legal draughtsmen impressed the Chinese as savouring of suspicion.

Their own business arrangements are more simple and general, with reliance on a mutual sense of equity; moreover, all contracts with foreigners had hitherto been made in a less technical manner. An American lawyer would not be satisfied with this. He would think of the other corporation lawyers at home, sitting in their offices on the thirty-fifth floor, to whom the ordinary Chinese way of drawing up contracts would seem criminally lax. To overcome the concealed resentment of the Chinese took time, together with much talk about how the common interest would be promoted by completely defining all responsibilities assumed. The argument which really impressed them was that other foreign nations had frequently interpreted simply drawn contracts entirely to the disadvantage of the Chinese.

Mr. Carey, also, did not personally believe in much legal refinement, but bowed to the mature judgment of the profession. He had won his way from the ranks, and his Irish originality had not been befogged with theoretical discussion. He immediately felt at home with the frank and human Chinese, and constantly had many of them at his house, where they partook of true American hospitality and shared in frolics of dancing and poker. The Chinese are fond of this American game, in which human nature plays so large a part; the impassiveness of their countenance lends itself admirably to the tactics of poker. It was amusing to hear Liang Shih-yi, who otherwise spoke not a word of English, enunciate from behind a pile of chips, in staccato tones: "Full house,"--"Two pair." This eminent financier was a worthy match for any poker expert.

Mr. Carey brought his unwarped intelligence to bear with great freshness on Chinese affairs, which he discussed in the language of an American contractor and business man who reduced everything to terms of getting something done. To observe how a man of his training, instincts, and tradition, so utterly different from the Chinese, remained in constant, intimate intercourse and joyous mutual understanding with them, made one believe that there must be real bonds of sympathy between Americans and the Chinese. Mr. Carey abbreviated many of the Chinese names, thus making them far more pronounceable. Mr. Chen Pan-ping, the Minister of Agriculture, thus became Ping-pong; the Secretary of State, Hsu Shih-chang, was Susie.

When the preliminary contract for the Grand Canal had been signed, Mr. Carey and all his associates departed for Shantung and Kiangsu under the guidance of Mr. Pan Fu, a young capitalist and official from Shantung Province, who was anxious to have the constructive work begun early.

A mistake made by Americans in other parts of the world was not avoided in China. Several of the new organizations that came in at this time and during the war made their entry with a considerable blare of trumpets and pounding of gongs, announcing the millions that were backing them and describing the manner in which they would rip things up generally when they got started. As a great part of international business is diplomacy, such methods of blatant advertisement are not best calculated to facilitate the early operations of a new enterprise. They raise expectations of "easy money" in the people dealt with, and they engender cynicism and rock-ribbed opposition on the part of competitors. Great enterprises in foreign trade are usually built up with quieter methods. My observations on this score by no means refer to all new American enterprise in China, but there was enough of this sort of brass-band work to give people an idea that it was the approved method of American entry into foreign markets. The subsequent flattening out of several of these loudly heralded ventures did not help matters.

I had on February 29th a long interview with Dr. Jeme Tien-yow, an American-educated engineer, who had won repute through the survey and construction of the Peking-Kalgan Railway, of which he was chief engineer. He was looked upon as a living example of what the Chinese could do for themselves in engineering. At this time he was managing director of the Hukuang railways. I had had extensive correspondence with him, directly and through the Consul-General at Hankow with respect to the engineering standards to be applied on his lines, as it was difficult to find a middle ground between the American and British manufacturers and those of other nations concerned. Doctor Jeme was on the whole favourable to America, but clung to European standards, much to the disadvantage of American equipment. We went over all the disputed points with regard to solid cast wheels or tread wheels, shapes of box cars, types of engines, and so on--a curiously technical conversation for a foreign minister to hold with a railway director as a matter of official business. Doctor Jeme was slow, undemonstrative, quite willing to discuss, but not ready to yield any point in which he thoroughly believed. The argument cleared up some matters and left others the subject of continued correspondence.

I was trying to induce the American group to take the lead in furnishing funds so that the building of the Szechuan line of the Hukuang railways could be undertaken. I also hoped that, notwithstanding the war, the British and French groups might continue to furnish enough funds to complete the line from Hankow to Canton.

Doubtless the greatest national need of China was the completion of these trunk lines, both to connect the north and south of the country, and to open a land route to Szechuan Province, which could then be reached only by boat on the Yangtse, subject to all contingencies of an uncertain and dangerous navigation. It should not have required argument to induce the capitalists to advance money for a short railway which would open an inland empire of forty millions of people, especially when they had already bound themselves by contract to furnish the funds.

The $30,000,000 originally advanced had been spent, without more than two hundred miles of actual construction to show for the vast sum. This was due partly to the need of buying out earlier Chinese companies at extravagant figures, but also in large part to the cumbersome and expensive organization of this international enterprise. Only by actually finishing one of these basically important lines and putting it in operation could the money already expended be made to count.

At home the group seemed favourable to going ahead to the completion of the work. Mr. Willard Straight in February went to London to seek the consent of the British and French partners. But beyond settling some minor details about alignments no definite result was secured. Chinese development was blocked disastrously through this failure to complete the existing contracts. In comparison with the amounts spent in Europe by America, the cost of entirely carrying out this enormously important work would have been infinitesimal; a thousandth part of our war expense would have permanently changed the face of China.

Indeed, completion of such an enterprise would far transcend mere business. What the Chinese needed was the organization of their national life. In every particular this depended upon communications--trunk lines north and south, east and west--which would have largely overcome obstacles to Chinese progress. The nation's mind, instead of being focussed on building up, unifying, and organizing the different parts of the country, remained localized and scattered. A thousand times the energy needed to achieve this unique work was spent by us in Europe. That is part of the cost of war.

Mr. Charles Denby, interested in automobile manufacture, called one morning and asked that I take a motor ride up the Tartar City Wall--a thing which had never before been attempted. I yielded to the idea, and without further inquiry joined him, together with the commandant of the guard, Colonel W.C. Neville. Leaving the rear gate of the Legation and approaching the broad ramp leading up to the wall, I was surprised to see gathered there all the American marines, as well as many other people, including motion-picture men. I had not counted on this publicity; it was, however, too late to have any regrets, so we were whisked up the steep incline and took a ride on the top of the great wall. This first automobile ascension of the monumental structure excited a good deal of attention. A British paper tried to raise a laugh by ironically criticizing the British minister for not supporting British industry by taking air flights, or doing other things which might serve to attract attention to national products. I did not mind what was said, as I had enjoyed the excitement of the ride.

Mr. Carey's party had by this time finished its survey. Laborious negotiations had gone on for an acceptable contract to improve the ancient Grand Canal. Mr. Carey also sought a contract for the building of railways. These matters were entrusted to Mr. Roy S. Anderson, who carried on the detailed negotiations. I had given Mr. Carey an introduction to the various officials concerned, and had from time to time supported his efforts, but did not take part in the details. The business was carried on with Mr. Tsao Ju-lin, the Minister of Communications, while the canal matter lay with Mr. Chen Pan-ping, Minister of Agriculture and Commerce, a younger man, educated in Japan and a member of the Christian Church. Mr. Chow Tsu-chi, the Minister of Finance, and Mr. Liang Shih-yi, wielded a directing influence in the negotiations. I was careful to abstain from anything which could possibly savour of pressure, or a desire to take advantage of the difficult financial necessities of the Government. The contracts were made not on the basis of any temporary or local interest, but to furnish a foundation for long-continued constructive work.

The Chinese Government gave to the American concern the right to build fifteen hundred miles of railway, to be selected from five alignments mentioned in the contract. Mr. Carey started for America on May 18th, to secure ratification of the agreements. With him he took the most favourable concessions which the Chinese Government had ever granted to foreigners. All the most advantageous provisions of former contracts had been embodied; the American contractors were to get a commission of 10 per cent. on the cost of construction and equipment, and were to share, also, in the profits of operation. A broad policy of development was adopted, embracing the encouragement of industries along the railways to be built.

The Chinese Government, accustomed to financial support from nations which had valuable concessions, hoped that the Americans would now offer such assistance. The concessions were in no sense made dependent upon loans, but collateral loan negotiations were proceeding, and Mr. Carey took with him proposals concerning loans and securities offered. His associates made every effort to secure a loan to China, but as they now turned over their holdings to the American International Corporation, and as the latter was negotiating to take over the American group agreements with Great Britain, Russia, France, and Japan, the matter became hopelessly tangled up with international affairs and no action resulted. The Americans understood that Japan would coöperate in a joint loan but would oppose any separate action by the United States. American finance was still too provincial to act independently in such a matter. Also it would approach each piece of business as a separate unit, not ready to exert itself in behalf of a loan in order to create a more favourable situation for other transactions. European and Japanese combinations in China took a different view; they were organized to represent a broad national interest in Chinese business. While the attitude of individual American corporations corresponded to the individualism of our business, yet the national commercial interest of America was bound to suffer because an organization did not exist which was broadly representative, which would look upon all parts of Chinese commerce and finance in their interrelation, and gather from every individual exertion favourable cumulative effects in other fields of enterprise.

In yet another respect American practice was unsuited to the conditions of business in China. After negotiating in a painstaking manner for months, the corporation's representatives had finally signed a formal agreement that was more advantageous than any ever granted before. The results of this successful negotiation were set before the home office, which took the position that its hands were still completely free. The provisions of the contract were minutely reëxamined; on several points it was concluded that still more favourable arrangements might be made. The representatives were instructed to reopen the negotiations, making the consent of the home corporation dependent on the acceptance of these additional terms.

Such a method could not be used in China more than once. The Chinese expect that when an agreement is arrived at with business representatives in Peking, it will be adhered to, unless very radical changes of conditions occur. They have been dealing on this basis with the agents of European corporations, whose experience is considered by their home offices as entitling them to handle the details of the negotiations without reporting minutely to home officials far less informed than they. To disavow the activity of a local representative in China, except under absolute necessity, is to discredit the whole negotiation. The representative who should wield great influence is suddenly reduced to the dimensions of a clerk with whom the Chinese will not take up anything of importance thereafter.

That the Americans would not make a loan disappointed the Chinese officials. They were used to looking for financial support to powerful groups, who desired or had obtained concessions. When, in addition, proposals came for many changes in the signed contracts, the displeasure of the Chinese knew no limits. The storm broke just before the funeral of Yuan Shih-kai. I was appealed to for aid in predisposing the Chinese officials to look upon the new proposals with more favour. The Minister of Communications as well as Mr. Chu Chi-chien, the Minister of the Interior, whom I interviewed, were dejected because the loan had been so abruptly refused. They had counted on America to take part in Chinese finance, in order that the Chinese Government might not be entirely at the mercy of the Five-Power Consortium, or rather of Japan, which was now the only active member of that group. I tried to explain the action of the Americans on the basis of sound business practice. I pointed out that in the United States, capital, industry, and commerce are not mobilized for foreign enterprise as is the case with the big foreign banking institutions of Europe. I tried to encourage them to set American firms to doing constructive work in China, and assured them that out of such relationships there would naturally grow a readiness to afford financial support.

They did not dispute my point, but, in the words of Cleveland, they felt themselves confronted by a condition, not a theory.