893.51/6369: Telegram

The Consul General at Shanghai (Gauss) to the Secretary of State

199. Following from Pierson for Sabin, Export-Import Bank with copy to Moore62 and Hornbeck:

“Reference your radio regarding sale 40 locomotives by Alco and Baldwin to Chinese Ministry Railway. Locomotives urgently required [Page 586]for use Tientsin–Pukow Railway which, engages in profitable coal transportation. Important that delivery be made before end of year. This seems to constitute main reason for seeking American equipment notwithstanding our higher price. Minister proposes furnish his promissory notes payable monthly over 5 year term beginning 1 month after delivery. Interest at 6 or 6½% per annum payable upon each note at maturity. This provision unusual for us but is in accordance with local custom. Minister reluctant to furnish bank guarantee but believe this or equivalent Chinese participation essential. I have made only one trip to interior to date but am impressed with amount of business, freight and passenger, being done by railroads. Minister Chang was formerly president of Bank of China and is well regarded. He has recognized all rail loans in default when he took office. If Export-Import Bank will participate 50% without recourse, firm of Andersen, Meyer and Company of Shanghai, a subsidiary of General Electric, will carry balance including final 15%. Total delivered sales price about 3 million United States dollars. I recommend we agree to purchase half of notes as received from Minister if guaranteed by Bank of China or Central Bank or Bank of Communications. Interest not less than 6% plus flat underwriting charge of 3%. Total order may be placed with Baldwin or Alco but will be divided between them. Total risk up to time of delivery in China will be on Andersen, Meyer which is evidence their faith in deal. This is best type of business available and if consummated will represent first substantial sale American equipment in China in many years.

Please present to Mr. Jones63 and to Executive Committee promptly and advise me care Gauss.”

Gauss
  1. R. Walton Moore, Assistant Secretary of State.
  2. Jesse H. Jones, Chairman, Board of Directors, Reconstruction Finance Corporation.