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Standard Oil and Petroleum Development in Early Republican China*

Published online by Cambridge University Press:  11 June 2012

Noel H. Pugach
Noel H. Pugach
Affiliation:
Assistant Professor of History, University of New Mexico
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Abstract

Despite the efforts of American government officials, attempts to establish a joint Chinese-American company to develop China's petroleum potential met with failure during the initial years of the Wilson administration. Duplicity and misunderstanding on the part of Standard Oil and of the Chinese government added another chapter to the dismal history of American business in China.

Type
Research Article
Information
Business History Review , Volume 45 , Issue 4 , Winter 1971 , pp. 452 - 473
Copyright
Copyright © The President and Fellows of Harvard College 1971

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References

1 Gerretson, F. C., History of the Royal Dutch, 4 vols., (Leiden, 1953–1957)Google Scholar, passim; Ralph, W. and Hidy, Muriel, Pioneering in Big Business, 1882–1911, (New York, 1955), 137, 528, 750 n. 46Google Scholar; Williamson, Harold et al. , The American Petroleum Industry: The Age of Energy, 1899–1959 (Evanston, III., 1963), 258Google Scholar; New York Times, February 14 and 15, 1914; Reinsch, Paul S., An American Diplomat in China (Garden City, N.Y., 1922), 62Google Scholar. An American Diplomat is the condensed version of Reinsch's memoir originally entitled, “Six Years of American Action in China” which is in the Paul S. Reinsch Papers, Wisconsin State Historical Society (Madison, Wisconsin), Box 15. The published version will be referred to except where it differs significantly from the original manuscript.

2 As the Standard Oil Company of New York (commonly called by its trademarked nickname, SOCONY) handled all Chinese marketing prior to 1911, it merely continued its established business after the dissolution of Standard Oil.

William Edward Bemis joined Standard Oil in 1882, developed its Statistical Department and later served on its Export Trade Committee, specializing in China. He directed a part of the oil selling program begun in 1903, which brought Standard Oil into the interior of China, and claimed credit for designing the improved mei foo lamp. Hidy and Hidy, Pioneering in Big Business, 331, 495; New York Times, February 15, 1914.

3 Because they focus on Jersey Standard after 1911, none of the major histories of Standard Oil discuss this incident. Writing from the perspective of Royal Dutch, Gerretson mentions it briefly. See Gerretson, , History of the Royal Dutch, IV, 119–129Google Scholar. Curry, Roy W., Woodrow Wilson and Far Eastern Policy, 1913–1921 (New York, 1957)Google Scholar does not mention the project. Li, Tien-yi, Woodrow Wilson's China Policy, 1913–1917 (New York, 1952)Google Scholar makes a passing reference to the contract of February 1914.

4 The following analysis of Standard Oil's decision to engage in petroleum development in China is based on the following sources: Gerretson, History of the Royal Dutch; Williamson et. al., American Petroleum Industry, 635, 644, 647–657, 665–676; Hidy and Hidy, Pioneering in Big Business, 136–154, 512–521, 528, 547–553.

5 Beckmann, George M., The Modernization of China and Japan (New York, 1962), 177, 221–22Google Scholar; Varg, Paul, The Making of a Myth: The United States and China, 1897–1912 (East Lansing, Mich., 1968)Google Scholar; Fincher, John, “Political Provincialism and the National Revolution,” in Wright, Mary C., ed., China in Revolution: The First Phase, 1900–1913 (New Haven, Conn., 1968), 185–226Google Scholar; Marie-Claire Bergère, “The Role of the Bourgeoisie,” ibid., 230295; Reinsch to Bryan, March 21, 1914, Lansing to Reinsch, May 1, 1914, Reinsch to Bryan, June 1, 1914, Department of State, Papers Relating to the Foreign Relations of the United States, 1914, 133–35.

6 In the course of the negotiations, the Chinese constantly reminded Standard Oil officials of the American China Development Company fiasco and alluded to Standard Oil's involvement in Mexican politics. See Bemis to Hsiung Hsi-ling and Chou Tzu-ch'i, June 19, 1915, in MacMurray to Lansing, August 17, 1915, 893.6363/20, RG 59, Department of State, National Archives (hereafter cited DSNA, with reference to RG 59 unless otherwise indicated). Also, Pearl, Cyril, Morrison of Peking, (Sydney, 1967), 234Google Scholar.

7 The available evidence is scanty and is limited to a few newspaper references and later State Department correspondence. See New York Times, March 29, 1913; Reinsch to Bryan, February 24, 1914, 893.6363/3 and enclosures in Reinsch to Bryan, March 16, 1914, 893.6363/4, DSNA. Both Standard Oil of New Jersey and Mobil Oil, the successor to SOCONY, have informed the author that they have no documents on the episode; they claim that files were either misplaced or destroyed because of the dissolution of Standard Oil and lack of space. Gerretson sees a direct connection between the Consortium and Standard Oil's negotiations, in view of the close ties between Standard Oil and National City Bank, one of the members in the American Group. Gerretson, , History of the Royal Dutch, IV, 121Google Scholar.

8 Interview between Williams and Hsiung Hsi-ling, October 18, 1913, Reinsch Papers, Box 2; Williams to Bryan, October 21, 1913, 893.51/1477, DSNA.

9 Reinsch to Bryan, February 16, 1914, 893.6363/1, DSNA; New York Times, December 5, 1913, February 14, 1914.

10 Pugach, Noel H., “Making the Open Door Work: Paul S. Reinsch in China, 1913–1919,” Pacific Historical Review, XXXVIII (May, 1969), 157–175.CrossRefGoogle Scholar

11 Reinsch, “Six Years of American Action in China,” Reinsch Papers, Box 15; Reinsch to Bryan, December 2, 1913, RG 84, Peking Post File, 1913, vol. 18, file 800, National Archives.

12 Reinsch, “Six Years of American Action in China,” Reinsch Papers, Box 15; Reinsch to Bryan, February 16, 1914, 893.6363/1, DSNA.

13 Reinsch to Bryan, February 16, 1914, 893.6363/1, DSNA; New York Times, February 14, 1914. The text of the agreement may be found in MacMurray, John V. A., Treaties and Agreements with and Concerning China, 1894–1919 (New York, 1921), II, 1109–1113Google Scholar.

14 New York Times, February 14 and 15, 1914.

15 New York Times, February 14, 1914; Journal of the American Asiatic Association, XIV (March, 1914), 34, 40.Google Scholar

16 Reinsch to Bryan, February 16, 1914, 893.6363/1, February 24, 1914, 893.6363/3, March 16, 1914, 893.6363/4, DSNA; New York Times, February 20, 1914.

17 Reinsch to Bryan, February 16, 1914, 893.6363/1, March 16, 1914, 893.6363/4, including enclosure of interview between Japanese Minister Yamaza and Hsiung Hsi-ling; interview between Sir John Jordan and Hsiung Hsi-ling, May 29, 1914, enclosed in MacMurray to Lansing, August 17, 1915, 893.6363/20, DSNA; New York Times, February 13, 1914; Willard Straight to Reinsch, February 25, 1914, Reinsch Papers, Box 2; Straight to James A. Thomas, March 24, 1914, Willard Straight Papers (Olin Library, Cornell University).

18 Reinsch to Bryan, February 16, 1914, 893.6363/1, March 16, 1914, 893.6363/4, DSNA.

19 Roy S. Anderson to Reinsch, March 17, 1914, Reinsch Papers, Box 2; Reinsch to W. E. Bemis, April 20, 1914, RG 84, Peking Post File, 1914, vol. 29, file 863, National Archives; Reinsch to Charles H. Blake, May 28, 1914, ibid.

20 Standard Oil made an earnest effort to dispatch men and equipment to China. Eventually, the company employed five geologists in China and spent close to $2,000,000. See 893.6363C44/6, DSNA; Reinsch, An American Diplomat, 98.

21 MacMurray to Reinsch, June 23, 1914, Reinsch Papers, Box 2; Reinsch to Bryan, July 2, 1914, 893.6363/9.

22 Coltman to Reinsch, November 27, 1914, RG 84, Peking Post File, 1914, vol. 29, file 863, National Archives; Reinsch to Bryan, April 5, 1915, 893.6363/12, DSNA.

23 Memoranda of the National Oil Administration to SOCONY, March 12, 1915 and April 5, 1915, Memorandum of SOCONY to the National Oil Administration, March 29, 1915, in MacMurray to Lansing, August 17, 1915, 893.6363/20; Reinsch to Bryan, April 5, 1915, 893.6363/12, DSNA.

24 Reinsch to Bryan, April 5, 1915, 893.6363/12; Bemis to Hsiung and Chou, June 19, 1915, in 893.6363/20, DSNA.

25 William H. Libby to Bryan, March 4, 1914, 893.6363/6; Bryan to Standard Oil, April 6, 1915, 893.6363/12; Bemis to Bryan, April 8, 1915, 893.6363/13, DSNA.

26 Reinsch memo, “Suggestions on the Standard Oil Company's Contract,” June 14, 1915, MacMurray memos, July 21, 1915, July 22, 1915, enclosed in 893.6363/20; MacMurray to Lansing, August 17, 1915, 893.6363/20, DSNA.

27 Reinsch memo, “Suggestion on the Standard Oil Company's Contract,” June 14, 1915, MacMurray memos, July 21 and August 4, 1915, enclosed in 893.6363/20, DSNA.

28 Bemis to Hsiung and Chou, June 19, 1915, MacMurray memo, June 29, 1915, enclosed in 893.6363/20, DSNA. Mexican dollars (or more correctly Mexican pesos) circulated on a large scale in China beginning with the late eighteenth century, mainly because they were silver coins of determined value and China used silver rather than gold. They were probably the most common coin in the treaty ports and were used extensively in foreign trade. These coins became the yardstick or standard against which other foreign coins or currencies were valued. Consequently, many contracts between foreign firms or governments and China stipulated amounts in terms of Mexican silver pesos.

29 MacMurray memo, July 21, 1915, enclosed in 893.6363/20; MacMurray to Lansing, August 17, 1915, 893.6363/20, DSNA.

30 MacMurray memos, July 7, 21, 22, 23, 1915, enclosed in 893.6363/20, DSNA.

31 Bemis to Hsiung and Chou, July 29, 1915, Chinese memo, July 29, 1915, Hsiung and Chou to Bemis, July 30, 1915, MacMurray memo, August 4, 1915, enclosed in 893.6363/20, DSNA; MacMurray to E. T. Williams, August 5, 1915, Box 49 of the John V. A. MacMurray Papers (Manuscripts Collection, Princeton University).

32 MacMurray to Williams, August 5, 1915, MacMurray Papers, Box 49; MacMurray to Reinsch, June 22, 1915, Reinsch Papers, Box 3; MacMurray memos, June 29, 1915, July 21, 1915, August 4, 1915, enclosed in 893.6363/20; MacMurray to Lansing, August 17, 1915, 893.6363/20, DSNA.

33 MacMurray to Williams, August 5, 1915, MacMurray Papers, Box 49; MacMurray memos, August 4 and 10, 1915, enclosed in 893.6363/20, DSNA.

34 Hsiung and Chou to Bemis, August 7, 1915, MacMurray memo, August 10, 1915, enclosed in 893.6363/20; MacMurray to Lansing, August 12, 1915, 893.6363/15, DSNA.

35 MacMurray to Lansing, August 12, 1915, 893.6363/15; Bemis to Hsiung and Chou, August 9, 1915, MacMurray memo, August 10, 1915, enclosed in 893.6363/20, DSNA.

36 MacMurray to Lansing, August 12, 1915, 893.6363/15; MacMurray to Lansing, August 13, 1915, 893.6363/17; MacMurray memo, August 10, 1915, enclosed in 893.6363/20; MacMurray to Lansing, 893.6363/20, DSNA.

37 MacMurray memos, August 10, 11, 12, 1915, enclosed in 893.6363/20; MacMurray to Lansing, August 17, 1915, 893.6363/20, DSNA.

38 MacMurray to Lansing, August 17, 1915, 893.6363/20; MacMurray to Lansing, August 18, 1915, 893.6363/18; MacMurray to Lansing, August 23, 1915, 893.6363/19; MacMurray to Lansing, September 23, 1915, with enclosures, 893.6363/23, DSNA.

39 MacMurray to Lansing, August 13, 1915, 893.6363/17; Lansing to SOCONY, August 14, 1915, 893.6363/17; Lansing to MacMurray, August 21, 1915, 893.6363/17; H. L. Pratt to Polk, September 24, 1915, 893.6363/22; Lansing to MacMurray, September 25, 1915, 893.6363/22, DSNA.

40 See 893.6363/25 and Williams to Trade Advisers, November 13, 1915, 893.6363/24; MacMurray to Lansing, September 23, 1915, 893.6363/21 and /23; Reinsch to Lansing, November 12, 1915, 893.6363/24, DSNA.

41 Reinsch to Lansing, June 19, 1916, 893.6363/25; April 5, 1917, 893.6363/26, April 26, 1917, 893.6363/27. In the early 1920's Jersey Standard as well as other American, British, Japanese, and Soviet concerns expressed interest in oil development in China, especially in Szechuan, but nothing substantial materialized. See, for example, William Warfield to Hughes, September 7, 1921, 893.6363/37, DSNA.

42 Lansing to MacMurray, July 26, 1915, 893.6363/14, DSNA. New York Journal of Commerce, August 16, 1915; New York Times, August 15, San Francisco Chronicle, August 15, 1915.

43 MacMurray to Williams, August 5, 1915, MacMurray Papers, Box 49.

44 MacMurray to his mother, August 16, 1915, ibid.

45 MacMurray to Lansing, August 17, 1915, 893.6363/20, DSNA.

46 Bemis to Hsiung and Chou, August 9, 1915, Bemis to MacMurray, August 13, 1915, enclosed in 893.6363/20; Reinsch, An American Diplomat, 223; New York Times, October 31, 1915; San Francisco Chronicle, August 18, 1915.

47 MacMurray to Lansing, August 17, 1915, 893.6383/20; DSNA.

48 With regard to these remarks, I would like to thank Professors Paul Varg and Lloyd Gardner for their insightful and critical comments on a paper I read to the Western Conference of the Association for Asian Studies (Bozeman, Montana, October 16, 1970), entitled “Chinese Impediments to American Economic Expansion, 1913–1920.” Professor Varg has critically examined the myth of the China market for the period 1897–1912. See Paul A. Varg, The Making of a Myth: The United States and China, 1897–1912.

49 The Huai River Conservancy Project is another prime example, and it had even wider ramifications.