Modern Asian Studies 40,3(2006)pp.737-759.2006 Cambridge University Press doi:10.1017/S0026749X06002174 Printed in the United Kingdom Foreign Devils,Finance and Informal Empire:Britain and China c.1900-19I2* IAN PHIMISTER University of Sheffield and University of Pretoria 'An imperial policy is essentially a commercial policy' (Charles Addis,1905) Look at the way we have swindled the Chinese in the case of the Pekin Syndicate and still worse in the case of the Chinese Engineering and Mining Company' (G.E.Morrison,1906) The template for British policy towards China from the 18gos until the collapse of the Manchu dynasty in 1911,write Peter Cain and Tony Hopkins,was 'an effective if sometimes awkward collaboration between...the Foreign Office and the Hongkong and Shanghai Bank'. It was this alliance that underpinned the successful achievement of Whitehall'stwin aims of upholding China's territorial integrity while also advancing Britain's economic and especially financial interests during a period of intense international rivalry in the Far East'. In the course of moving towards this goal even as they maintained the credit-worthiness of the Chinese government,the Foreign Office and the Hongkong and Shanghai Bank 'cooperated so closely that it is misleading as well as unnecessary to speak of one dominating the other,not least because they were manned by the same sort of [gentlemanly capitalist]people.One such individual was Sir Charles Addis,from 1905 onwards in charge of the London Office of the Hongkong and Shanghai Bank,and close confidant of the Foreign Office.Declaring his belief that 'to resent the intrusion of politics into business is to do injury to both',Addis and other agents of gentlemanly capitalism like him not only hoped that China 'would remain strong and independent',but also that it would be converted to progress "Financial assistance from The Leverhulme Trust is gratefully acknowledged. P.Cain and A.Hopkins,British Imperialism 1688-2000(Harlow:Longman,2002), Pp.361,38o. 0026-749X/o6/s7-50+$0.10 737
Modern Asian Studies 40, 3 (2006) pp. 737–759. C 2006 Cambridge University Press doi:10.1017/S0026749X06002174 Printed in the United Kingdom Foreign Devils, Finance and Informal Empire: Britain and China c.1900–1912∗ IAN PHIMISTER University of Sheffield and University of Pretoria ‘An imperial policy is essentially a commercial policy’ (Charles Addis, 1905) ‘Look at the way we have swindled the Chinese in the case of the Pekin Syndicate and still worse in the case of the Chinese Engineering and Mining Company’ (G.E. Morrison, 1906) The template for British policy towards China from the 1890s until the collapse of the Manchu dynasty in 1911, write Peter Cain and Tony Hopkins, was ‘an effective if sometimes awkward collaboration between ...the Foreign Office and the Hongkong and Shanghai Bank’. It was this alliance that underpinned the successful achievement of Whitehall’s ‘twin aims of upholding China’s territorial integrity while also advancing Britain’s economic and especially financial interests during a period of intense international rivalry in the Far East’. In the course of moving towards this goal even as they maintained the credit-worthiness of the Chinese government, the Foreign Office and the Hongkong and Shanghai Bank ‘cooperated so closely that it is misleading as well as unnecessary to speak of one dominating the other, not least because they were manned by the same sort of [gentlemanly capitalist] people’.1 One such individual was Sir Charles Addis, from 1905 onwards in charge of the London Office of the Hongkong and Shanghai Bank, and close confidant of the Foreign Office. Declaring his belief that ‘to resent the intrusion of politics into business is to do injury to both’, Addis and other agents of gentlemanly capitalism like him not only hoped that China ‘would remain strong and independent’, but also that ‘it would be converted to progress ∗Financial assistance from The Leverhulme Trust is gratefully acknowledged. 1 P. Cain and A. Hopkins, British Imperialism1688−2000 (Harlow: Longman, 2002), pp. 361, 380. 0026–749X/06/$7.50+$0.10 737
738 IAN PHIMISTER through a programme of "responsible lending"which Britain was uniquely qualified,and therefore morally obliged,to undertake'? Yet for all its many merits in explaining the important shift in emphasis from an initial concern with markets for exports from India and Britain to a preoccupation with opportunities for finance, such a view of British business interests in China may be too narrowly focused.Because it remains largely within a framework established by earlier studies all of which concentrated on banking and railways,3 it completely ignores mining,the most sought-after sphere of concessions after railways themselves.Arguably too,it is a perspective that pays insufficient attention to links between the non-banking companies actually involved in China at this time.When this is done-and the larger part of this paper looks in some detail at the interests and operations of two of the largest City-registered companies and their relationship with the Foreign Office-a quite different picture emerges.Scrutiny of the affairs of the Chinese Engineering and Mining Company,and the Pekin Syndicate,and to a lesser extent the Yangtse Valley Company,reveals a world far removed from the one described in the subject's conventional wisdom. It is one in which the cross-cutting cosmopolitan interests subsumed under 'the City'pulled in different directions at different times. Frequently highly speculative,they were occasionally fraudulent as well.The ensuing relationship with British imperial interests was considerably more ragged than either smooth assertions of 'credit worthiness'or seamless formulations of 'gentlemanly capitalism' presently acknowledge I As is well-established in the scholarly literature,the battle for railway and mining concessions in China reached its height between 1895 and 1goo,that is,in the years after the Sino-Japanese War and the end of the Boxer Rising.Less frequently noted,though,is that 2 Ibid,pp.374-5.For Addis,see especially R.Dayer,Finance and Empire:Sir Charles Addis,1861-1945 (London:Macmillan,1989). 3 Most notably,F.King,The History of the Hongkong and Shanghai Bank (Cambridge: Cambridge University Press,1987);and E.Edwards,British Diplomacy and Finance in China,1895-1914(Oxford:Clarendon Press,1987). N.Pelcovits,Old China Hands and the Foreign Office (New York:King's Crown Press, 1948),p.190
738 IAN PHIMISTER through a programme of “responsible lending” which Britain was uniquely qualified, and therefore morally obliged, to undertake’.2 Yet for all its many merits in explaining the important shift in emphasis from an initial concern with markets for exports from India and Britain to a preoccupation with opportunities for finance, such a view of British business interests in China may be too narrowly focused. Because it remains largely within a framework established by earlier studies all of which concentrated on banking and railways,3 it completely ignores mining, the most sought-after sphere of concessions after railways themselves. Arguably too, it is a perspective that pays insufficient attention to links between the non-banking companies actually involved in China at this time. When this is done – and the larger part of this paper looks in some detail at the interests and operations of two of the largest City-registered companies and their relationship with the Foreign Office – a quite different picture emerges. Scrutiny of the affairs of the Chinese Engineering and Mining Company, and the Pekin Syndicate, and to a lesser extent the Yangtse Valley Company, reveals a world far removed from the one described in the subject’s conventional wisdom. It is one in which the cross-cutting cosmopolitan interests subsumed under ‘the City’ pulled in different directions at different times. Frequently highly speculative, they were occasionally fraudulent as well. The ensuing relationship with British imperial interests was considerably more ragged than either smooth assertions of ‘credit worthiness’ or seamless formulations of ‘gentlemanly capitalism’ presently acknowledge. I As is well-established in the scholarly literature, the battle for railway and mining concessions in China reached its height between 1895 and 1900, that is, in the years after the Sino-Japanese War and the end of the Boxer Rising.4 Less frequently noted, though, is that 2 Ibid., pp. 374−5. For Addis, see especially R. Dayer, Finance and Empire: Sir Charles Addis, 1861−1945 (London: Macmillan, 1989). 3 Most notably, F. King, The History of the Hongkong and Shanghai Bank (Cambridge: Cambridge University Press, 1987); and E. Edwards, British Diplomacy and Finance in China, 1895−1914 (Oxford: Clarendon Press, 1987). 4 N. Pelcovits, Old China Hands and the Foreign Office (New York: King’s Crown Press, 1948), p. 190
BRITAIN AND CHINA 739 much this same period was characterised by a succession of share manias in mining and other City of London markets.So pervasive was the atmosphere of speculation that in 1898,following a speech by the Lord Chief Justice,Lord Russell,in which he deprecated the prostitution of the limited liability system to the greed of unscrupu- lous persons',several London newspapers denounced the tide of demoralisation which has threatened at times to turn the British Empire into a more or less shady company concern'.This was the context in which the Pekin Syndicate (1898),the Yangtse Valley Syn- dicate (1899),and the Oriental Syndicate (1899)were all launched. These concerns,variously described as 'respectable British enter- prises',6 and as financial instruments'exemplifying free-standing companies',7 were not in fact what they were taken for by later historians.In the first place,they were not straightforwardly British' companies.The London-registered Pekin Syndicate,for example, which started life as an Anglo-Italian concern,soon came to depend on French investors for its continued existence.8 Secondly,as some con- temporaries appreciated,these enterprises were less than respectable. They were also closely interlinked.From the start,they were directed or advised by three important individuals:Carl Meyer(representing Rothschilds money),Percy Tarbutt (representing South African mining groups),and Edmund Davis(representing Belgian interests). Often enough,they sat on the same board of directors.All of them played key roles in shaping the pattern of British investment in China, not least in the case of the Chinese Engineering and Mining Company, the largest single industrial firm in China registered in the City. 5 S.and B.Webb,The Decay of Capitalist Civilisation (London:The Fabian Society, 1923),p.106;and Daily Chronicle,1o November 1898;both as cited in G.Searle, Corruption in British Politics 1895-1930(Oxford:Clarendon Press,1987),pp.38-9. 6 D.McLean,Chinese Railways and the Townley Agreement of 1903',Modern Asian Studies,7:2(1973),p.145- Cain and Hopkins,British Imperialism,p.371.For Edwards,the Pekin Syndicate was a 'substantial concern'backed by 'solid City interests';see his British Diplomacy and Finance,pp.196,33. 8 J.Osterhammel,British business in China,1860s-195os',in R.Davenport- Hines and G.Jones(eds),British Business in Asia Since r860(Cambridge:Cambridge University Press,198g),p.197.See also,The Critic,12 November 1898. 9 For directors of,and shareholders in,the Yangtse Valley Syndicate;the Pekin Syndicate Investment Trust Ltd;and the Chinese Mining and Engineering Company; see respectively BT s1/8558/62317;BT31/8o76/5821g;and BT31/9233/68532, PRO.For the Oriental Syndicate,see E.Davis to Lord Lansdowne,26 June 1903, FO 17/1759,PRO.The Oriental Syndicate was itself largely owned by Davis' Anglo-Continental Gold Syndicate,for which see The Stock Exchange Year Book,1897;
BRITAIN AND CHINA 739 much this same period was characterised by a succession of share manias in mining and other City of London markets. So pervasive was the atmosphere of speculation that in 1898, following a speech by the Lord Chief Justice, Lord Russell, in which he deprecated the prostitution of the limited liability system to ‘the greed of unscrupulous persons’, several London newspapers denounced ‘the tide of demoralisation which has threatened at times to turn the British Empire into a more or less shady company concern’.5 This was the context in which the Pekin Syndicate (1898), the Yangtse Valley Syndicate (1899), and the Oriental Syndicate (1899) were all launched. These concerns, variously described as ‘respectable British enterprises’,6 and as ‘financial instruments’ exemplifying ‘free-standing companies’,7 were not in fact what they were taken for by later historians. In the first place, they were not straightforwardly ‘British’ companies. The London-registered Pekin Syndicate, for example, which started life as an Anglo-Italian concern, soon came to depend on French investors for its continued existence.8 Secondly, as some contemporaries appreciated, these enterprises were less than respectable. They were also closely interlinked. From the start, they were directed or advised by three important individuals: Carl Meyer (representing Rothschilds money), Percy Tarbutt (representing South African mining groups), and Edmund Davis (representing Belgian interests). Often enough, they sat on the same board of directors. All of them played key roles in shaping the pattern of British investment in China, not least in the case of the Chinese Engineering and Mining Company, the largest single industrial firm in China registered in the City.9 5 S. and B. Webb, The Decay of Capitalist Civilisation (London: The Fabian Society, 1923), p. 106; and Daily Chronicle, 10 November 1898; both as cited in G. Searle, Corruption in British Politics 1895−1930 (Oxford: Clarendon Press, 1987), pp. 38−9. 6 D. McLean, ‘Chinese Railways and the Townley Agreement of 1903’, Modern Asian Studies, 7:2 (1973), p. 145. 7 Cain and Hopkins, British Imperialism, p. 371. For Edwards, the Pekin Syndicate was a ‘substantial concern’ backed by ‘solid City interests’; see his British Diplomacy and Finance, pp. 196, 33. 8 J. Osterhammel, ‘British business in China, 1860s–1950s’, in R. DavenportHines and G. Jones (eds), British Business in Asia Since 1860 (Cambridge: Cambridge University Press, 1989), p. 197. See also, The Critic, 12 November 1898. 9 For directors of, and shareholders in, the Yangtse Valley Syndicate; the Pekin Syndicate Investment Trust Ltd; and the Chinese Mining and Engineering Company; see respectively BT 31/8558/62317; BT 31/8076/58219; and BT 31/9233/68532, PRO. For the Oriental Syndicate, see E. Davis to Lord Lansdowne, 26 June 1903, FO 17/1759, PRO. The Oriental Syndicate was itself largely owned by Davis’ Anglo-Continental Gold Syndicate, for which see The Stock Exchange Year Book, 1897;
740 IAN PHIMISTER The first Chinese Engineering and Mining Company was established in 1878 to work extensive coal deposits in and around Kaiping.10 Entirely Chinese owned,it expanded more or less steadily until the late 18gos,by which time annual output was c.780,oo0 tons.Some gooo labourers were employed.I Foreign capital was not sought before 1898,when a loan of f2o0,ooo was raised to develop the ice-free deep water port of Chingwangtao.These funds and related issues had earlier been discussed by the Director General of the Kaiping Collieries,Zhang Yi,12 with Charles Moreing,a well-known City figure and chief partner in the London-based firm of Bewick,Moreing, mining consultants.13 On the lookout for new mining prospects in the aftermath of the recent collapse of the Westralian'boom,Moreing was quick to see that the proposed modernisation of China's mining industry promised rich pickings.His firm promptly applied for half of the bonds of the Chingwantao loan,and he arranged for one of Bewick,Moreing's most talented mining engineers to take charge of the newly established Bureau of Mines in northern China.This was Herbert Hoover,who much later on was to become President of the United States of America.14 Hoover arrived in Tienstin in 1899,but had barely taken up the reins before an already difficult situation was rendered immeasurably more complicated by the Boxer Rising. In the ensuing chaos,it seemed to some Chinese officials that the only way of preventing foreign Powers from seizing Chinese assets as compensation for the murder of their citizens and damage to property, was to involve overseas investors in them.And when Russian and Japanese troops began occupying the Kaiping Collieries complex,this prompted Zhang Yi to cast about for ways of rapidly transforming the existing Chinese Engineering and Mining Company into a and especially His Excellency Chang Yen Mao...v.Beioick Moreing and Company,Herbert Charles Hoover,Charles Algernon Moreing,Edmund Davis,Walton Fitzjames Turner and Albert Thys,High Court of Justice,Chancery Division,10 April 1905,pp.4-11,J4/6971, PRO. 10E.Carlson,The Kaiping Mines,1877-19r2(Cambridge,Mass:Harvard University Press,1971),passim.The wider context is discussed in T.Wright,Coal Mining in China's Economy and Society 1895-1937(Cambridge:Cambridge University Press,1984). i1 The Statist,20July 1901. 12 Variously Zhang Yanmou'and 'Chan yen Mao'.See Wang Yuru,Capital Formation and Operating Profits of the Kailuan Mining Administration (1903- enChacles gmo in D Jeremy (ed.),Dictionary of Business Biography (London:Butterworth,1984). 14 G.Nash,The Life of Herbert Hoover.The Engineer,1874-1914(New York:Norton, 198g)
740 IAN PHIMISTER The first Chinese Engineering and Mining Company was established in 1878 to work extensive coal deposits in and around Kaiping.10 Entirely Chinese owned, it expanded more or less steadily until the late 1890s, by which time annual output was c.780,000 tons. Some 9000 labourers were employed.11 Foreign capital was not sought before 1898, when a loan of £200,000 was raised to develop the ice-free deep water port of Chingwangtao. These funds and related issues had earlier been discussed by the Director General of the Kaiping Collieries, Zhang Yi,12 with Charles Moreing, a well-known City figure and chief partner in the London-based firm of Bewick, Moreing, mining consultants.13 On the lookout for new mining prospects in the aftermath of the recent collapse of the ‘Westralian’ boom, Moreing was quick to see that the proposed modernisation of China’s mining industry promised rich pickings. His firm promptly applied for half of the bonds of the Chingwantao loan, and he arranged for one of Bewick, Moreing’s most talented mining engineers to take charge of the newly established Bureau of Mines in northern China. This was Herbert Hoover, who much later on was to become President of the United States of America.14 Hoover arrived in Tienstin in 1899, but had barely taken up the reins before an already difficult situation was rendered immeasurably more complicated by the Boxer Rising. In the ensuing chaos, it seemed to some Chinese officials that the only way of preventing foreign Powers from seizing Chinese assets as compensation for the murder of their citizens and damage to property, was to involve overseas investors in them. And when Russian and Japanese troops began occupying the Kaiping Collieries complex, this prompted Zhang Yi to cast about for ways of rapidly transforming the existing Chinese Engineering and Mining Company into a and especially His Excellency Chang Yen Mao... v. Bewick Moreing and Company, Herbert Charles Hoover, Charles Algernon Moreing, Edmund Davis, Walton Fitzjames Turner and Albert Thys, High Court of Justice, Chancery Division, 10 April 1905, pp. 4–11, J4/6971, PRO. 10 E. Carlson,The Kaiping Mines, 1877–1912 (Cambridge, Mass: Harvard University Press, 1971), passim. The wider context is discussed in T. Wright, Coal Mining in China’s Economy and Society 1895–1937 (Cambridge: Cambridge University Press, 1984). 11 The Statist, 20 July 1901. 12 Variously ‘Zhang Yanmou’ and ‘Chan yen Mao’. See Wang Yuru, ‘Capital Formation and Operating Profits of the Kailuan Mining Administration (1903– 1937)’, Modern Asian Studies, 28, 1 (1994), p. 100. 13 For details of his career, see G. Burke, ‘Moreing, Charles Algernon’, in D. Jeremy (ed.), Dictionary of Business Biography (London: Butterworth, 1984). 14 G. Nash, The Life of Herbert Hoover. The Engineer, 1874–1914 (New York: Norton, 1983)
BRITAIN AND CHINA 741 London-registered entity.That Zhang's motives were entirely altrui- stic was later hotly disputed,but whatever they were,he very soon found himself out-maneuvered by those with whom he had chosen to work.15 Documents drawn up on Moreing and Hoover's instructions, which apparently replaced the existing Chinese Engineering and Mining Company with a new company of the same name (hereafter CEMC),to be jointly managed by Chinese and European interests following a substantial injection of foreign capital,actually had the effect by May 1901 of transferring the entire ownership, including the newly developed harbour facilities at Chingwantao, into European hands.Not to put too fine a point on it,the previous Chinese owners were defrauded of their property.16 With the CEMC capitalised at f1,o0o,ooo,its promoters profited handsomely from their involvement in the affair.The interlocking syndicates and companies which they variously directed did even better.At no cost to themselves,they took possession of625,o00 CEMC shares distributed at par once the mining rights obtained by Moreing had been made over. Holders of the old Kaiping shares received the balance of 375,000 shares,not enough to threaten control now exercised in London and Brussels by people who had paid nothing for their shares'.A further f500,ooo in debentures was raised to clear the debts of the old company and provide working capital for the new one.A large number of free shares were given to those friends of the promoters who took up this issue.Everything was done 'quietly and privately, and at no stage were the debentures placed on the open market.Once again the promotional profits were...tremendous'17 Working behind the scenes and pulling the financial strings was the Oriental Syndicate in which Edmund Davis was the leading light.18 With the City not surprisingly wary of Chinese issues 15 Far Eastern Review,November 1928.See also,Carlson,Kaiping Mines,pp.67-9; and Nash,Hoover,pp.125-81. 16 Hou Chi-ming,Foreign Investment and Economic Development in China,1840-1937 (Cambridge,Mass:Harvard University Press,1965),pp.73-4. 17 Carlson,Kaiping Mines,pp.69-73.See also,Nash,Hoover,pp.170-6. 8For Davis's business career,see R.Davenport-Hines,Sir Edmund Gabriel Davis', in Jeremy (ed.),Dictionary of Business Biography.More of Davis'social and cultural background is sketched in I.Phimister,Sir Edmund Davis',Oxford Dictionary ofNational Biography (Oxford:Oxford University Press,2004)
BRITAIN AND CHINA 741 London-registered entity. That Zhang’s motives were entirely altruistic was later hotly disputed, but whatever they were, he very soon found himself out-maneuvered by those with whom he had chosen to work.15 Documents drawn up on Moreing and Hoover’s instructions, which apparently replaced the existing Chinese Engineering and Mining Company with a new company of the same name (hereafter CEMC), to be jointly managed by Chinese and European interests following a substantial injection of foreign capital, actually had the effect by May 1901 of transferring the entire ownership, including the newly developed harbour facilities at Chingwantao, into European hands. Not to put too fine a point on it, the previous Chinese owners were defrauded of their property.16 With the CEMC capitalised at £1,000,000, its promoters profited handsomely from their involvement in the affair. The interlocking syndicates and companies which they variously directed did even better. At no cost to themselves, they took possession of 625,000 CEMC shares distributed at par once the mining rights obtained by Moreing had been made over. Holders of the old Kaiping shares received the balance of 375,000 shares, not enough to threaten control now exercised in London and Brussels by ‘people who had paid nothing for their shares’. A further £500,000 in debentures was raised to clear the debts of the old company and provide working capital for the new one. A large number of free shares were given to those friends of the promoters who took up this issue. Everything was done ‘quietly and privately’, and at no stage were the debentures placed on the open market. Once again the ‘promotional profits were ...tremendous’.17 Working behind the scenes and pulling the financial strings was the Oriental Syndicate in which Edmund Davis was the leading light.18 With the City not surprisingly wary of Chinese issues 15 Far Eastern Review, November 1928. See also, Carlson, Kaiping Mines, pp. 67–9; and Nash, Hoover, pp. 125–81. 16 Hou Chi-ming, Foreign Investment and Economic Development in China, 1840–1937 (Cambridge, Mass: Harvard University Press, 1965), pp. 73–4. 17 Carlson, Kaiping Mines, pp. 69–73. See also, Nash, Hoover, pp. 170–6. 18 For Davis’s business career, see R. Davenport-Hines, ‘Sir Edmund Gabriel Davis’, in Jeremy (ed.), Dictionary of Business Biography. More of Davis’ social and cultural background is sketched in I. Phimister, ‘Sir Edmund Davis’, Oxford Dictionary of National Biography (Oxford: Oxford University Press, 2004)