893.50/12–144
Memorandum of Conversation, by the Chief of the Division of Chinese Affairs (Vincent)
Mr. Lu,60 accompanied by his interpreter, Dr. Sun, called this morning by appointment. Mr. Lu is President of the Min Shung Shipping Company of China. He is an interesting character, having been in his early days a wharf coolie. He is now one of China’s leading businessmen and an intimate adviser to Generalissimo Chiang Kai-shek.
After some general conversation concerning the International Business Conference at Rye, I introduced the subject of Chinese plans for development of post-war shipping. Mr. Lu said that river shipping will be limited to Chinese companies but that foreign investment in [Page 1089] the form of loans was permissible. With regard to coastal shipping, again the companies must be Chinese but foreign voting stock not to exceed ⅓ of the capitalization is permitted.
Near sea shipping companies may of course be Chinese or foreign and there is no limitation on the amount of foreign capital that may be invested in such of those companies as may be Chinese.
Mr. Lu explained that the Chinese Government had originally been much more restrictive in its attitude toward foreign investment in Chinese shipping but that he had persuaded them to adopt a policy as outlined above. He added that Chinese shipping laws incorporating the foregoing ideas would be enacted and hazarded the guess that any subsequent modification in the law would be toward further liberalization.
I asked Mr. Lu about government investment in shipping. He said that, so far as he knew, the government planned to operate only the China Merchant Steam Navigation Company, which it now owns, and that other shipping enterprises would be private. He said that the China Merchants would probably maintain all three services—river, coastal and near sea.
Mr. Lu explained that it was impracticable actually to divide shipping into the three categories he had mentioned because most ships engaged in near sea traffic also would engage in coastal and to a limited extent river shipping and that ships in the river traffic might also engage in coastal shipping. He admitted, therefore, that in practice the limitation on foreign investment applicable to river shipping would apply to the other categories in many instances. However, he said that there was no limitation on the amount of money which Chinese shipping companies could borrow and that the lender might attach conditions to the loan virtually establishing financial control over the companies. Mr. Lu laughingly said that this was a common subterfuge in China.
There followed a general discussion concerning economic developments in China. Mr. Lu was in agreement with my idea that an improvement in agricultural conditions was essential to any industrial development in China. I reminded him of the statement of the ancient irrigation expert: “Dig deep your ditches and keep your dikes low.” I said that China might bear this statement in mind in approaching the problem of attracting foreign investment in Chinese industry. I expressed confidence that American private capital would be interested in participating in the development of Chinese industry which was soundly conceived and operated. I felt that there was little necessity for government investment in industry and that government capital, either indigenous or secured through foreign loans, should be devoted to improvement in agricultural conditions and [Page 1090] transportation. If this were done I felt that capital for industrial development would be forthcoming.
Mr. Lu expressed agreement with these ideas and said that private Chinese capital desired very much to have the cooperation of private American capital in the development of Chinese industries.
- Lu Tso-fu.↩