The Hankow-Szechuan Railway Loan

Abstract

The Hankow-Szechuan loan controversy, which has just been closed by the final ratification of the loan agreement, is typical of the numerous loan questions in China. In order to understand the meaning of the different phases of this controversy, two points must be borne in mind — that a foreign railway loan in China is entirely different from what it would be in the United States, and that the creditors in advancing their capital to China are induced by other than purely commercial motives. In the United States a railway loan is understood to be a commercial transaction between two parties, either private or public; in China it is regarded as a “ treaty ” between the Chinese Government and many other governments. No matter how a loan is made and who makes it, it invariably becomes mixed up with politics in the end. Loans are concluded only after much tedious diplomatic negotiations. Promises and “ undertakings,” which might have been made years before under exceptional circumstances, often play a more important part in determining the terms of the loan than the merits or demerits of the loan itself.