FOR some centuries foreigners have been gradually expanding their trade with China and increasing their investments there. They have built western cities in that eastern land, they have constructed railroads, founded banks, placed their steamships upon the interior rivers, and established strong commercial companies. The rivalries of foreigners during the past hundred years to obtain economic privileges, concessions and spheres of influence have led to at least five wars and constitute a substantial chapter in the story of modern diplomacy. The conviction has been widespread, and still exists, that China offers rich rewards to traders and investors of other lands. Even in our own country there are many who would agree with the oft-quoted statement of President Roosevelt that "our future history will be more determined by our position on the Pacific facing China, than by our position on the Atlantic facing Europe." In view of this belief and of the position which citizens of outside countries have won for themselves in China, it may be well to consider what are the actual interests which foreigners possess there, and the financial value of these interests.

The size of the foreign stake of each country in China depends largely upon the amount of its investments and its trade. But the importance of this stake to each country is measured by the proportion which its China investments and trade bears to its total foreign investments and trade.

The British and the Japanese have the largest investments in China, each having a total in the neighborhood of $1,250,000,000.[i] The Russians are generally ranked third, although there is great difficulty in making an estimate of the value of their holdings, due in part to the meagerness of the data, and, in even greater measure, to the uncertainty whether their chief asset, the Chinese Eastern Railway, should be valued upon the basis of the original cost of construction, upon the total amount of money expended, including annual deficits, or upon the present cost of reconstruction. With this explanation, their investments might be placed anywhere from $200,000,000 to $400,000,000. American investors come next, although, in the opinion of some, they should be rated above the Russians; their holdings amount to about $250,000,000.

The total of the investments made by all foreign countries in China is estimated by Dr. C. F. Remer to be approximately $3,000,000,000. Viewed by itself this is a large sum of money; but when compared with foreign investments in certain other undeveloped countries it is only a moderate amount. It is, for example, less than three-fourths of the investments which Americans alone have made in Canada. The investments made by the British, while important and substantial, are less than those which they have made in a single Latin-American country, Argentina. Our American investments in China, although they have increased strikingly in the past two years, are noticeably small in comparison with our holdings in several other countries. They amount to less than 1½ percent of our total foreign investments, according to the statistics of January 1931; only 4¼ percent of those which we have made in the countries to the south of us; and only 5½ percent of our holdings in Canada. On the other hand, Japan's investments, while practically the same in amount as the British, are much more important to Japan than the British are to Great Britain, for practically all of Japan's foreign investments are in China.

The most complete data for the British investments appear to be those collected by the Royal Institute of International Affairs, in preparation for the Conference of the Institute of Pacific Relations held at Kyoto in October 1929. To supplement information already available, questionnaires were sent to British firms in China, a large majority of which returned the desired information. It was found from these reports that the British investments amounted to at least £190,000,000; and it was estimated, after making proper allowance for the investments of the firms which did not answer the questionnaire, that the total was approximately £260,000,000 ($1,264,900,000). These British investments center in Hong Kong, a British possession, and in the cities of the Yangtze valley, especially in the International Settlement at Shanghai. The substantial character of these investments may be seen from the extent of the British real estate holdings which are estimated to amount to $400,000,000. In addition there is the value of the buildings, many of them imposing structures: banks, offices, and factories. The British share in the Chinese Government loans amounts to about $165,000,000; investments in railroads to $95,000,000; and in mines to $10,000,000. The importance of British participation in shipping is shown by the fact that in 1929 over 44 percent of China s coastwise trade was carried in British steamers. These investments of Great Britain form an important economic and financial stake in China, and to one visiting Hong Kong and Shanghai they are most impressive; yet they total less than the British investments in some other countries, and considering the enormous size and population of China they are not relatively large.

As to the Japanese investments, there have been several recent studies which are in general agreement, and which are more detailed and complete and therefore presumably more accurate as to totals than the estimate of British investments. Mr. Odagiri, Director of the Yokohama Specie Bank, in 1929 placed Japanese business investments and loans in China at $1,264,815,000. A more recent estimate, based in part upon the statistics of the Research Department of the South Manchuria Railway Company and of the Japanese Creditors Association for China, places the total at $1,271,769,000 (figuring the value of the yen at 50 cents). Some three-fourths of these investments are in South Manchuria, where Japan has her leased territory, including Dairen and Port Arthur, and her South Manchuria Railway. While the railway itself is Japan's chief asset, she has, in addition, large interests in coal and iron mines, steel mills, factories and hotels. The coal and iron mines are of particular importance to Japan, in view of her lack of those mineral resources which are so essential to the life of an industrial nation. In 1927, 91 percent of the iron ore produced in China, including Manchuria, came from properties which are under Sino-Japanese control; and most of this, either as ore or as pig iron, is consumed by Japanese industries. As for coal, the Fushun colliery, operated by the South Manchuria Railway Company, is the largest open cut coal mine in the world, and will be able to supply any deficiencies in the Japanese market for many years to come. Outside of Manchuria, Japanese investments are increasing in Shanghai and in other central and northern Chinese ports such as Tientsin, Hankow and Tsingtao, where Japanese firms are in active competition with other foreigners and with the Chinese. In shipping, the Japanese are second only to the British. But it is in cotton manufacturing that Japanese interests have been developing most rapidly. In January 1930, Japanese owned and operated 43 cotton mills in China which had a capitalization of over $120,000,000, and contained 39 percent of all the cotton spindles in that country. These mills are making greater profits than the Chinese factories or than similar cotton mills in Japan. Viewed as a whole, Japanese investments appear to be in a different class from those of other countries; they are not a financial luxury, but seem to be essential for the maintenance of the present economic status of Japan.

Russia's investments, which are largely limited to central and northern Manchuria, consist for the most part of the Chinese Eastern Railway, that section of the Trans-Siberian Railway which runs through Chinese territory. In the old Tsarist days Russia poured money into Manchuria with a lavish hand. A group of foreign experts in Manchuria during the World War estimated that Russia's total investments in China had amounted to about $750,000,000. But a large proportion of this stake has been lost -- the railway from Changchun to Port Arthur, now known as the South Manchuria, to Japan, and the treaty-port concessions in Tientsin and Hankow to China. The present value of Russian investments is estimated by the Far Eastern Economic Research Foundation of Tokyo at about $232,000,000. The chief problem in regard to Russian investments is to determine a proper valuation for the Chinese Eastern Railway, a task which at present, due to the Sino-Soviet negotiations now taking place at Moscow, has political as well as economic importance. According to the original contract agreement in 1896, the Chinese Government was given the privilege, after 36 years from the opening of the road, "to buy back this line upon repaying in full all the capital involved, as well as all the debts contracted for this line, plus accrued interest." This provision was supplemented by the Sino-Soviet Agreement signed at Mukden in 1924, which stipulated that China might at any time redeem " the said railway with Chinese capital, the actual and fair cost of which to be fixed by the two contracting parties." The cost of the actual construction of the railway has been variously estimated, the greater number of estimates lying between $175,000,000 and $200,000,000, the latter sum being the approximate figure of the Chinese Eastern Railway statisticians. But construction cost does not include the additional expenditures made by the Russian Government, especially the unpaid interest on the railway bonds held by Russia, and the many annual deficits which were paid out of the Russian Treasury. In 1921, a well qualified official, who was in a position to know the facts regarding the finances of the Chinese Eastern Railway, estimated that the Company was then indebted to the Russian Government to the extent of about $425,000,000, including interest. More recent estimates place the total investment of the Russian Government in this road, including unpaid interest, advances for deficits, and other payments up to 1924, at well above $500,000,000. On this basis the valuation, as of 1931, including unpaid interest, would be much higher. But much of this money, even of the sums included in the construction costs, was spent for purposes which can hardly be charged to the railway, such as "expenditures for schools, churches, police, railway guards and the construction of the Russian section of the present city of Harbin. If the value of the road be placed at the present cost of replacement, it has been estimated that $50,000 a mile, or a total of approximately $50,000,000 would be ample. An additional factor, increasing the difficulty, is that the Chinese Government, according to the Sino-Soviet Agreement of Mukden in 1924, is to come into complete possession of the railway, without cost, sixty years after the opening of the line in 1903. That is, China will have a legal title to the road, in any case, in 1963. It is surely a problem for banking experts to determine the present value of Russia's investment in the Chinese Eastern Railway, when within 32 years this investment will cease to be Russian and will become Chinese.

American investments in China are comparatively small, amounting to scarcely one-fifth of those of either the British or the Japanese. The total is probably in the neighborhood of $250,000,000, although some estimates would place it not much over $200,000,000. The difficulty in determining the exact amount is due both to lack of detailed data, especially in regard to missionary investments, and to uncertainty as to the items which should be included under the term investment. The National Foreign Trade Council, of New York, estimated the total investments of Americans in China, in October 1930, at approximately $265,000,000. The total was composed of business investments, $125,000,000; missionary and other non-commercial investments, $75,000,000; and loans and debts, $65,000,000. This estimate is in general harmony with one made by the Department of State in December 1927, which placed business investments at $95,000,000, and philanthropic and missionary at $52,000,000. The latter estimate, which did not deal with loans or debts, was conservative at the time, for it did not include American funds placed in business enterprises which were owned by other than Americans, or in missionary and philanthropic properties which were registered as Chinese. Since the report was made between $40,000,000 and $50,000,000 of additional American money has been invested in business in China. The Department of Commerce in November 1930 issued a bulletin summarizing American direct business investments in foreign countries, which placed such investments in China at $113,754,000; but the bulletin concerned itself solely with one class of business investment, and to its estimate there should be added at least a sum between $20,000,000 and $30,000,000, representing the direct business investments of American citizens residing in China, which were not included in the report. Recent estimates of unpaid loans and debts vary from about $30,000,000 to $65,000,000. For general and comparative purposes, it is adequate to place America's investment stake in China, including business, mission, and philanthropic investments, and loans and debts due from the Chinese Government, at between $200,000,000 and $250,000,000, with the probability that the latter figure, all factors included, is nearer the correct total.

These business investments are largely in Shanghai, the economic and financial center of China, although there are American interests also, of smaller value, in Tientsin, Hankow, Mukden, Hong Kong, Canton and other cities. Until recently the leading investment has been in the petroleum business; six American petroleum companies, with the Standard Oil Company of New York in the lead, have a total direct investment in China amounting to nearly $43,000,000. During the past three years, however, American capital has entered China in larger amounts, especially in the public utility field. In 1929 the American and Foreign Power Company purchased the municipal electrical properties of the International Settlement of Shanghai for 81,000,000 taels. At the time this was equivalent to $53,678,700, but due to the rapid decline in the value of silver and the consequent depreciation of the tael the purchase has been completed for approximately $32,000,000. The International Telephone and Telegraph Company, in 1930, purchased the Shanghai Mutual Telephone Company, which operates in the International Settlement and the adjoining French Concession, and plans to expend some 22,000,000 taels on immediate improvements. American interests have also taken the lead in commercial aviation. A Sino-American company, the China National Aviation Corporation, with a capital of $10,000,000 (silver), has obtained the contract to carry mail and passengers on the leading routes in central China: from Shanghai via Nanking to the upper Yangtze cities; from Shanghai via Tsinan and Tientsin to Peiping; and from Shanghai, with intermediate stops, to Canton. The main routes provided for in the contract are already in operation, and have become highly popular.

American missionary and philanthropic investments are much larger than those of any other country. Estimates of the total investments vary from $52,000,000, made by the Department of State in December 1927, to from $70,000,000 to $80,000,000, made by several more recent investigators. A further idea of the missionary and philanthropic stake may be gained from the total of the annual gifts from America. The amount recently expended in a single year by American Protestant missionary societies in China is stated by the secretary of the Foreign Missions Conference of North America to be about $6,400,000. The statistics, with the exception of those for one society, are for the year 1929. These figures do not include the Roman Catholic missionary expenditures, nor the sums for such philanthropic work as that of the Peking Union Medical College, which represents an investment of some $10,000,000, nor such gifts as that of the Rockefeller Foundation to the China Medical Board in 1928, which amounted to $12,000,000. In the latter case, however, the endowment fund was not invested in China.

The foreign trade of China for 1928 and 1929 each year exceeded $1,500,000,000. About three-fourths of this total was divided between Japan, the United States and the British Empire, in the order named. From the official figures of the Chinese Maritime Customs, however, it would appear that the British Empire has the largest share, provided Hong Kong be included with Great Britain, the Dominions, and the other parts of the Empire. These figures give the British Empire, for the four years 1925-28, an average share of China's trade of 31 percent; Japan with Korea, 29.9 percent; and the United States, with the Philippines, 16.5 percent. But Hong Kong is a distributing center for the commerce of all countries; and it has long been realized that in order to ascertain the actual amount of the trade of each foreign state with China it would be necessary to unscramble the Hong Kong trade and credit each country with its proper share of it. During 1930, fortunately, the Government of Hong Kong began to publish reasonably adequate reports which give imports and exports according to countries of origin and destination. On the basis of these statistics, for the twelve months ending May 31, 1931, the British Empire had 16 percent of the total Hong Kong trade; Japan, 8.7 percent; and the United States with the Philippines 6.9 percent. Although these returns are not regarded as complete, they doubtless give a fairly accurate idea of the proportion of the trade attributable to these three leading countries. If then the 84 percent of the Hong Kong trade which is non-British be subtracted from the total China trade credited to the British Empire, and the proportionate shares of the Hong Kong trade belonging to Japan and to the United States respectively be added to the figures of their trade with China, it would appear that Japan leads in the China trade, with the United States and the British Empire almost tied for second place.

But there is a further factor which makes it evident that the actual amount of American commerce is even greater than it would seem to be from this computation: goods sent from America to China by way of Japan are often credited in the Chinese Customs statistics to Japan rather than to the United States. An illustration may be found in the exports of raw cotton. In 1927 Japan was credited with exporting some 200,000 bales of cotton to China, but since Japan produces no cotton these bales must have come largely from America and India. Mr. Julean Arnold, American Commercial Attaché in China, has estimated that the American trade which was credited to Japan amounted, in 1928, to about $30,000,000.

The money value of the China trade of each of the three leading countries, as compiled from their commercial statistics for 1929, which include their direct trade with Hong Kong and South Manchuria, is as follows: Japan, $500,000,000; United States, $338,000,000; Great Britain, $160,000,000. One is impressed by the fact that America's trade is surprisingly large in comparison with its investments in China, and that Great Britain's is noticeably small.

Of greater significance, however, than the money value of the annual trade with China, is the proportion which this trade bears to each country's world commerce. In 1929 the trade of Japan (including Formosa and Korea) with China was 24.4 percent of her total world trade; that of the United States, only 3.5 percent; that of Great Britain, only 1.6 percent. Japan's stake in the China trade is therefore seven times more important to her than America's China trade is to America, and fifteen times more important than the British China trade is to Great Britain.

The trade of other countries with China is relatively small. But that of Soviet Russia deserves consideration; it has been increasing recently, causing much anxiety in commercial circles. Statements are frequently made that north and central Manchuria are being flooded with Russian products at lower prices, considering quality, than Chinese, Japanese or other foreign imports, and that Soviet contracts are pending with the Nanking Government for great quantities of petroleum at prices which other importers can not meet. But the last published commercial statistics should not be disturbing to anyone. For 1928 and 1929, the Sino-Soviet trade amounted to only 5.4 percent and 5.5 percent respectively of the total Chinese foreign trade, a much smaller percentage than Russia enjoyed before the World War. It is true that Soviet Russia dominates the commerce of Mongolia and Chinese Turkestan and that it may come to provide the greater part of the imports along the Chinese Eastern Railway. It may even challenge the foreign firms in other parts of China, especially in the petroleum field. But at present its trade is not proportionately large.

The question naturally arises whether it is desirable or possible to increase the stake which the foreign nations now hold in China. So far as investments are concerned, China needs substantial amounts of money for railroads, motor roads, public utilities and factories, but large foreign loans will probably be delayed until adequate financial security can be given, and that will depend upon peace and stability of government. As for trade, it has long been common to draw an alluring picture of the commercial possibilities of China. Anyone with pencil and pad can figure out startling results by multiplying some single small purchase by 450,000,000. One is reminded of the oft quoted suggestion that if every Chinese should wear a gown one inch longer, the increased demand for cotton cloth would be enough to keep all the cotton mills in America busy for a year. Equally hopeful is the recent estimate of the happy results for the United States should each Chinese be persuaded to buy one California prune each week! One can prove that if the people in China should each buy an additional five dollars' worth of American goods a year, it would add some seventy-five percent to the total exports of the United States. And these optimists can point to the encouraging increase in the total foreign trade of China, which has developed from 158,000,000 taels in 1880 to 2,397,000,000 taels in 1929. But the pessimists, or higher critics as they would prefer to be regarded, insist that the exceptionally low economic level on which the mass of the Chinese live, and the disturbed political conditions in China, make any notable increase in the purchasing power of the Chinese highly improbable -- at least in the near future. Foreign exporters, however, still seem to be optimistic, for trade commissions have gone to China during the past year from Great Britain, Japan, Germany and Canada, attempting to lay the foundation for the hoped-for commercial expansion of the future.

Any increase in trade, however small, would be appreciated by each of the industrial nations, including our own, but the one country to which its investments and trade in China are of supreme importance is Japan. Count Uchida, when Minister for Foreign Affairs, stated in the Diet that Japan, with a large population in a small territory, could only insure her existence by economic coöperation with China; and Viscount Ishii, in his recent Memoirs, writes, "Japan can not exist without China." The Japanese view of her stake in China, as compared with that of her leading economic competitors, was well expressed to the writer by one of the foremost Japanese diplomats, who said, "Japan's interests in China are vital; British interests in China are substantial; American interest in China are" -- then he hesitated, and thinking doubtless of our missionary and philanthropic investments, smiled and added -- "sentimental."



Great Britain $1,250,000,0001
Japan $1,250,000,0002
Soviet Russia $200-400,000,0003
United States $250,000,0004
1 Based upon estimate of a committee of the Royal Institute of International Affairs, 1929. See W. J. Hinton, "Present Economic and Political Position of Great Britain in China," The Annals, Vol. 152, Nov. 1930; D. K. Lieu, "Foreign Investments in China," Shanghai, 1929.
2 M. Odagiri, "Japanese Investments in China," 1929, a pamphlet published under the auspices of the Japanese Council of the Institute of Pacific Relations; M. Odagiri, "Japanese Loans to China," Far Eastern Review, March 1931; Toshi Go, "Japanese Investments in China," ibid; R. H. Akagi, "Japan's Economic Relations with China," Pacific Affairs, June 1931; D. K. Lieu, op. cit.; "Second Report on Progress in Manchuria to 1930," Dairen, 1931, p. 55-6.
3 Chinese Eastern Railway, "Statistical Year Book," 1929; "China Year Book," 1931, p. 209; M. Bakhmetieff, "The Issue in Manchuria," Slavonic Review, Dec. 1929, p. 308; D. K. Lieu, op. cit.; "Second Report on Progress in Manchuria to 1930," p. 33-4. Certain figures in the text were kindly furnish d by Dr. C. Walter Young and Mr. Toshi Go.
4 C. F. Remer, "American Investments in China," Honolulu, 1929; P. D. Dickens, "American Direct Investments in Foreign Countries," Washington, 1930; M. Winkler, "Prosperity and Foreign Investments," Foreign Policy Association Information Service, May 1930; ibid, "America's Stake Abroad," Feb. 1931. Much of the data has been obtained by personal correspondence.


(in million haikwan or customs taels)1

1927 1928 1929
British Empire
  Great Britain 133.06 174.82 193.48
  British India 64.58 66.68 72.29
  Canada 14.15 17.76 40.63
  Australia and New Zealand 1.92 3.48 7.13
  South Africa 0.33 0.38 0.55
  Straits Settlements 32.54 32.00 35.44
---------- ---------- ----------
    Total 246.58 295.12 349.52
Hong Kong 382.27 408.20 388.06
Japan (including Formosa) 502.63 547.89 579.56
  Korea 75.57 64.70 55.44
United States 288.54 332.74 368.67
  Philippines 10.63 11.62 12.59
Russia 99.76 118.28 75.35
France 66.13 93.62 74.50
Germany 59.70 78.52 89.53
---------- ---------- ----------
    Grand total direct foreign trade. 1,931.55 2,187.32 2,281.46
1The average value of the haikwan tael in American money was as follows: in 1927, $.69; in 1928, $.71; in 1929, $.64.

[i]All figures are in American gold dollars unless otherwise stated.

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  • GEORGE H. BLAKESLEE, Professor of History and International Relations in Clark University; an American specialist in Pacific problems at the Washington Conference
  • More By George H. Blakeslee