The Chinese delegation arrived at Berlin on June 9, 1937. Kung met
Hans von Mackensen on June 10 (von Neurath was visiting eastern Europe); during the meeting, Kung pointed out that Japan was not a reliable ally for Germany, as he believed that Germany had not forgotten the Japanese invasion of
Tsingtao and the Pacific Islands during World War I. China was the real anti-communist state and Japan was only "flaunting". Von Mackensen promised that there would be no problems in Sino-German relationships so far as he and Neurath were in charge of the Foreign Ministry. Kung also met Schacht on the same day. Schacht explained to him that the anti-Comintern pact was not a German-Japanese alliance against China. Germany was glad to loan China 100 million
Reichsmark and they would not do so with the Japanese.
[21]
Kung visited
Hermann Göring on June 11; Göring told him he thought Japan was a "Far East Italy" (referring to the fact that during World War I
Italy had broken its alliance and declared war against Germany), and Germany would never trust Japan.
[22] Kung asked Göring "Which country will Germany choose as her friend, China or Japan?", and Göring said China could be a mighty power in the future and Germany would take China as friend.
Kung met
von Blomberg on the afternoon of June 13 and discussed the execution of 1936 HAPRO Agreement. Under this agreement, the German Ministry of War loaned China 100 million Reichsmarks to purchase German weapons and machines. In order to repay the loan, China provided Germany with
tungsten and
antimony.
The most important industrial project from Sino-German cooperation was the 1936 Three-Year Plan, which was administered by the Chinese government's
National Resources Commission and the Hapro corporation. The purpose of this plan was to create an industrial powerhouse capable of resisting Japan in the short run, and to create a center for future Chinese industrial development for the long run. It had several basic components such as the monopolization of all operations pertaining to tungsten and antimony, the construction of the central steel and machine works in provinces such as
Hubei,
Hunan, and
Sichuan, and the development of power plants and other chemical factories. As outlined in the 1934 barter agreement, China would provide raw materials in return for German expertise and equipment in setting up these ventures. Cost overrun for these projects was partly assuaged by the fact that the price of tungsten had more than doubled between 1932 and 1936.
[24] Germany also extended RM 100 million line of credit to the Chinese government. The Three-Year Plan also introduced a class of highly educated technocrats who were trained to run these state-owned projects. At the height of this program, Sino-German exchange accounted for 17% of China's foreign trade and China was the third largest trading partner with Germany. The Three-Year Plan had many promises, but much of its intended benefits would eventually be undermined by the breakout of full-scale war with Japan in 1937.[25]