Shortly after my first meeting with Ambassador Huang, Secretary of Commerce Frederick Dent invited me to join the National Council on U.S.-China Trade. The Nixon administration organized the council in early 1973 as part of its strategy to bolster public support for its China policy. It was a mixed public-private group that worked to increase the opportunities for trade with the PRC. I became vice chairman of the council and attended its first conference in Washington in May 1973, only a few weeks before leaving for China.
I also talked with the heads of three organizations in which I had long played a leadership role—Bayless Manning of the Council on Foreign Relations, Joshua Lederberg of The Rockefeller University, and Richard Oldenburg of the Museum of Modern Art—and asked them if it would be helpful for me to explore contacts for them with the PRC. All three responded enthusiastically and in the affirmative. Accordingly, carrying the portfolios of a number of organizations—the Chase, the U.S.-China Council, and the three not-for-profits—we set off for China.
RETURNING TO THE MAINLAND
Physically entering China in those days was not easy.
We flew first to Hong Kong and then set off the following day on a two-hour train ride from Kowloon to Luo Wu, a small village on the border of the New Territories in China’s Guangdong Province. We stepped off the train into the humid, tropical air of a south China summer day and carried our own bags across the railroad bridge that spanned a small river, while loudspeakers blared “The East Is Red” and a medley of other Chinese patriotic songs. The eerie voices and martial music were strangely foreboding. But just as we stepped into China proper, we encountered W. Michael Blumenthal, president of the Bendix Corporation and later Secretary of the Treasury, on his way out. Seeing the familiar face of someone actually returning from China gave us heart.
An unenthusiastic official processed our papers, and then we waited at the Shenzhen station for a few hours before boarding another train to Guangzhou. There we transferred to the airport, only to discover our scheduled flight to Beijing had departed without us. We waited among throngs of Chinese while several passengers were unceremoniously dumped from the next flight so that special seating could be arranged for us in the front of the plane. Early in the evening we touched down in the capital, having flown for three hours across China’s endless and ancient landscape.
We drove into Beijing along a rough road packed with people on bicycles and wagons drawn by horses and teams of oxen. We saw few motor vehicles either then or during the rest of our time in China. Finally, we arrived at the once elegant Beijing Hotel in the heart of the city, only a few blocks from Tiananmen Square and the Forbidden City. Built early in the century to cater to European travelers (my parents and Aunt Lucy had stayed there in the 1920s), the grand old hotel was now suffering from years of neglect. Nevertheless, these were the best accommodations in town, and the staff was polite and attentive to our needs.
INFORMAL/ACCOMMODATING, RIGID/INFLEXIBLE HOSTS
On virtually every business trip I made for Chase during my thirty-five-year career, I would approve a prearranged schedule of meetings before leaving. This trip was different. We had no idea of our itinerary or whom we would see until after we arrived in Beijing. Soon after we unpacked, our official host from PIFA, a retired Chinese diplomat, called on us to ask where we would like to go and whom we would like to see. We told him that we hoped to spend four or five days in Beijing and were eager to meet with senior government officials—mentioning Zhou Enlai specifically—and to visit the Great Wall, the Ming Tombs, and the Forbidden City. We also asked for permission to travel to Xi’an, Shanghai, and Guangzhou. He said most of this could be arranged, but meetings with senior officials, particularly Zhou, would remain uncertain until toward the end of our stay in Beijing.
We had learned before leaving New York that traveling within China would be difficult, so I had asked Huang if we could use the Chase plane for that purpose. Huang demurred, claiming that facilities to service private aircraft were not available, but the government would put a plane at our disposal. And they did: a four-engine Russian Tupolev with seating for twenty-four and a crew of four, more than adequate for our party of six plus four interpreters. Given the extremely limited airline service in China at the time, such a gesture was a clear indication of the importance the Chinese placed on our visit.
While in Beijing the government assigned us a large, black Chinese-made Hongqi limousine with a driver and an interpreter-guide. Due to our host’s rigid concept of protocol, however, only Peggy and I were allowed to ride in it. The other members of our group had to be content with much smaller cars. Joseph and Frank were not very happy with this inequity, but the Chinese refused to yield an inch, to the point of refusing to allow anyone to ride with us even for short distances.
In other respects our hosts were remarkably informal and accommodating. We were told at our initial briefing, for instance, that our spouses were welcome to participate in all meetings, including those with senior officials, and that except at official banquets we should dress in casual clothes, such as slacks and shirts without ties, because of the summer heat.
By chance our visit coincided with the arrival of Ambassador David Bruce, the newly appointed chief of the U.S. Liaison Office, and his wife, Evangeline. I had first met David in Paris in 1945 when he headed the OSS mission attached to General Eisenhower’s headquarters. David subsequently served with great distinction as ambassador both to France and Great Britain.
The Bruces invited Peggy and me to have lunch with them in the newly built U.S. residence in the Diplomatic Quarter a few blocks from our hotel. Their furniture had not yet arrived, so we ate on a card table in their bedroom. David touched on the intense power struggle being waged between moderates and hard-liners within the Chinese Communist Party. David’s account of turmoil within the leadership stood in stark contrast to the orderly way in which our visit was being orchestrated, but it also confirmed my sense that creating a presence for Chase or any American organization would require patience and hard negotiations.
WITNESS TO THE CULTURAL REVOLUTION
Mao instigated the Great Proletarian Cultural Revolution in the mid-1960s in a brutal bid to solidify his own grip on power. While he succeeded in eliminating or neutralizing his opponents within the Communist Party, Mao lost control of his chosen instrument, the zealous and bloody-minded Red Guards, cadres of young, fanatical Communist Party members who ran rampant until the Red Army finally brought them to heel a few years later. During this time, extremist political factions, egged on by Mao’s wife, Jiang Qing, inflicted profound misery on millions of people and ripped apart the fabric of Chinese society. Indeed, we saw constant evidence of the Cultural Revolution’s effects and soon came to realize that it had not yet run its course. Three vignettes may serve as illustrations of what we observed.
At Beijing University a distinguished scientist, who still bore the title of vice president, accompanied us to the campus but sat in silence while three members of the Revolutionary Committee in their early twenties presided at the meeting. In response to a question about university entrance requirements, they made it clear that academic preparation was secondary to unquestioning loyalty to Mao’s teachings. The disastrous impact this had on the quality of scholarship and teaching for a full generation can well be imagined.
It was the same story at the recently renamed Capital Hospital, formerly the PUMC, where James (Scotty) Reston of The New York Times had undergone an emergency appendectomy, anesthetized with acupuncture, two years earlier. Although several doctors trained before the revolution were still on staff, they remained in the background while members of the Revolutionary Committee led us on a tour. These student leaders boasted of the medical care available to “the masses” because of Mao’s leadership, but it was apparent that the facilities were primitive and the hospital lacked the most basic surgical instruments and medicine, even though it was considered the best in China. As chilling proof of this, we looked through the ope
n door of an operating theater just after a leg amputation had been completed; the temperature was above 90 degrees, and flies buzzed around the severed leg, which stood upright in a bucket beside the operating table.
We visited a ceramic factory outside Guangzhou established during the Tang dynasty and famed for the finely wrought pieces it had produced for more than a thousand years. The factory was now mass-producing poor-quality imitations of those earlier masterpieces. We asked if workers were permitted to create original pieces and were told that nothing could be produced for “elite individuals” that was not also available to the masses.
Throughout our visit no one said anything, even when we were alone in the car, that deviated in the slightest degree from strict Maoist doctrine. Had they done so, they would have doubtless been banished to the countryside for “reeducation.” In fact, nothing gave us much hope that the Chinese leadership was about to relax its iron grip on the country.
NEGOTIATING WITH THE BANK OF CHINA
Despite these depressing encounters, our meetings in Beijing with Chinese officials went well. The most important was with the chairman of the state-owned Bank of China, which managed the country’s external financial and banking relations. The chairman seemed suspicious of even the most rudimentary Western banking practices and dubious about adopting them. He explained that paying interest was inconsistent with Marxist doctrine and then said, “You must realize, Mr. Rockefeller, that we have no experience with either lending or borrowing money.” He gave us little reason to think this policy was about to change.
It became clear that even if we established a relationship with the Bank of China, it would be a very limited one. I was quite surprised, therefore, when after more than an hour of pointing out all the reasons that China could not open its doors to foreign trade or investment, the chairman suddenly declared that the Bank of China would be interested in establishing a limited correspondent relationship with Chase. I had to assume he had received instructions from a superior to make the offer, and I lost no time in accepting the proposal.
The implementation of even this modest arrangement was neither easy nor quick. A correspondent relationship normally requires the foreign bank to open an account in New York by making a dollar deposit. In this case such a seemingly innocuous deposit would have triggered calamitous consequences; there was an estimated $250 million in claims against the PRC for assets seized from Americans after the revolution, and the U.S. government had frozen $75 million in Chinese assets in the United States in retaliation. Had the Bank of China deposited money with us before an agreement was reached on these blocked balances, the PRC’s funds would have been seized by the U.S. government. As a temporary expedient, therefore, we adopted the unusual course of making a dollar deposit with the Bank of China to enable them to satisfy the modest letter of credit and remittance business they proposed conducting with us. While many criticized Chase for doing business with yet another Communist country, I was persuaded there was great potential in being the first American bank in China—even though it might be some time before the relationship was profitable. I felt our new connection was supportive of broader American interests as well. The diplomatic opening achieved by Nixon and Kissinger had enormous significance, but if the full fruits of rapprochement were to be realized, contact with the PRC at the private as well as at the government level would be necessary. To bring about a fundamental change in China’s closed and suspicious society would be a slow and arduous process. This could only be accomplished by personal contact and through a gradual process of building closer relationships. It gave me satisfaction to have played a part in that process.
ZHOU ENLAI
When our last day in Beijing rolled around with no word on whether Zhou Enlai would receive us, we became concerned that it might not happen at all. That afternoon, however, we were told not to leave the hotel for dinner and to wait for instructions. There was no further explanation of what might be in store for us.
Sometime after 9:00 P.M., one of the officials from PIFA walked into my room and told us the Premier would receive us at precisely 10:45 in the Great Hall of the People. It was a hot, muggy night, and after a hectic day and a copious Chinese meal, we had largely given up hope of meeting Zhou and were thinking instead of sleep and our departure the next day. His words quickly revived us.
We left the hotel at 10:30 and drove through dimly lit streets the short distance to Tiananmen Square. The pink walls of the Forbidden City and the huge portrait of Chairman Mao looming over the Gate of Heavenly Peace were barely visible in the darkness. We moved slowly around the square and stopped at an entry on the south side of the Great Hall of the People precisely at the appointed hour.
Zhou Enlai himself stood at the top of the steps to greet us. Winston Lord, one of Henry Kissinger’s aides on his historic trip to China and later our ambassador there, subsequently told me this was an unusual gesture for Zhou to make; he had not done this for either Nixon or Kissinger. The Premier looked even smaller and frailer in person than in his pictures. He was dressed in a regulation dark gray “Mao tunic” with the red badge of the Politburo affixed to it. He shook hands with each of us and posed for a photograph in front of a large painting called the Welcome Guest Pine. We then moved inside to the “Taiwan” room (the symbolism was not lost on us), a large carpeted room where we were seated in a formal square around Zhou in overstuffed armchairs. Beside each chair stood a white porcelain spittoon, standard equipment at all our formal meetings. I sat on Zhou’s right. Nancy Tang, his young Brooklyn-born interpreter, was just behind him.
Zhou had a surprising amount of knowledge about my family. He also asked about T. V. Soong and H. H. Kung, high-ranking Chinese bankers who were also relatives and strong supporters of Chiang Kai-shek, and seemed surprised that I did not know them, not realizing, among other things, that I was a generation younger than they. I heard no rancor in his voice when he talked about them or even when he mentioned his old adversary, Generalissimo Chiang.
In fact, Taiwan came up for discussion only in relation to its remarkable economic growth. Zhou agreed that Taiwan’s growth had been impressive. But he dismissively noted that Chiang had set up a free port “like Hong Kong” by importing raw material, manufacturing cheap goods with exploited labor, and then exporting the finished products at a profit. While this was good for Chiang and his coterie, he said, “it was not good for the workers, who didn’t benefit at all.”
Zhou referred positively to Nixon’s visit and the broader contacts with the United States that were now possible. He attributed this result to “the decisiveness” of Chairman Mao. As one of the few senior Party members who had survived Mao’s reign of terror during the Cultural Revolution, Zhou was careful in every word and gesture never to raise himself above the Chairman. We talked about Henry Kissinger, and Jamie Pusey later told me that Nancy Tang, when speaking to Zhou, had referred to Henry as “the Doctor,” apparently his nickname among the inner circle of the Chinese leadership.
Zhou seemed most interested in discussing the international economic and monetary situation. He questioned me about the weakness of the U.S. dollar, which had effectively been devalued by 20 percent over the previous two years, the high inflation rate in the United States, and the volatility of international exchange rates. He mentioned the disastrous devaluation that China had experienced right after World War II and the runaway inflation in Germany after World War I, which he remembered from his student days in Paris and Berlin in the early 1920s. He asked if something like that could happen in the United States. Zhou noted that his conversations with both Nixon and Kissinger had convinced him that neither “seemed to be very interested in or to know very much about economics.”
The Premier seemed genuinely concerned that our economic problems might have an effect on China and asked me to explain the international monetary system—quite an undertaking for that time of night without any preparation! I said that I would try, but it might take a while. While I am sure my coll
eagues blanched at the prospect of listening to this midnight lecture, Zhou simply nodded his head for me to proceed.
I began with the Bretton Woods agreement, the Marshall Plan, the dramatic expansion of world trade in the 1950s and 1960s, and on to the emergence of the Eurodollar market. I spoke of the onset of the U.S. inflationary spiral in the mid-1960s that resulted from LBJ’s disastrous “guns and butter” fiscal and budgetary policies. Those policies, I said, had produced balance-of-payments deficits, which in turn had led to Nixon’s decision to go off the gold standard and impose wage and price controls in 1971. I concluded my tour d’horizon almost an hour later by suggesting that it was faulty U.S. economic policies rather than fundamental economic ills that had created the troubles for the dollar. If we followed more prudent economic policies, I felt, the strength of the dollar would return.
Zhou listened attentively to my discourse, unlike some of my colleagues who could barely keep their eyes open. When I finished, he questioned me on some of the points I had made about trade and currencies. Zhou acknowledged that trade could be useful for China’s growth and development, but would not concede that changes in his country’s managed economy would have to be made in order to facilitate foreign investment and participation.
The potentially destabilizing effect of foreign trade on the yuan, China’s currency, seemed to trouble him the most. Like his Soviet counterpart, Alexei Kosygin, Zhou was perplexed by the hard reality of currency inconvertibility and seemed not to understand the tremendous limitations this imposed on China’s ability to trade with the rest of the world. If anything, the Chinese were even more unsophisticated than the Russians on these matters. Zhou believed that the yuan’s greatest strength was that it was not an international currency, and “because of that,” he said, “it is very strong, backed by the economic strength of our country.”
Memoirs Page 33