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Dr. Kung's prime problem at the moment is to finance the five-year plan of railway building inaugurated by China in 1935. China has only about 6,000 miles of line and the inferiority of her transport systems is a major factor in retarding the nation's progress. The program seeks to add 1,000 more miles per year and its biggest achievement so far, made possible through the aid of the British Boxer Indemnity credit, has been the completion of the Canton-Hankow Ry. This growth of trackage has caused an acute shortage of rolling stock. President Warren Lee Pierson of the U. S. Export-Import Bank saw that for himself during a two-month visit to China from which he returned only , last fortnight. Last week he and Dr. Kung and Export-Import Bank Advisory Committee Chairman Jesse Jones sat down together in Washington, soon agreed on a bargain whereby China will get 20 U. S. locomotives and equipment costing $1,500,000. Baldwin Locomotive Works and American Locomotive, Sales Corp. split the order, which is to be delivered in seven months.* They will assume half the credits, the Export-Import Bank the other half. The debt, paying 6%, will be evidenced by notes of the Chinese Government and the Minister of Railways, guaranteed by a Chinese bank. While Dr. Kung went off to his 30th reunion at Oberlin College, Jesse Jones declared: "The participation in the credit is in accordance with the bank's policy of assisting American exporters to maintain and to expand foreign trade."
The Export-Import Bank was launched by Franklin Roosevelt in early 1934 as the nub of a "balanced foreign trade" which would eventually counteract the most fundamental change in U. S. economic history—the switch from a debtor to a creditor nation effected by the War. With almost every foreign nation in debt to the U. S., they no longer had money to buy U. S. products. The New Deal proposed to give them long-term commercial credits. But the established U. S. banking system, created for a debtor nation, provided no source for such long-term commitments. The first Export-Import Bank was created to fill the need in the case of Russia. Idea was that there would follow other Export-Import Banks, one for Cuba, one for Chile, etc. But the original bank could never fulfill its job and soon expired because of the Johnson Act which forbade extension of credits to nations refusing to pay their debts to the U. S. The second Export-Import Bank, and presumably the permanent one, followed with a plan embracing any or all nations. Recent deals include $3,500,000 to Italy to stabilize its cotton, $27,500,000 to Brazil to clear dollar exchange.
*The 20 will be freight locomotives of the Mikado type (2-8-2 wheel arrangement), are a relatively minor order for the two companies. Having sagged almost to zero production in 1932, U. S. locomotive works are now going at full speed. In the first five months this year 277 engines were ordered.