861.77/2615: Telegram
The Minister in China (Schurman) to the Secretary of State
[Received July 18—5:50 a.m.]
311. Your July 1, 2 p.m. Cannot learn of any new developments in railway negotiations. As powerful neighbor and as force to be played off against Japan, China feels that [she] cannot disregard Soviet Russia. Minister for Foreign Affairs has not negotiated but has had conversations with Paikes in which he has steadily insisted that Chinese Eastern and status of Mongolia are questions that must be considered together. Latter appears very difficult to adjust.
Manager of the Russo-Asiatic Bank, Peking, states both he and the Chinese Government have pointed out to Paikes that Soviet Government could not legally concede railway to China since railway is not state railway but privately owned. This status was insisted upon [Page 908] by China when concession granted to avoid dangers of Russian railway through Chinese territory. Paikes had not attempted to rebut this. Bank manager had also pointed out to Paikes that in spite of fears of Reds to the contrary the bank had maintained strictly neutral attitude between Red and White Russians and between Chinese, Japanese and other Governments and that the very existence of so many conflicting interests assured strict neutrality.