During all this time the high Chinese officials, who were my friends, were at a loss to explain to me how this subordinate's defiance of their orders could be successful. They intimated that the obstruction must be due to Japanese influence exercised in opposition to American enterprise in China. We noted that immediately upon publication of the vice-minister's answer and before we knew about it ourselves, a secretary of the Japanese Legation quite officiously expressed to one of the American secretaries his surprise at such a publication.
But by this act the vice-minister had overstepped the mark. The leaders of the Communications party, who were holding aloof from politics with General Tuan, strongly condemned Chuan, who had always been dependent on them. He showed a remarkable change. He even sent emissaries to me, pleading for forgiveness and stating that he was in no way animated by hostility to American interests, but had acted on an honest though mistaken view of the transaction.
Calling on me on July 2nd, he repeated his apology. On the 30th of June the Ministry of Communications had formally accepted the offer of funds by the American company. Thereafter negotiations were again interrupted by political changes and disturbances.
This incident will serve to illustrate the complexity of Chinese affairs, and the condition of disorganization in which the Chinese Government was at this time.
The creation of a Chino-American Industrial Bank was the subject of many discussions I had with Chinese officials and financiers. This occupied a good deal of my attention during 1918, while Mr. Hsu Un-yuen, after his retirement from the presidency of the Bank of China, was devoting his time to working out a plan and securing the support of prominent Chinese for this undertaking. Mr. Hsu Sing-loh was also working on it independently; Mr. Hsu was secretary of the Minister of Finance, educated in England, and exceptionally well informed. In December of 1918 I accompanied Mr. Hsu to the house of Mr. Yang, a capitalist interested in the China Merchants Steamship Company, where we met with the Premier, Mr. Chien Neng-hsun, and Mr. Chou Hsueh-hsi, who had recently been Minister of Finance. Here we talked over matters of banking and finance, with Mr. Chou leading the conversation. He was sure the Government would give a favourable charter that would enlist the necessary capital. Chinese ideas about an industrial bank were vague; in some mysterious way it was thought that it could produce capital for developing industries, or, rather, could manifold its capital for such uses. Three industries were ready—cotton, steel, and scientific agriculture—for an extensive development. He did not know how bad it is for a bank to lock up its capital in long-time commitments. I asked those present as to how ready the Chinese public would be to absorb the long-term bonds. Mr. Chou thought they would take them, if strongly backed, at a relatively low interest. All desired to go ahead. Ultimately the bank was founded, but by another group.
Before parting on that day our wealthy host brought forth from the strong-boxes many great treasures of Chinese art, including paintings of the Sung and Ming periods. China boasts only one museum. Only through seeing such private collections can one form an estimate of the richness and extent of Chinese art treasures. For an hour I looked on delightedly while one after another of these precious works of Chinese painting were unrolled before us. Chinese pictures are very modest. They come out when called, but retire again readily to the quiet of the storeroom. Also, darkness has not the dulling effect on the water-colours used by Chinese painters that it exercises upon pictures done in oils.
Incidentally, Minister Chow and other prominent officials had been interested in a savings bank combined with a lottery, which announced the sale of so-called premium bonds. There were to be quarterly drawings, at which a certain number of the bonds would receive prizes, ranging as high as $100,000. Mr. Chow explained to me that it would be futile for a Chinese savings bank to offer a matter of 5 or 6 per cent. interest for funds. Nobody would heed it, because of the profitableness of commercial enterprise. In order to strike public attention and to cause people to bring their money for deposit, the inducement of winning a large amount must be provided. The assurance that the original deposit itself would not be lost, but would ultimately be repaid, would be the second attraction.
The minister said that it was the plan of the bank to reduce the amount of prizes and to increase their number so that gradually the payment of a reasonable interest would be approached, as the people got accustomed to the idea of placing their funds in such an institution. The fact that this country, whose people are so frugal and parsimonious and where there is so much accumulated capital, should hitherto have been without savings banks appears remarkable to a stranger. But the high return on commercial loans, and the ever-present gambling instinct of the Chinese, account to some extent for this absence.