893.77/2832
Memorandum by the Economic Adviser, Department of State (Feis)
Mr. Kinney, American representative of the South Manchuria Railway Company, came in to talk with me this morning. I questioned him regarding the disposition of the Chinese railways in Manchuria. He said that they were in three different groups: (1) those to which the Chinese Government had made various loan advances which had not been repaid; (2) those which the Chinese had built out of their own funds but which were not competitive in any way with the South Manchuria Railway, and (3) the same as (2) but possibly competitive Chinese railways.
He thought that somewhat different handling might be made of each of these three groups. He anticipated that as soon as the new local [Page 44] administrations were firmly set up in Manchuria, the South Manchuria Railway Company would enter into conference with these new authorities regarding the whole railway problem, and there work out a settlement.
I questioned him as to whether he anticipated that these local authorities would be in touch with Nanking, and he replied in the negative, giving as a reason the fact that the Nanking authorities had repudiated these new local authorities. He then stated that an important matter to be discussed in these railway conferences was the construction of new railways, the rights for which the Japanese already held under various treaties. The South Manchuria Railway is desirous of undertaking extensive new construction, and he stated that the Japanese Government would probably be willing to advance funds for this purpose. He went on to comment that this would bring benefit to the United States in the way of orders for railway materials, and so on.
I made no comment, but if these anticipations of Japanese policy are correct, it will almost certainly mean an attempt either of the Japanese Government or of the South Manchuria Railway to borrow abroad. The attraction of orders for railway material will probably be held out in return for loans in the American market. I consider these intimations additional reasons for being on the alert as regards Japanese financing in this country.
Mr. Kinney had just left Tokyo on December 17, and found nothing to indicate that the Japanese did not intend directly or indirectly to retain control over Manchuria.