Midterm Scoring Guidelines

This exam assesses your ability to provide a thoughtful and holistic understanding of a historical business case. In order to achieve this, you must not only read the provided materials carefully and critically and show attention to its details; you should also demonstrate knowledge of historical context, connect the case to broader themes of our class where necessary, and develop your own line of reasoning clearly and succinctly.

What Happened in the Real Case?

In 1925, a surge of Chinese nationalism and anti-foreign sentiment, triggered by the May 30th Incident in Shanghai, led the Canton-based Kuomintang (KMT) government to consolidate its power and support labor strikes and boycotts against foreign businesses. These actions, while threatening to Standard Oil, didn’t affect it directly but particularly targeted the British and crippled commerce in South China.

Standard Oil’s initial response was strategic. As its chief competitor, the British-owned Asiatic Petroleum, was the primary target of the nationwide boycott, it refused Asiatic’s request for a joint, China-wide embargo. Indeed, as the Chinese boycott only modestly restricted its sales, Standard Oil aimed to capture market share while its rival was weakened.

However, the Nationalist soon tightened its control by establishing a government monopoly on all oil purchases. Combined with the ongoing boycott, this caused Standard Oil’s sales to plummet and its warehouse stocks to swell, leading to substantial losses.

Faced with this commercial pressure, Standard Oil made a pivotal decision: it would negotiate directly with the Nationalist monopoly, even though this meant breaking ranks with other foreign powers and defying the U.S. State Department, which opposed recognizing the Nationalist Party’s “illegal” taxes.

Finance Minister T. V. Soong was also motivated to deal, as the population was suffering from oil shortages and high prices. After initial talks and a period of waiting for better terms following a political shift within the Nationalists, a deal was finally struck in December 1927. Standard Oil agreed to pay a special tax directly to the new Nationalist government in Nanking in exchange for a significant tax reduction. In a final act of corporate pragmatism, Standard Oil immediately asked the U.S. government to officially protest the very tax it had just agreed to pay, seeking to maintain the principle of treaty rights even as it violated them in practice.

Scoring Guidelines

How well did your answer match the actual turn of events? Don’t worry: Your answers are not assessed based on its fidelity to the real outcome, but how well you explain your reasoning using historically defensible content knowledge. Here are some basic guidelines:

• This is not a test of your business acumen or knowledge of economics. Instead, your task is to analyze key contexts and issues in the case.
• Given the timed nature of the exam, responses may contain errors that do not detract from their overall quality, as long as the historical content used to advance the argument is accurate.
• Exam responses should be considered first drafts and thus may contain grammatical errors.

The following section presents a rubric for scoring. It is not based upon your answering in a particular type of way. I will reward appropriate points to any type of response, based upon the criteria that you answer the question, use appropriate evidence to their interpretation, analyze the case intelligently, and speculate within effective bounds where necessary.

The examples given within each scoring band do not constitute necessary criteria, but are intended to reflect the sorts of insight which might be expected at this level.

Question 1: Context

You must relate the topic of the prompt to broader historical events, developments, or processes that occur before, during, or continue after the time frame of the case. While the immediate case is new, the geographical contexts, power relations, and institutional settings should be familiar to you from our previous readings and class discussion. You are rewarded for drawing connections to external knowledge decoded in any case.

Historical contexts in this case include, but are not limited to:

Unequal treaties:

Signed between the Qing government and foreign powers, they deprived China of access to revenue from its customs, which were used to pay back its many indemnities. However, since the end of WWI, these treaties were subject to renegotiation, and the Chiang Kai-shek would partially restore tariff revenue in the 1930s. Seen in this light, the kerosene taxes were but the first test of relationship between the Chinese government and the treaty powers.

Revenue crisis, and why it persisted:

While the unequal treaties explained why the Chinese government weren’t able to levy foreign imports, it did not explain their chronic budget crisis. In this case, it is necessary to note that much of the budget was linked to the warlords’ conflict for territory and hegemony, and that Sun Yat-sen’s death only deepened a power vacuum which was filled by military strongmen and widespread violence, chaos, and oppression.

China’s domestic instability:

This is the late warlord period, between the death of Sun Yat-sen and the rise of Sun Yat-sen. At the time, the Nationalist Party and the Communist Party were still technically in the First United Front (1923-1927), bound together by a shared desire to unify the country and end warlord rule. The nationalistic protests would embolden the Chinese Communist Party while fracturing the Nationalist Party. The right-wing faction, led by Chiang, would emerge victorious and later purge the Communists from the Front in 1927.

Rise of nationalism:

The May Fourth Movement of 1919, which grew out of collective anger over the Treaty of Versailles, is considered the first mass student-led patriotic movement in China, marking a pivotal moment in the rise of Chinese nationalism. The May 30th Massacre of 1925, only fueled nationwide anti-foreign sentiments. The rise of nationalism would continue to fracture Chinese politics and deepen the divide between the Communist and Nationalist parties, but one unifying theme was to repeal the unequal treaties and restore Chinese sovereignty. This has major long-term implications for foreign businesses such as Standard Oil that benefited from lowered tariffs and extra-terriorial protection.

Economic ideologies:

As we read in their own words, Sun Yat-sen, as well as his successor Chiang Kai-shek, espoused the “three principles of the people”. In particular, Sun’s desire to synthesize socialism and capitalism in China and his political relationship with the Soviet Union suggest that Standard Oil should expect greater state intervention in the economy, and that socialism was, at least in terms of economic ideology, had become a serious trend to be reckoned in China.

Regional dynamics

This concerns the role of the Soviet Union and Imperial Japan. Between the end of the First War and Pearl Harbor, the United States viewed Japan as one of the key challenges to regional order. The Washington Treaty clearly shows Japan’s growing imperial ambitions in the region, and the United States had an interest in maintaining the existing open door policy and ensuring an equal application of treaty rights to imperial powers.

Scoring Rubric

0 point:

• No response, off topic, or plain wrong. This point is not awarded for merely a phrase or a reference.

1 point:

A fair response that identifies some historical contexts but overlooks some critical events, individuals, or background information. It depends mostly or only from what is directly stated in the case. It might reference contexts that are not relevant, or the explanations might contain significant factual mistakes.

Answers here may fall short of the higher range because they:

• Identifies one or two surface facts from the case (e.g., an embargo occurred; there was a kerosene tax).
• Heavy reliance on the case narrative without situating events in larger frameworks.
• Typical shortfalls: no mention of unequal treaties, revenue pressures, or the wider nationalism/warlord context.

2 points:

An average response, which accurately summarizes key events from the case but demonstrates little additional breath or depth. It might be narrowly focused, light on explanation, or overlooks key complexities.

It will be difficult for answers to enter this band unless they summarize key events correctly (embargo, Canton monopoly, later tax bargain) and connect them to some wider developments (e.g., anti‑foreign protests, revenue pressures).

Answers here may fall short of the higher range because they:

• identify the correct context but do not explain their meaning and significance
• leave out crucial contexts, such as failing mention the unequal treaties that motivated the call for embargo, how they worked, why they hindered China’s fiscal capabilities, and how the Nationalists are motivated to renegotiate the terms of the treaty
• have no mention of the domestic politics, such as wrongly assuming that the Nationalist in Guangdong was the dominant power
• and so forth

Sample answer: Q1, 2 points

3 points:

A good to very good answer, which displays sensitivity to the general circumstances both mentioned in the case and beyond.

Answers in this band may:

• go beyond the immediate events, individuals, organizations mentioned in the text
• offer original calculations and deductions (e.g., Standard Oil’s market share, trade volume changes)
• show some range (e.g., mentions Soviet assistance to Canton and the possibility of alternate oil supplies)

Sample answer: Q1, 3 points

4 points:

An excellent response that goes beyond immediate events mentioned in the case, engages with class readings and/or discussion, and zooms in and out to reveal deeper trends, patterns, and developments.

Answers in this band may:

• situate the case across multiple temporal and spatial scales: local Canton politics; national revenue and warlord dynamics; regional great‑power competition (Japan, Britain, US, Soviet Union); and longer trends (May Fourth nationalism, treaty revision debates, and the later Chiang regime’s fiscal policies).
• make analytical claims about causal linkages (e.g., revenue scarcity + mobilized nationalism produced Canton’s tax/monopoly move; foreign firms’ treaty claims shaped diplomatic constraints on coercive support) and supports each claim with case facts or class readings
• identify tensions and tradeoffs (commercial self‑interest vs. treaty principle; short‑term market access vs. long‑term precedent-setting).

It will be difficult for answers to enter this band unless they:

• relate the case to local, regional, global contexts
• probe deeper causes of political instability
• consider long-term developments of Chinese politics and business, beyond the immediate horizon of the case.

Sample answer: Q1, 4 points

Question 2: Issues

Cases are a jigsaw puzzle with the pieces arranged in a confusing pattern. The narrative portion of the text is written to provide only the most superficial factual information; it leaves out some critical contexts and expresses no conclusions about that information. In other words, the case is literally meaningless until you give them meaning.

Causes of domestic instability:

American trade and investment faced significant obstacles, including challenges from foreign rivals, particularly Japan, and China’s own volatile conditions like recurrent instability, political intrigue and deception. Given the volatile change in leadership, it’s worth asking what’s the root cause, whom Standard Oil could deal with (i.e. Chiang Kai-shek), and whether any decision – either embargo or a bespoke deal – would have staying power.

Ambivalent meanings of nationalism:

Chinese political parities were using nationalistic protests to exert pressure on foreign oil companies; while useful in the short run, such nationalistic protests have the power to fragment Chinese politics. For foreign businesses like standard oil, the protests were a serious threat, but they might be temporarily blunted by China’s dependence and desperate need for foreign liquidity. In the long run, there is also the possibility of aligning them with national agenda of industrialization and modernization.

Relationship between Standard Oil and the US government:

The Departments of State and Commerce fully appreciated the importance of the oil venture and feared a disastrous effect on Chinese-American trade if another power gained control of China’s oil fields. Kerosene had accounted for half of American exports to China and was the only major item that had not met Japanese competition. At the same time, one cannot assume that commercial interests and diplomatic goals were always aligned. The US consulate in particular was responsible for representing US national interests in China, not just those of Standard Oil, which might be tempted to abandon the embargo and strike a separate deal with the Chinese government. This could lead to serious rift between the company and the US government, and further jeopardize the status of unequal treaties.

Relationship between Standard Oil and Chinese government:

The Chinese state, grappling with a persistent revenue shortfall, was once again turning to fiscal levers to replenish its coffers. This wasn’t a novel maneuver; Beijing has previously sought quick infusions of capital by divesting rights, a strategy that offers a fleeting balm rather than a cure. The latest round of taxation, therefore, should be understood not as an isolated event but as one more iteration in an ongoing effort to shore up the nation’s finances—a pattern likely to persist.

Despite their dependency on Western oil, the Chinese were justified in their pursuit of optimal arrangements for developing a national oil industry, aiming to secure financial and technological advantages. Exhibiting themselves as tough bargainers, they recognized the value of their natural resources and sought to exploit them independently, thereby resisting western imperialism. As a strategy available to a weak giant, they effectively played off Standard Oil against foreign rivals to achieve their objectives in 1914, and could repeat the tactic this time around.

Scoring Rubric

0 point

• No coherent identification of issues or purely factual listing without analysis.

1 point

• Lists several issues (embargo or deal, risk to market share, diplomatic protest) but treats them as unconnected points.
• Little or no assessment of relative importance or consequences.

2 points

• Identifies relevant issues and offers straightforward analysis (e.g., embargo risks inventory pileup; negotiating could set precedent).
• Omits deeper structural drivers or fails to weigh tradeoffs between issues (e.g., doesn’t discuss how revenue crisis compels Canton to sustain the monopoly).

Sample answer: Q2, 2 points

3 points

• Connects immediate operational issues to political/diplomatic problems: e.g., the embargo may protect treaty principles but cripples Canton civilians and invites the Canton government to find alternate suppliers; negotiating with Canton can regain market access but risks endorsing illegal taxes and creating precedent
• Differentiates actors’ incentives (Standard vs. Asiatic Petroleum vs. US consular vs. British Foreign Office) and recognizes rival behavior (Asiatic’s covert shipments, label changes to disguise origin)
• Notes structural issues that affect staying power of any agreement: warlord fragmentation, Canton’s revenue needs, Soviet role in supply, and the fragility of diplomatic enforcement.

Sample answer: Q2, 3 points

4 points

• Explicitly demonstrates how the issues interlock and projects likely dynamics (e.g., paying the tax may restore sales but undermines treaty norms, encouraging other provinces to levy similar taxes; naval escorts protect shipments short term but increase international tension; rival firms’ opportunism can undercut collective strategy)
• Uses precise evidence to illustrate each issue (kidnapping/warehouse raids, British/US debates over naval action, Standard’s later direct deal and advance payment)
• Shows historical imagination and recognizes ambiguity: judges which issues are contingent vs. structural and flags evidence gaps or counterfactuals (e.g., how differently events might have unfolded if Washington had authorized stronger action).

Sample answer: Q2, 4 points

Question 3: Action

You may demonstrate creativity and imagination in your response, but only if it is historically defensible and based on a thoughtful and empathetic understanding of risk factors and power relations in the case. Indeed, you are evaluated less by the specific action you advocate, but how well you reason. Specifically, you are rewarded for engaging with the document’s ambiguities and gaps and draw reasonable inferences from the text within a broad spectrum of possibility, without drawing conclusions that are overly rigid.

Below are some risk factors that you might consider.

Internal biases

The failure of the 1919 deal with the Yuan Shikai government stemmed from more than just China’s “internal chaos.” Crucially, American business itself bore considerable blame: inefficient and generally unprepared for foreign operations, they were often unwilling to take risks and hesitant to admit when abstention from an enterprise was prudent. China’s dependence on foreign oil – and in particular, on Standard Oil – was real, but the past history pointed to a more complex reality than one of China eagerly accepting American offers or Americans readily seizing opportunities.

Governmental relationship

Should Standard Oil cast its lot with the embargo, it would not merely be a corporate decision; it would represent a significant fraying of the treaty system itself, potentially souring its already delicate relationship with Washington. While the immediate allure of such a move might promise fleeting advantages, the company would likely discover itself confronting the considerable ire of its domestic and international business peers. Over time, this isolation could insidiously erode America’s standing on the global stage. What Standard Oil must therefore grapple with, with a keen eye on the horizon, is not just where its commercial ambitions align with the broader currents of global commerce, but also how to navigate the inevitable divergence, charting a course that mitigates the inherent risks when those interests inevitably diverge.

Rival entry

The impending decision promised to ripple far beyond China’s borders. Even the United Kingdom, a global player often cautious in its pronouncements, might find itself compelled to react in favor of its home champion, Asiatic Petroleum. Simultaneously, other major powers, each with its own strategic interests, stood poised to capitalize on the unfolding situation. Japan, acutely dependent on imported resources and eyeing China’s Northeast with particular avarice for its oil reserves, saw an opportunity. So too did the Soviet Union, a less significant oil supplier but deeply attuned to Japan’s regional ambitions. Both nations could potentially align with Beijing’s official protest, thereby challenging an embargo and further destabilizing the already precarious balance of power among the imperial nations. Whatever course China charted, any effective strategy would necessitate a sober appraisal of the risks, viewed through the prism of the competing interests and potential actions of all involved global players.

Long-term risks

The persistent specter of budgetary shortfalls loomed large, a challenge already acutely felt during the fractious warlord era, and one that only intensified when Chiang Kai-shek embarked upon his ambitious, and costly, Northern Expedition. Even after 1927, as historical accounts reveal, Chiang’s regime relentlessly pursued revenue, a drive manifested through the imposition of new taxes or, at times, through more shadowy, extra-legal means — a pattern starkly illustrated by several case studies of our class. This pattern of seeking new revenue streams, whether via novel taxation, coercive measures, or outright intimidation, would become a recurring theme. Indeed, this dynamic held true even when the costs of foreign tariffs could be effectively passed back to China in the form of inflated prices. The proposed analysis, therefore, must grapple with how entities like Standard Oil operated within a framework increasingly leaning towards state capitalism, a system where foundational foreign treaties were subject to renegotiation.

Scoring Rubric

0 points

• No plausible action; recommendations contradict known facts, or rest on unsupported assertions.

1 point

• Offers a simple prescription (e.g., “join embargo” or “negotiate”) without weighing alternatives, actors, or risks.

2 points

• Proposes an action and lists important risks/benefits, but the recommendation is under‑developed (no prioritized steps or stakeholder engagement).
• May suggest plausible mitigations (e.g., ask US for naval escorts) but fails to address precedent effects or competitor behavior.

Sample answer: Q3, 2 points

3 points

• Recommends a plausible, nuanced course (example: maintain coordinated embargo initially to preserve treaty principle; simultaneously instruct Standard to prepare a contingency negotiated offer that limits precedent-setting by insisting on tax collection at distribution, a fixed cap, and a formal, transparent arrangement; seek allied diplomatic pressure and, if needed, naval protection for essential shipments) and justifies it.
• Evaluates tradeoffs and names key actors to engage (Chinese finance minister, US Minister, British consuls, Asiatic Petroleum) and anticipates rival responses (Asiatic may undercut embargo) with mitigations (mutual agreement not to sign unilateral deals; rapid diplomatic notification)
• Uses evidence: cites past success of embargo pressure, British/US reluctance for forcible intervention, and Standard’s later practice (advance payments, tax bargain) as cautionary precedent

Sample answer: Q3, 3 points

4 points

• Presents a multi‑stage strategy anchored in the political reality, for example:
  • short‑term use of legal/diplomatic pressure and embargo to seek withdrawal or reasonable cap;
  • mid‑term contingency negotiation that explicitly avoids recognition of a monopoly by (a) making taxes transparent, limited, and collected at point of sale, (b) securing equal treatment clauses, and (c) insisting on written, time‑limited guarantees;
  • long‑term plan to diversify supply lines, strengthen local sales agent relations, and lobby for treaty negotiation channels.
• Weighs costs to principle vs. markets and recommends precise steps, e.g., who to engage and when (U.S. Secretary to weigh in if negotiations move to precedent territory; coordinate with British consulate/Asiatic Petroleum to maintain a united front; prepare naval protection only as last resort) and articulates likely outcomes and fallback options.
• Anchors arguments in case evidence (embargo effects, Asiatics’ covert shipments and label changes, US diplomatic positions, Standard’s later advance payments) and shows explicit awareness of longer consequences for treaty regime and regional balance.

Sample answer: Q3, 4 points

Score Distribution

Here’s a breakdown of the scores:

Metric	Q1	Q2	Q3	Total
Median	3	3	3	8
Average	2.47	2.55	2.87	7.89
STD	0.89	0.8	0.93	2.19

The final letter grade is calculated based on the distribution of scores.

Grade	Cut-off	Frequency	Percentage
A	10	9	23.68
A-	8	14	36.84
B+	6	11	28.95
B	3	4	10.53