partial control of the South Manchuria Railway.^100 Understanding full well
where the country was headed, he planned to use an expansionist Japan to
further his own opportunities in China.
Since his goal was stability in the Far East, the banker believed that
Japan was in the best position to maintain safe conditions for business. If
that necessitated Japan’s domination of China, so be it. When, during
World War I, Japan presented twenty-one demands to China that would
have made that country a virtual protectorate, the banker readily agreed.
He told Takahashi that both countries would benefit: Japan needed China’s
resources, and China needed Japan’s administrative talent. The Open
Door policy notwithstanding, he dismissed considerations of Chinese ter-
ritorial integrity and showed concern only for a guarantee of equal access
to Chinese markets for other nations.
Schiff pressed his opinions on the State Department. In 1916 he wrote
the counselor of the department that Japan had to expand to solve its prob-
lem of surplus population. Furthermore, “Japan, because of her nearness to
China,... understands better than perhaps China herself, and certainly
better than any other nation, the needs of China and the manner in which
it will be possible to organize China into a modern state.” Therefore,
American opposition to Japan’s policies could well lead to an explosion.
Concerned that the United States had overly offended Japan, the banker
thought it wise to supply Japan with the funds for “the labor of moderniza-
tion.” He repeated his opinion to Secretary of State Robert Lansing in
1917, when the Japanese envoy to the United States, Viscount Kikujiro
Ishii, sought American recognition of Japan’s “paramount” interest in
China. Whether the United States liked it or not, Schiff said, Japan will
dominate in China, and American influence would be felt only if it oper-
ated alongside Japan.^101
Schiff looked to China as another promising area for investment before the
turn of the century. In 1891 he discussed Kuhn, Loeb’s possible participa-
tion in a Chinese bond issue. During the Sino-Japanese War he was ap-
proached by John Foster, a former secretary of state and one long con-
cerned about China. His interest aroused, Schiff suggested to James
Wilson in 1895 that Foster, then in China, should “keep his eyes open and
not lose any opportunity to secure financial and railroad negotiations.” He
was confident that, with Cassel’s aid, Kuhn, Loeb could handle invest-
ments. While Morgan stayed aloof, Kuhn, Loeb secured a modest share of
loans that were handled largely by Europeans.^102
Dependent on capital from Europe, Kuhn, Loeb could not venture fur-
ther. Moreover, like other American houses, the firm was well aware of the
difficulties business faced in China. The country was disorganized and
The Making of a Leader 35