Czechoslovak Companies in the Chinese Market between the World Wars (Škoda Works and Sellier & Bellot Cases)

Czechoslovak Companies in the Chinese Market between the World Wars (Škoda Works and Sellier & Bellot Cases) Aleš Skřivan, Jr. Official Czechoslovak statistics attest to the fact that in the inter ‑war period China did not rank among countries with the largest share in Czechoslovak exports.1 Yet inter‑ ‑war China was not a marginal market for Czechoslovak industry and Czechoslovak export to China even achieved undeniable successes. China became an important cus‑ tomer of some Czechoslovak companies, which thus demonstrated that the chaotic situation in the Middle Kingdom was not an insurmountable barrier for them. The Chinese share in the total Czechoslovak export grew gradually and little by little did China become an increasingly important market for Czechoslovak companies. These facts appear in even more favourable light if we realize that it was export to a distant, exotic and destabilized country with very doubtful legal environment. As is clear for instance from reports by Czechoslovak diplomats in China or from information from the Export Institute,2 many a Czechoslovak company, most of which were from the Czech Lands, was interested in the possibility to export to China. They were not only large companies, but also smaller ones and even individuals. Chinese market attracted attention of companies of a large variety of products, including those producing very specific ones that is goods of marginal importance from the point of view of the total Czechoslovak export to China. Among those exploring their chances to sell their products in China were for instance companies making handbags, sweets or flypaper. In this context, we should also mention the fact that a considerably larger number of Czechoslovak companies was interested in the possibilities of exporting to China than in the products they could import from this region. At first sight, when looking at the agenda of the Shanghai office of the Czechoslovak Export Institute, it 1 The Chinese share in the Czechoslovak export culminated in 1938, reaching approximately 4%. For more information, see for instance Zahraniční obchod republiky Československé, Series III (Zahraniční obchod, Period 1922–1937, State Statistical Institute, Prague 1923–1938; Zahraniční obchod bývalého Česko ‑Slovenska v roce 1938, Series III (Zahraniční obchod), State Statistical Office, Prague 1939. 2 The Export Institute was established by the Czechoslovak government in 1934. This institution was to for instance mediate access to more distant market to Czechoslovak exporters. For more information on activities of the Export Institute, see T. JIRÁNEK, Export‑ ní ústav československý (1934–1944), in: Hospodářské dějiny — Economic History, Vol. 20, 1992, pp. 209–258. ALEš SKřIvAN, JR. 111 may seem to an uninformed observer that a wide range of Czechoslovak products won their ways to the Chinese market. Quite on the contrary, most Czechoslovak compa‑ nies, which explored the possibility of export to China, abandoned this intention — be it due to the high cost of such trade, risk arising from trade relations with unknown environment, fear of lack of information concerning the Far ‑East region or other rea‑ sons. In fact, the inter ‑war Czechoslovak export to China was distinguished by rela‑ tively narrow commodity diversification and among individual producers selling their products to China, two companies played decidedly a key role: Škoda Plzeň [Škoda Works in Plzeň]3 and Zbrojovka Brno [Brno Arms Factory].4 Škoda Works and the Brno Arms Factory were among the largest industrial com‑ panies of inter ‑war Czechoslovakia, whose activities and their very existence were strategically important for the Czechoslovak state. These two companies were also among the leading and long ‑term Czechoslovak exporters. Both companies exported to many countries and their results often markedly influenced the overall picture of the Czechoslovak foreign trade both as to its total volume and territorial or com‑ modity structure. One of the countries, where Škoda Works’ and Brno Arms Fac‑ tory’s products went to in the inter ‑war period, was China. Exports of the Brno Arms Factory and Škoda Works to China in the inter ‑war period logically show some obvi‑ ous similarities but also some striking differences. Both companies first developed trade relations with northern China and only gradually — also due to the dramatic events in Manchuria — did they manage to strengthen trade relations with southern China (mainly the Guangzhou (Canton) government) and central China (primarily with the representatives of Chiang Kai ‑shek’s Nanking regime). The “Chinese trade” of the Brno Arms Factory and Škoda Works also underwent similar cycles. The first expansion of the “Chinese trade” in both companies took place in the latter part of the 1920s and reached its peak in 1930. It was followed by a slump and stagnation, which were connected with the dramatic events in Manchuria and the beginning of the Great Depression — this stage roughly coincides with the first half of the 1930s. Ap‑ proximately in the mid ‑1930s, the development turned — first with the Škoda Works (1934), then with the Brno Arms Factory (1936) — and a new boom in the “Chinese trade” began, reaching its peak in 1937. The start of the Japanese invasion into cen‑ tral and southern China in 1937 brought the Škoda Works’ “Chinese trade” to a quick decline. In the case of the Brno Arms Factory, the fall was clearly slower. In 1937 and 1938, the Brno Arms Factory took advantage of the intensifying military activities and related high demand for arms from China to considerably expand its arms trade — similar reaction, albeit their export was on a smaller scale, came for instance from the Sellier & Bellot company. The Brno Arms Factory’s supplies definitely collapsed after the formation of the Protectorate. Despite the above mentioned fluctuations, China’s share in the total export of the Brno Arms Factory as well as Škoda Works was repeatedly large, despite the fact that it cannot be determined exactly — mainly due to the fact that the data in the available sources are not accurate and probably do not inform about all direct and indirect supplies to China. 3 Its official name was Joint -Stock Company, formerly Škoda Works in Plzeň. 4 Czechoslovak State Arms Factory, since 1924 called Czechoslovak Arms Factory, Joint- -Stock Company in Brno. 112 PRAGUE PAPERS ON THE HISTORY OF INTERNATIONAL RELATIONS 1/2014 In some respects, however, the form and course of the “Chinese trade” of Škoda Works and the Brno Arms Factory visibly differed. Firstly, the commodity structure of their supplies was different. Arms production clearly prevailed in the Brno Arms Factory, which almost exclusively sold arms, while the arms production of Škoda Works failed in China with the company having to rely on non ‑military supplies. Unlike the Brno Arms Factory, Škoda Works gained certain experience with the Chinese market before World War I. This fact played to a certain extent a positive role at the beginning of a new post ‑war stage of Škoda Works’ “Chinese trade”, although it undoubtedly had also negative impacts in the form of embarrassing negotiations concerning debts from the past. The co ‑operation of both companies in export to China was somewhat controversial. In some cases Škoda Works and the Brno Arms Factory managed to co ‑operate and split the profit from their activities in the Chinese market. In other cases, nevertheless, the behaviour of competing companies prevailed. ŠKODA WORKS Škoda Works was already exporting to China before the World War I. Škoda Works also had a share in military ‑related deliveries, consisting not only of traditional artil‑ lery but also of the participation of Škoda Works in the construction of warships for China. Škoda Works reached a participation share of approximately 25% of the deliv‑ eries as part of the Austro ‑Hungarian loans to China between 1911–1914.5 Unlike other Czechoslovak companies (for instance the Brno Arms Factory), Škoda Works was able to use its pre ‑war experiences in the Chinese market. On the other hand, pre ‑war ex‑ ports to China caused Škoda Works quite a few complications. In 1917, China declared war on the Austro ‑Hungarian Empire and stopped making payments on its Austro‑ ‑Hungarian loans. This step noticeably affected Škoda Works as well. After the war ended, complicated negotiations ensued between Škoda Works, the representatives of Viennese banks and China to force China to at least partially pay back its pre ‑war loans. The course of these negotiations changed regularly, one of the possible solutions was a commitment by the Chinese to purchase other Škoda Works products, for instance lo‑ comotives, with the profits from the new business helping to at least mitigate the losses from the above ‑mentioned loans. This particular case and primarily its controversial effects seem to reflect the overall problematic nature of Czechoslovak ‑Chinese rela‑ tions, which as already mentioned were naturally affected by a number of significant factors: the chaotic situation in China after the fall of the empire, the unwillingness of the Chinese to make payments on any debts to countries with which they were at a state of war during World War I, and the overall lack of interest in China by the Prague gov‑ ernment. Italian diplomat Marc Rosenthal negotiated on behalf of Škoda Works,6 and 5 I. BAKEŠOVÁ, Čína ve XX. století, Part 1, Olomouc 2001, p. 40. 6 Regarding the activities of Rosenthal in the position of representative for Škoda Works in China, see Archiv Ministerstva zahraničních věcí České republiky (hereafter AMZV), Praha, IV. sekce národohospodářská (hereafter SN), karton 1208, Zpráva č. 1/IV -23 z Úřadu delegáta Republiky Československé v Pekingu ze dne 18. října 1923. ALEš SKřIvAN, JR. 113 in 1922 he succeeded in negotiating a contract which solved the problems of the old debts. On the basis of this agreement on November 14, 1922, China was supposed to gradually make payments on its old obligations, and at the same time Škoda Works committed to cancel six contracts for deliveries of weapons to China from the period between August 1913 to April 1914.7 It was however merely a relative suc‑ cess, and considerable problems with the repayment of old obligations were to ap‑ pear in later years.8 Year 1926 1927 1928 Orders received 6,355,724 12,606,140 38,732,918 Invoices issued 6,910,375 2,850,919 16,168,956 Year 1929 1930 1931 Orders received 36,413,618 62,697,155 9,668,906 Invoices issued 39,236,822 70,386,495 27,975,585 table 1: Škoda Works’ Deliveries to China During 1926–1931 (value in CZK) Source: Archiv společnosti Škoda Plzeň, Annual statistics for Schneider (1915–1938), Statistiques 1926–1931, unclassified. During the first few post ‑war years, the renewal of trade with China proceeded slowly and with modest results. China does not appear as an independent item in Škoda Works summary export statistics until 1923. The overall totals of invoiced de‑ liveries to China was only CZK 27,991 and thus China had a very insignificant propor‑ tion of Škoda Works’ overall exports.9 In the following year, 1924, the value of the in‑ voiced deliveries fell to a negligible CZK 1695.10 7 For more information on the agreement, see V. KARLICKÝ, Svět okřídleného šípu: Koncern Ško da Plzeň 1918–1945, Plzeň 1999, pp. 77–79. 8 For more information on the payment of old debts, see I. BAKEŠOVÁ, Československo ‑Čína 1918–1949, [s. p.] 1997, pp. 80–81. Cf. the consolidation of old debts from Sept. 1925 The China Year Book 1931, London, Chicago, Shanghai 1931, p. 354. On the question of Austro- -Hungarian loans and negotiations on the debts from the early post -war years, see also The National Archives, London (hereafter TNA), Foreign Office (hereafter FO) 371/8022, Realisation of Austrian issued bonds of Chinese government 6% loan (1912–1913) held by Administrator of Austrian Property, Department for Administration of Austrian Property (November 30th, 1922); ibidem, Consolidation of overdue Austrian loans to China, telegram from Mr. Clive, Peking (December 12th, 1922). 9 Approximately 0.003% of the total invoiced value (export and domestic orders together) CZK 807,227,925. China’s share of the overall value of invoiced exports was approximately 0.008%. Archiv společnosti Škoda Plzeň (hereafter ASŠ), Roční statistika pro Schneidera (1915–1938), Statistiques 1915–1923, unprocessed. The majority of the documentation in the Škoda Plzeň Archives containing data on exports to China in the inter -war period has not yet been processed nor filed, which complicates research. 10 ASŠ, Roční statistika pro Schneidera (1915–1938), unprocessed. Statistics compiled for the French group Schneider et Cie, which was the majority owner of Škoda Works from September 1919 on. 114 PRAGUE PAPERS ON THE HISTORY OF INTERNATIONAL RELATIONS 1/2014 In the mid ‑1920s, during the developing boom in Czechoslovakia, the “Chinese deliveries” underwent a considerable acceleration. In 1925, exports to China reached values in the millions — the total received orders for China was approximately 2.14 million crowns, and the invoiced amount of the “Chinese deliveries” approxi‑ mately 1.26 million crowns.11 Between 1926–1930, the value of Škoda Works exports to China grew by a factor of 10 (see Table I). In 1930, the “Chinese trade” reached its first peak, when Škoda Works accepted orders for over 62 million crowns, and the invoiced amount of “Chinese deliveries” came to more than 70 million crowns. The orders for China contributed almost 30% of the overall accepted foreign orders in 1930 and China was in this respect clearly first among foreign customers. The total amount of invoices issued for Chinese orders contributed approximately 17% of Škoda Works’ total invoiced exports — in this respect China was second only to Turkey.12 Regarding the commodity structure of the “Chinese deliveries”, during 1925–1927 it was primarily various deliveries for Chinese railroads — locomotive garnitures, tank engine gears, axles, boilers, motors, generators, tyres, etc. The majority of or‑ ders were destined for northern China, for instance in Harbin and Dalian (Dairen). Often it was comprised of deliveries for the Chinese Eastern Railway.13 In 1928, deliv‑ eries began for a newly constructed power plant in the Shanghai suburb Zhabei. The power plant in Zhabei, which began operating in 1930, was for Škoda Works a signifi‑ cant and in its own way prestigious order. During only the year 1928, Škoda Works registered orders for equipment for this power plant valued at approximately 18 mil‑ lion crowns.14 In addition to orders for the power plant in Zhabei placed in 1928, a few more of the orders for Chinese railways placed with Škoda Works are worth mention‑ ing. Interest in China in locomotives from Škoda Works was growing, for instance in August and October 1928 a total of 5 Mikado locomotives were ordered for roughly CZK 5,550,000. There were also orders for Manchuria, for instance in January 1928 an order for four IDI locomotives for approximately CZK 4,700, 000. It was however not just for locomotives, more orders were to come from Harbin for various equipment (bridge construction elements, braces, etc.15) for railway companies for several mil‑ lion crowns. In September 1928, one steam towboat and one cargo steamship were ordered for northern China from Škoda Works.16 11 Ibidem. 12 Ibidem; ASŠ, Statistiques 1926–1931, unprocessed. 13 More detailed information for example in ASŠ, Generální ředitelství, podfond Vrchní administrativní ředitelství — ROCHETTE (hereafter GŘ -VAŘ -ROCHETTE), folder: 10/114, China -Japan; ASŠ, GM -SAM -ROCHETTE, Chinese Eastern Railway, Harbin, without further specification. 14 Out of all of the items, particularly the two turbo -generators (each producing 12,000 kW), two three -phase transformers (each 12,500 kW), two double -bodied steam turbines (each 10,000 kW) and three vertical -tube boilers are worth mentioning. ASŠ, Orders over CZK 100,000 (1928), unfiled. 15 Interest in China at the time was also growing in boosters (which aid in boosting the towing capacity of locomotives) from Škoda Works. See J. VANĚK, Boostery, zapomenutá kapi‑ tola, in: Svět železnic, Vol. 1, Is. 4, 2002, pp. 6–8. 16 ASŠ, Orders over CZK 100,000 (1928), unfiled. ALEš SKřIvAN, JR. 115 Not even in the later years, when the wave of orders from China was reaching its peak, did the basic character of the Chinese deliveries change much. Primarily it was purchases of locomotives, which in essence became the main pillar of the “Chi‑ nese trade” of this period, for instance in 1929, locomotives Mikado for Qiqihar or type “E” tender locomotives Harbin. In 1930, Škoda Works successfully concluded two key contracts: 24 IDI locomotives for the Chinese State Railway Shenyang (Mukden)‑ ‑Hailin (contract concluded on March 11, 1930) for 28.3 million crowns and 16 Mikado locomotives for Qiqihar (ordered in June 1930) for 18.9 million crowns.17 In the sum‑ mer of 1929, another three large steam towboats were ordered for northern China. New orders for power plant equipment also began to appear, for instance in 1930 three vertical ‑tube boilers including additional equipment for the power plant in Nantao in the Shanghai region for roughly 4 million crowns and a steam turbine (3000 kW), turbo ‑generator (3750 kW) and a vertical ‑tube boiler including additional equipment for Fuzhou for approximately 3.8 million crowns.18 Towards the end of the 1920s, Škoda Works, like the Brno Arms Factory, was interested in the Shenyang Arsenal, or rather in the possibility of deliveries, which would aid in the moderniza‑ tion and expansion of this plant. Škoda Works delivered water ‑tube boilers and other equipment to the Shenyang Arsenal.19 Nevertheless, these deliveries to the Shenyang Arsenal represented only a small part of the overall volume of Chinese orders. The construction of the bridge over the river Sungari in Manchuria in the late 1920s de‑ serves special attention. The project for this 400 ‑meter long railroad bridge with steel construction weighing 1375 tons was in its own way unique. Škoda Works placed spe‑ cial emphasis on this construction project and visibly presented the bridge as one of their greatest successes of the period.20 “Chinese trade” grew into considerable proportions and China’s position in Škoda Works’ export strategy over the course of several years changed significantly. As of October 10, 1930, Škoda Works held receivables in China for roughly 100 million crowns, with over one half of this sum being formed by receivables for locomotives.21 In the following year however developments reversed direction. Several negative fac‑ tors — the Great Depression, increasing competition in the Far East, the Japanese 17 ASŠ, Orders over CZK 100,000 (1929 and 1930), unfiled. Regarding the transport of locomotives through the port of Hamburg, see for instance AMZV, SN, file 505, Report no. 20176/30 (Locomotives and cars — export to China and Egypt) from the Consulate General of the Czechoslovak Republic in Hamburg dated October 27, 1930. 18 ASŠ, Orders over CZK 100,000 (1929 a 1930), unfiled. A listing of the deliveries to China during this period could naturally be much longer. The listed prices should be considered approximate, as often it is possible to find varying prices for specific deliveries in different places in the available archives. The prices were adjusted several times, and in some cases it is not entirely clear which of the listed prices was final. 19 ASŠ, GŘ -VAŘ -ROCHETTE, folder: 10/114, China -Japan; ASŠ, Orders over CZK 100,000 (1928), unfiled. 20 In this context, I would like to point out the rather extensive photo documentation on the bridge, which is stored in ASŠ, for instance the construction of the Sungari II bridge, album no. 409. 21 Other significant items included claims for power -plant equipment and the previously mentioned boats. ASŠ, GŘ -VAŘ -ROCHETTE, folder: 10/114, China -Japan. 116 PRAGUE PAPERS ON THE HISTORY OF INTERNATIONAL RELATIONS 1/2014 invasion of Manchuria — all together led to the decline in Škoda Works’ “Chinese trade.” The events in Manchuria evidently had the greatest effect on this rapid de‑ cline. Up to then, northern China had clearly represented the most interesting ter‑ ritory from a trade perspective for Škoda Works, and the majority of Škoda Works’ deliveries were headed for northern China, in particular to Manchuria. The Japanese invasion of Manchuria and the creation of the state of Manzhouguo basically led to Škoda Works being forced out of the region, and deliveries from Škoda Works were to be replaced primarily by Japanese firms. The assassination attempt on Ing. To‑ karyevski, the director of the Shenyang division of Škoda Works, in November 1931 also corresponded with the dramatic situation in the north.22 Škoda Works was forced to redirect its activities to central and southern China, which caused quite a few dif‑ ficulties. These factors led to a substantial change in the overall statistical results of the “Chinese trade”. In 1931, Škoda Works issued invoices for “Chinese deliveries” for approximately 28 million crowns. New orders in the same year however did not even reach 10 million crowns, which was several times smaller in comparison with previ‑ ous year 1930 (see Table I). Škoda Works had to react quickly to the rapidly changing situation in China. Among other measures — taking into account the currently smaller volume, the im‑ portance of the “Chinese trade” and also the unclear perspectives — Škoda Works tried to analyze the costs of its representatives and offices in China in an attempt to achieve some savings. In this context, remunerations for certain workers of Škoda Works in China were re ‑determined, and an effort to lower expenditures for office equipment in individual offices is also evident. Savings were, however, not meant to be the only solution for the adverse situation, Škoda Works naturally sought out new prospective customers, and monitored the competition more compared to previous years.23 In 1932, the results of the “Chinese trade” continued to worsen. From this period, it is worth mentioning the interesting story of the Zhabei power plant, in whose construction Škoda Works took a significant part. At the end of January 1932, Japa‑ nese forces landed in the Shanghai area and then in the Zhabei District fought with Chinese units (the so ‑called 19th Chinese Army). The suburbs of Zhabei were largely destroyed during the fighting, in large part due to the Japanese air force.24 Confused 22 For more information concerning details on the assassination attempt, see ASŠ, GŘ -VAŘ- -ROCHETTE, folder: 10/114, China -Japan. The name Tokaryevski also appears in the available materials in other transcripts. 23 More information in ASŠ, GŘ -VAŘ -ROCHETTE, folder: 10/114, China -Japan. 24 There was a considerable difference in the atmosphere in areas with concentrations of foreigners (international settlement and French concession) and the situation in the remainder of Shanghai. While the Chinese sectors lived in fear, many of the foreigners acted as if the entire conflict did not affect them. This phenomenon was confirmed by correspondence (both official and semi -official) between the office of the General Inspector of the Chinese Maritime Customs Service and the individual customs offices during this period, where very little attention is paid to the bloody fighting in Shanghai. For instance, The Second Historical Archives of China, Nanjing, The Maritime Customs Service Archive (further only SHAC -MCSA), Part Three: Semi -Official Correspondence with Selected Ports, Reel 116, 679 (1) 32226, Letter from L. H. Lawford to Frederick Maze (11th Feb- ALEš SKřIvAN, JR. 117 reports of the direct threats to Czechoslovak citizens living in Shanghai, in particular to employees of the power plant in question, appeared in the Czechoslovak press. According to the inaccurate information in the reports, fire from Japanese artillery was supposed to have completely destroyed the complex. Fortunately for the power plant, the Japanese apparently were not interested in its destruction.25 This could be partly due to the fact that at the request of Škoda Works, the Czechoslovak legation in Shanghai on January 28 issued a “certification that the power plant’s equipment was the property of Škoda Works, and that the director is authorized to fly the Czechoslovak flag in the defence of this property” to the director of the power plant.26 During these dramatic weeks, Škoda Works had to face further problems. Towards the end of February 1932, news reports appeared in China that the Japanese had purchased ammunition with poison gas from Škoda Works. After consulting with the Czechoslovak legation in Shanghai, Škoda Works’ representatives officially denied this false information and at the same time, at the initiative of the Czechoslovak diplomatic mission, articles denying such deliveries were published in several of the most important Chinese and foreign ‑owned newspapers (for instance the American Shanghai Evening Post and the British The North China Daily News a The Shanghai Times).27 In 1933, the value of Chinese deliveries remained at a level several times smaller in comparison with the boom between 1928–1930. In December 1933, Škoda Works succeeded in negotiating a new contract for the construction of a sugar refinery and distillery in the Guangzhou province (the contract is usually marked as “C. Antonio /Sze ‑Tow/” in the available archive materials).28 This contract in effect became the starting point for a new more successful period. In 1934, Škoda Works succeeded in an agreement to build a new sugar refinery in southern China, (usually marked as “San Pedro /Shuntak/”).29 It was however not all sugar refineries. Škoda Works also ruary 1932); ibidem, Letter from Frederick Maze to L. H. Lawford (16th February 1932). On the other hand, the decision by the general inspector to provide a financial contribution to employees forced to evacuate their homes, for instance in Zhabei, was a nice gesture. For more information, see SHAC -MCSA, Part Six: The Sino -Japanese War and its Aftermath, 1931–1949, Reel 283, 679 (1) 14856, Chief Secretary’s Memo. No. 3699 (17 February 1932). 25 V Šanghaji ze čtyř milionů obyvatel je 175 Čechoslováků, in: Moravské Slovo (Brno), February 26, 1932 (no author listed). 26 AMZV, Politické zprávy (hereafter PZ), Shanghai, Report on the political situation and on the Japanese military operation in Shanghai dated February 4, 1932, compiled by Ambassador Robert Feitscher. 27 AMZV, PZ, Shanghai, Report on the political situation and on the Japanese military operation in Shanghai dated March 1, 1932, compiled by Ambassador Robert Feitscher. 28 The official agreement was not signed until March 1934. See further ASŠ, China agreements 1933–46, unfiled, temporary box number (t. b. no.) 690 51. This order was how ever already registered in January 1934 — with a total sales price of 16.8 million crowns (or 18.5million crowns). For more information, see ASŠ, Orders over CZK 100,000 (1934), unfiled. Here I must also point out the fact that the labelling of orders was in places confusing. In some cases the same order was listed in different places in the relevant documents under different labels possibly incorrectly copied. 29 The official contract for this sugar refinery was not signed until March 1935. The grand opening was held on January 2, 1936. ASŠ, Chinese contracts 1933–46, unfiled, t. b. no. 690 51. 118 PRAGUE PAPERS ON THE HISTORY OF INTERNATIONAL RELATIONS 1/2014 registered new orders for locomotives (for instance 10 locomotives for Shanghai for almost 5 million crowns), for locomotive boilers or even an order for a coal facility for Nanjing (Nanking). They also built on their previous deliveries of power plant equipment to Shanghai.30 The overall value of the “Chinese orders” once again in 1934 was already in the tens of millions of crowns. On the other hand, in view of the unfavourable situation in northern China, the offices in Dalian (Dairen) were shut down in 1934.31 The boom in the “Chinese trade” continued in 1935 as well. In comparison to the end of the 1920s, the share of locomotives in the Chinese deliveries was reduced, while Škoda Works’ activities in the construction of new industrial plants in China increased. With respect to the previously mentioned objective circumstances, Škoda Works strengthened business ties primarily with southern China. It continued with deliveries for the “C. Antonio” sugar refinery (for instance the delivery of back‑ ‑pressure steam turbines 600 kW) and in the construction of the previously men‑ tioned “San Pedro” sugar refinery.32 In March 1935, Škoda Works signed a contract with the Guangzhou government for the construction of another sugar refinery (usu‑ ally marked as “Santa Ana /Tung Koon/”).33 Another significant order for the Can‑ tonese government was the contract for the construction of a power plant for a paper mill, signed on February 18, 1935. After conversion, Škoda Works required roughly 8 million crowns for construction work and deliveries in this project alone in 1935. The delivery was officially handed over to the Chinese in October, 1936.34 Škoda Works however did not limit its interest only to southern China, it also con‑ tinued making deliveries to Shanghai and penetrated further to the west, into the in‑ terior, for instance into the Sichuan province. In the case of Shanghai, it was primar‑ ily equipment for power plants (for instance boilers and tubing for the power plant in Zhabei for approximately 5 million crowns and a boiler aggregate with accessories for the power plant in Nantao for roughly 3 million crowns). Orders for steelworks came for instance from the Sichuan province (specifically for vertical ‑tube boilers and an evaporation station).35 In the fall of 1935, a contract was concluded for the delivery of two boilers with accessories for the power plant in the Hunan province valued at over 2 million crowns.36 As was earlier indicated, in comparison with the end of the 1920s, business with northern China had generally weakened. Even so, business with northern China was not completely interrupted. Among the most interesting orders 30 The delivery of 2000 kW turbines in 1934. ASŠ, Orders over CZK 100,000 (1934), unfiled. 31 In 1936, the office of Škoda Works in Shenyang was closed. For more information on the representation of Škoda Works in China, see BAKEŠOVÁ, Československo ‑Čína 1918–1949, pp. 81, 84. 32 ASŠ, Orders over CZK 100,000 (1935), unfiled. 33 ASŠ, Chinese contracts 1933–46, unfiled, t. b. no. 690 51. 34 ASŠ, Chinese contracts 1933–46, unfiled t. b. no. 690 51. For information on the other activities of Škoda Works in the Chinese market in 1935, see for instance AMZV, SN, file 657, letter from the Joint -Stock Company, formerly Škoda Works addressed to the Ministry of Foreign Affairs dated December 17, 1935. 35 ASŠ, Orders over CZK 100,000 (1935), unfiled. 36 ASŠ, Chinese contracts 1933–46, unfiled, t. b. no. 690 51. ALEš SKřIvAN, JR. 125 mation from the Nanjing government that the delivery was for the exclusive use of its army be attached to the export application. The Ministry of National Defence’s strict policy was likely a reaction to the changing situation in China, where large ‑scale mil‑ itary actions were taking place after the start of the Japanese invasion into central and southern China in July 1937. Additionally taking into account the possibility of a negative reaction by the international community, the Ministry of National Defence during this period of dramatic events in China did not desire for ammunition from Czechoslovakia to get into the hands of any other parties than the Nanjing govern‑ ment, which was recognized by the majority of other nations as the sole legal repre‑ sentative of China (including Manzhouguo).61 Out of the originally planned volume of 200 million rounds of ammunition, “only” 50 million had been delivered to China, based on a contract from January 1938. Even so, this order unambiguously became the most important Chinese contract of Sellier & Bellot. Between February and June 1938, the rounds were gradually shipped in six shipments from the port of Hamburg to China.62 Central Trust of China paid 250,625 British pounds for the above ‑mentioned 50 million rounds. Approximately 30,000 pounds from this amount was written off as “payment of confidential expenditures abroad in conjunction with winning the contract”. Most likely it represented bribes, which were in small part paid from the commission of Leo Lilling, and mostly paid from the profits of Sellier & Bellot.63 For several months after the establishment of the Protectorate, reports continued to be received from China on how Lilling & Co. was trying to win new contracts and also on the activities of competing companies in China. The creation of a list of code words which were later used in telegrams sent from China to Czechoslovakia be‑ came an interesting phenomenon. After war broke out in Europe, communications between Sellier & Bellot and Lilling & Co. were sporadic. On the other hand, as evi‑ denced by available sources from the period of the second world war, Sellier & Bellot did not have any unpaid debts64 — unlike the Plzeň Škoda Works and the Brno Arms Factory. 61 With regards to the given facts, it is worth mentioning that in the past Sellier & Bellot supplied ammunition to Chang Kai -shek’s enemies. In September 1934, 200,000 rounds were expedited to the Manchuria government, the puppet regime controlled by the Japanese, which Chang Kai -shek refused to recognize. ASB, AF No. 1, Sellier & Bellot, Box No. 39, ser. no. 539–543, Listing of production — infantry ammunition for military purposes intended for foreign sale. 62 The first half of this order, 25 million rounds, was approved by the Ministry of National Defence on February 1, 1938, the second half on April 27, 1938. ASB, AF No. 1, Sellier & Bellot, Box No. 39, ser. no. 539–543, Listing of production — infantry ammunition for military purposes intended for foreign sale. 63 ASB, AF No. 1, Sellier & Bellot, Box No. 17, ser. no. 158–167, Contract between the Central Trust of China and Sellier & Bellot represented by Mr. Leo Lilling; ibidem, Request for the approval of payment of confidential expenditures abroad (addressed to the Czechoslovak National Bank). 64 ASB, AF No. 1, Sellier & Bellot, Box No. 17, ser. no. 158–167, Statement appended to the request for approval of payment (addressed to the exchange department of the National Bank for Bohemia and Moravia in Prague) dated February 13, 1942. 126 PRAGUE PAPERS ON THE HISTORY OF INTERNATIONAL RELATIONS 1/2014 CONCLUSION The stories of Škoda Works and Sellier & Bellot in the Chinese market were logically to a certain extent similar, but in certain aspects differed. Both companies met with consid‑ erable problems and obstacles which for instance had to do with the very specific (exotic) nature of the Chinese market, but also with the great geographical distance between Cen‑ tral Europe and China. Both companies for instance very likely used bribery in an attempt to gain contracts in the Chinese market, although clear direct evidence does not exist. In comparison with Sellier & Bellot, Škoda Works at least in some respects natu‑ rally had better objective conditions for expansion into the Chinese market. It was a larger company which clearly had access to sufficient finances necessary for expan‑ sion into important and distant markets. Škoda Works could also take advantage of relatively intensive co ‑operation with important foreign companies. Unlike Škoda Works, Sellier & Bellot did not establish themselves in the Chinese market until the 1930s. Clearly, Sellier & Bellot realized its largest deal with China shortly before the disintegration of Czechoslovakia. The striking difference between both companies can be observed in the commodity structure of deliveries headed to China. Taking into account its production programme and certain other factors, Sellier & Bellot basically exported only ammunition to China, primarily in the period of escalation of the Sino ‑Japanese conflict. On the other hand, Škoda Works’ exports to China in‑ cluded a relatively wide range of products, from locomotives to power ‑plant equip‑ ment or even various deliveries for sugar refineries. In comparison with Sellier & Bellot, Škoda Works’ deliveries were missing items of a military character. Škoda Works made repeated attempts at exporting military equipment, but unsuccessfully and never gained a more significant order for the delivery of arms to China. ABSTRACT As the basic statistical summaries prove, during the inter ‑war period China did not belong among the main business partners of Czechoslovakia. On the other hand, the Chinese market played an important role in the sales strategy of certain Czechoslovak companies, including those which held a significant position in Czechoslovak industry. Škoda Works and Sellier & Bellot are included among the relatively narrow group of companies which were able to find success in the Chinese market. Their “Chinese trades” were in some respects similar, but in others fundamentally different. Both companies had to face problems which for instance arose from the very specific nature of the un‑ stable and from the Czechoslovak point of view extremely exotic market. On the other hand, the rea‑ sons for their successes in the Chinese market were somewhat different. KEYWORDS: Czechoslovakia; China; International Trade; Economic History Aleš Skřivan, Jr. | Department of Economic History, Faculty of Economics, University of Economics, Prague, W. Churchill Sq. 4, 130 67 Prague, Czech Republic Department of Historical Sciences, Faculty of Philosophy and Arts, University of West Bohemia in Pilsen, Tylova 18, 301 24, Plzeň, Czech Republic [email protected]