Pekin Syndicate, the Rothschild Archive, Li Hong Zhang and the Role of Angelo Luzzati

In this part the author cites many resources from the study of Frank H. King.

Mr. King did very complicated research about the Italian Angelo Luzatti and Li Hong Zhang. However, this part includes more about Li Hong Zhang‟s actions in the Pekin Syndicate. The original study of Mr. King can be found in the web that the author has already given. The author believes Mr. King‟s study would be a very precious

321 Elisabeth Köll, From Cotton Mill to Business Empire: The Emergence of Regional Enterprise in Modern China, Vol. 229, Harvard East Asian Monographs Series. Cambridge, Mass.: Harvard University Press, 2003.

322 William Goetzmann, Yale University and Elisabeth Köll, Case Western Reserve University, The History of Corporate Ownership in China, First Draft, 19 September, 2002, p. 13.

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research about China‟s economic buildup. Economic build up and banking would be the later new research topics of new students. Here, the author uses the Mr. King‟s study for the last part of his Li Hong Zhang‟s chapter.

323Contemporary commentators were virtually unanimous: behind the Pekin Syndicate, founded in 1897. The Peking Syndicate Ltd, as initially conceived and incorporated in 1897 was a financial venture designed to obtain concessions from China and to promote these.³²⁴ There was also another important unit called Rothschild finance. In 1899 Chinese Viceroy, Li Hong Zhang had remitted £4,203 through the Hong Kong Bank; he wished his friend Lord Rothschild to purchase deferred shares in the Pekin Syndicate. Mr King thinks that this case itself is important for History of China because:³²⁵

First because it confirmed there had indeed been a Rothschild/Syndicate relationship and secondly because the archives might somewhere and in some unexpected box contain

323 In this part the author quoted the study of Frank H.H. King. One letter and a new understanding:

The Rothschild Archive and the Story of the Pekin Syndicate. His PDF format of study can be found in:

http://www.rothschildarchive.org/ib/articles/AR2007Pekin.pdf

Mr. King is professor emeritus of the University of Hong Kong and honorary fellow of the university‟s Centre of Asian Studies. His publications include Money and Monetary Policy in China, 1845–1895 (Cambridge MA: Harvard University Press, 1965) and The History of the Hongkong and Shanghai Banking Corporation, (Cambridge: Cambridge University Press, 1987‒ 1991 [4 volumes]). He is currently preparing a history of the Pekin Syndicate.

324 Frank H.H. King, Joint Venture in China: The Experience of the Pekin Syndicate, 1897–1961, BUSINESS AND ECONOMIC HISTORY, Second Series, Volume Nineteen, 1990. Copyright (c) 1990 by the Business History Conference, pp. 113–122.

325 Quoted the study of Frank H.H. King. One letter and a new understanding: The Rothschild Archive and the Story of the Pekin Syndicate. His PDF format of study can be found in:

http://www.rothschildarchive.org/ib/articles/AR2007Pekin.pdf

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further references, however remote, to the relationship. And then this summer a letter from Viceroy Li became available; 2 its contents were to prove even more significant historically. The letter seemed to require a new interpretation of the Syndicate and its intended role in pre-Boxer China. Furthermore, if one were to follow the lead, scholars might be induced to reconsider the actual roles of the Powers and of private initiatives in the so-called Battle of the Concessions which followed China‟s defeat in the First Sino-Japanese War.³²⁶

The Peking Syndicate was an exploration company, and it is worth noting that Rothschilds are known to have invested in several of this type of company. He also continues to explain the reasons of the importance of Peking Syndicate:³²⁷

The third reason is; while each exploration company had a separate history and unique development, there was a pattern. A group of legitimate financiers, investment bankers, and/or speculators and rogues would establish a company, modestly financed but suggestively named, to search out a possible project for development, mining, railway, or forest concession.

326 Cited from Frank H.H. King: Page:41

http://www.rothschildarchive.org/ib/articles/AR2007Pekin.pdf

327 Quoted the study of Frank H.H. King. One letter and a new understanding: The Rothschild Archive and the Story of the Pekin Syndicate. His PDF format of study can be found in:

http://www.rothschildarchive.org/ib/articles/AR2007Pekin.pdf

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The company‟s capital would be used for preliminary expenses including, in several cases, bribes or shares for co-operating officials. The role of such a company was to find a resource suitable for exploitation, obtain the concession or right to exploit, and develop the concession or hype its potential to the point that it could be sold to a newly formed company with a greater nominal capital for public subscription and at a price which reflected market expectations as to the profitability of a speculative undertaking. The exploration company could then either be dissolved or move to another possible development, usually within the same region.

A promoter of an exploration company had committed little; if he succeeded in selling a concession he would profit from a market which anticipated successful development; alternatively he could purchase founders‟ or deferred shares at low cost and sell at the peak of market expectations, if all went according to plan. In the case of legitimate promotion and the actual economically practical development of the concession, a founding promoter might gain a major business foothold in the region.

The Pekin Syndicate was initially an exploration company, but one with a history which marked it as exceptional even in those days of gold on the Rand, diamonds in South Africa, rubies in Burma, and tin in Malaya. A lone adventurer, finding alluvial gold, might be forgiven if he legitimately thought this was but the edge of a new Ophir and thereupon attempted in some way to duplicate the steps previously noted.

Such a man was an Italian engineer, Angelo Luzzati (b.1858 in Asti), who in 1885 obtained a gold concession in Bangtaphan near Kamnoetnopakhun from the Siamese government and, finding sufficient capital unavailable in either Bangkok or Italy, sought funds on the London market, working through Jewish co-religionists, thus first coming into contact with Rothschilds.

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However, the enterprise was a failure: the alluvial gold was limited, and the expensive machinery, imported from Europe, a costly mistake. But Luzzati had a strong personality, ingratiating himself with business leaders in Bangkok and with investors in London.

While at the same time, as an Italian patriot, receiving an audience with the Italian monarch, Umberto I, and obtaining a diplomatic mission to Siam‟s Rama V (King Chulalongkorn), the latter welcoming contacts with Europe‟s royal families and operating with the belief that this would help ensure the continued independence of his country.³²⁸

For his efforts and to encourage his diplomatic role Luzzati was commissioned a cavaliere of the Order of Ss Maurizio e Lazzaro in 1889. Furthermore, he was now firmly established in the public press (and in history) as „Luzzatti‟, thus permitting the assumption, wholly without foundation, that he was related (nipote) to Luigi Luzzatti, a Venetian, a noted economist, and sometime Treasury Minister. The founding of the Pekin Syndicate itself took place after Luzzatti‟s return to Italy.

At some time in the early 1890s he became acquainted with Carlo di Rudinì, son of Italy‟s sometime premier, Marquis Antonio di Rudinì (1839–1908), and a former supernumerary member of the Italian Legation in Peking [Beijing]. Also involved was a brilliant Chinese financial expert and linguist, Ma Jian Zhong a leading member of Viceroy Li‟s staff. This unlikely triumvirate sought finance for an exploration company which would, inter alia, operate in China, attempting to acquire concessions and establish a note-issuing bank, a bank which would in turn finance further Syndicate projects, all reminiscent of such comprehensive schemes as those of

328 Quoted the study of Frank H.H. King. One letter and a new understanding: The Rothschild Archive and the Story of the Pekin Syndicate. His PDF format of study can be found in:

http://www.rothschildarchive.org/ib/articles/AR2007Pekin.pdf

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Count Eugene de Mitkiewicz in 1887 or perhaps the Reuters concession in Persia.

Once again Italian capital was not sufficiently forthcoming; in consequence the promoters turned to the same British capitalists who sponsored the Siamese companies, Gold Fields and the Anglo-Italian Exploration Company; to, that is, George Cawston, Carl Meyer, and the Rothschilds.³²⁹

The result was the publicly traded Peking Syndicate, incorporated in 1897, as yet without a concession but with Luzzatti recompensed by an allocation of founders‟

or deferred shares. Rudinì had withdrawn from China, Ma continued his duties as a member of Viceroy Li‟s entourage, leaving Luzzatti to be appointed the company‟s Agent-General in China. Italian foreign policy in the East was indecisive, and the Italian chargé d’affairs in Peking, Marquis G. Salvago Raggi, tolerated Luzzatti as the only Italian with any apparent continuous interest in China. But he was not an admirer.

He noted that Luzzatti possessed a heated imagination moving from proposed project to proposed project, often without real knowledge of their prospects. ³³⁰

When Luzzatti informed the German Minister of his interest in Shandong, for example, that gentleman, Salvago Raggi observed, raised his eyebrows and quietly suggested Shanxi, and to this idea Luzzatti reportedly turned without delay. He had been seeking and had now found a point d’appui.³³¹

Indeed, although Luzzatti reportedly knew nothing of the province, Ma Jian Zhong had friends and colleagues with close connections to the Shanxi provincial

329 Quoted the study of Frank H.H. King. One letter and a new understanding: The Rothschild Archive and the Story of the Pekin Syndicate. His PDF format of study can be found in:

http://www.rothschildarchive.org/ib/articles/AR2007Pekin.pdf

330 Quoted the study of Frank H.H. King. One letter and a new understanding: The Rothschild Archive and the Story of the Pekin Syndicate. His PDF format of study can be found in:

http://www.rothschildarchive.org/ib/articles/AR2007Pekin.pdf

331 A point d'appui, in military theory, is a location where troops are assembled prior to a battle.

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authorities, and they, together with a eunuch in the imperial court, handled the intricate details while Luzzatti eased the way with appropriate gifts, keeping contact with both the British Minister, the Syndicate being a British incorporated company, and the Italian chargé, Luzzatti insisting that this was an Anglo-Italian venture in which Italians should play a significant role.

The initial negotiations of Luzzatti and Ma had been successfully undertaken, but the Chinese government dealt only through the foreign missions, and the next step had to be initiated by the relevant ministers. Sir Claude MacDonald, the British Minister, finding himself dealing with an Italian, sought and received assurances from London that the financing was sound; he also received Foreign Office encouragement.

Both Mac Donald and Salvago Raggi, aware that the Shansi concession had the support of Li Hong Zhang and convinced that all Chinese interests appeared in agreement, pushed successfully for an imperial edict and the formal approval of the Zongli Yamen, China‟s embryo foreign office. These obtained, MacDonald accepted the registration of the concession by the British Legation in Peking, thus apparently securing the legality of the proceedings under the Treaty System, for, as an agent of the Pekin Syndicate would later comment.

At a minimum the Syndicate obtained the coal and iron mining rights with a related railway concession covering an area of 21,000 square miles. Figures in the range of 900,000 million tons of coal were estimated which, when fully developed, would yield expected profits of £750,000 annually. Additionally the Syndicate obtained the petroleum rights for the entire province. And then, only a month later, the Pekin Syndicate obtained a second concession, in Henan Province of China, with terms similar to those of the Shanxi Concession. Written into the agreements and understandings were prohibitions barring alienation; the Pekin Syndicate had,

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therefore, to transform itself into a mining and railway company, while continuing to negotiate for unrelated railway concessions as an exploration company. This increase in activity led in 1898 to the issue of £³³²20,000 of ordinary shares at a premium of

£106,000. Unable, however, to found a separate Anglo-Italian mining company, the Syndicate issued £1,200,000 specially designated „Shansi shares‟ with the intent that somehow the two roles of the company, discovery and exploitation, would thereby be kept separate with over-all direction being retained by the original investors, the Rothschild interest now being confirmed by the designation of Carl Meyer as chairman.

The growing threat of the Boxers minimised public subscription, and a high proportion of the new shares were taken up by the underwriters. Their subsequent sale in the new century would lead to temporary French control, the financing of the Banque Industrielle de Chine, and the rumored involvement of Rothschilds. But that was in the future. With the signing of all relevant documents, there was celebration at the Pekin Syndicate‟s company meeting in London; Rudinì‟s role was graciously acknowledged but Luzzatti was welcomed home a hero. He then disappears from the record, never returning to China. The exploitation of the concessions was delayed by the Boxer Uprising and afterwards China had changed; „Young China‟ was in the ascendance; “Rights Recovery” prevailed. The Shanxi concession was retroceded, the railway was sold to the Chinese and paid for with the proceeds of a loan from the Syndicate, with one exception Honan licenses to mine were denied or delayed, joint marketing with rival Chinese mining companies enforced, with the consequence that the Pekin Syndicate paid but one, half-year dividend – in 1936.

332 Quoted from the study of Frank H.H. King. One letter and a new understanding: The Rothschild Archive and the Story of the Pekin Syndicate. His PDF format of study can be found in:

http://www.rothschildarchive.org/ib/articles/AR2007Pekin.pdf