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Cantonese Government with money, in order to get rid of the 40,000 persons who were unemployed and living on the Government dole. Mr. Brenan replied that Hong Kong would not pay a cent for this purpose, since it would be regarded as blackmail, but that, in order to enable the Canton Government to show their people that they had got something out of the settlement. Hong Kong would lend money for the development of the province. Mr. Brenan mentioned their willingness to make a properly secured loan for the construction of the Whampoa port, together with a railway loop round Canton City, if the amount were within reasonable limits. Mr. Chen appeared impressed with this idea.
3. At a meeting on the 21st July the Cantonese Minister for Foreign Affairs made the following verbal proposal for a settlement:—-
(a.) The Shameen Incident.—Cuarantees to be afforded against the repetition of such incidents, involving the regulation of Shameen defence measures and use of gunboats. Compensation to be paid in respect of the victims. (b.) Boycott. Hong Kong to assist Canton financially as regards the unemploy- ment question-that is to say, to pay compensation to the strikers.
1.
The second demand was definitely refused. As regards the first, the British delegates replied that no change could be made in the defence measures until the safety of foreign residents was adequately guaranteed. As for compensation, they maintained that the Chinese were responsible for the incident, and pointed out that on the British side also there were heavy claims for damage and loss, but that they were willing to leave these questions for subsequent adjustment. They then proposed a development loan as means for an immediate settlement, mentioning the Whampoa port scheme and a project for a loop railway line, provided that this did not cost more than about 10 million dollars. In reply, the Cantonese delegates reiterated that their Government could not terminate the boycott without the expenditure of money, and that the boycott was the direct outcome of the Shameen incident; so that, if the British could not accept responsibility for the shooting, this responsibility should be fixed by international enquiry. The British delegates pointed out the difficulties with regard to such an enquiry, but agreed to refer the proposal to His Majesty's Government. The Cantonese delegates, for their part, said that they would refer the loan proposal to their Government, and the conference was adjourned on the 25th July.
5. Mr. Brenan considered that the Cantonese Government were not willing to settle without a cash payment and had adopted the idea of an enquiry in order to suspend negotiations. Another possible explanation was that they might be playing for delay owing to their recent military success in Hunan, in the hope that they might soon establish themselves on the Yang-tsze and increase their influence throughout China, and so be in a much stronger position for negotiation.
6. Nevertheless, His Majesty's Government gave careful consideration to the proposal for an enquiry. They thought it would be a mistake in tactics entirely to reject it, and that the Cantonese Government should be informed that they would take part in the enquiry on the following conditions :-
(a.) The boycott to be first removed.
(b.) The French Government to participate (the French own a part of the Shameen Concession and have troops stationed there who took part in the firing).
(c.) Adequate precautions to be taken for complete impartiality.
(d) The presiding judge to be a national of a Power not represented at Canton. (e.) Full facilities to be given by foreign Governments to enable their nationals
to give evidence.
(f.) The enquiry to be confined solely to ascertaining all the facts of the Shameen incident, and to be conducted under terms of reference strictly drawn up for this purpose.
7.
His Majesty's Minister at Peking, His Majesty's acting consul-general at Canton and the Governor of Hong Kong all concurred in this reply, but it was decided to postpone its delivery to the Cantonese Government until the political and military situation in South China became clear. It was thought possible that the Cantonese northern expedition might fail, and that the Cantonese Government might in such an event be in a more conciliatory frame of mind.
8. The Governor of Hong Kong was anxious that the offer of de jure recognition to the Canton Government might be used as a bargaining counter, but
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His Majesty's Government were unable to agree to this suggestion. Both the Governor of Hong Kong and Mr. Brenan were in favour of attaching further con- ditions to the acceptance of the enquiry proposal, and these were still under consideration when, on the 2nd September, Sir C. Clementi suggested that the proposed reply should now be delivered, and that, if no answer were received from the Cantonese Government within a fortnight, they should be given a further week in which to reply, failing which the British offer of a loan and their reply on the question of the enquiry should be withdrawn. It seemed, however, to His Majesty's Government that the situation had considerably changed since the reply to the Canton Government was agreed upon. His Majesty's naval forces had been compelled to take action against the strike pickets in Canton harbour, and the Cantonese northern expedition had been unexpectedly successful. Sir C. Clementi was accordingly asked to review the situation afresh.
9. The circumstances in which naval action was taken at Canton were as follows. On the 26th August Mr. Brenan reported that since the suspension of the negotiations the boycott had been effectively tightened up throughout the province; that new pickets were being recruited, armed and drilled; and that the Strike Committee were becoming more truculent. This organised brigandage" culminated on the 28th August in the opening of fire by the pickets upon a British subject and an American, who were on their way from the Customs Wharf to the Hong Kong steamer. Mr. Brenan urged that reprisals should be taken, and on the 31st August he was informed that orders had been sent to the Commander-in-chief to seize and disable picket boats, in order that these acts of piracy by the picket boats should be prevented. The naval forces were, however, not to become involved in street fighting, and the co-operation of the American naval forces was, if possible, to be secured. All the picket boats used for hostile purposes in pursuance of the boycott were to be seized, and not merely those caught interfering with British subjects. These operations were successfully executed without a shot being fired. No picket boats were scized, because they all made off at the first sign of action, but the harbour was cleared of them and shooting ceased. At the same time strike pickets were driven from British-owned wharves and a gunboat was moored alongside. The boycott examination shed was also cleared and guarded in the same way, and cargo boats were not allowed to approach it. Similar action was taken at Swatow, where one picket boat was seized.
10.
The French, Japanese and United States Governments had been informed of the action which His Majesty's Government proposed to take, and as a United States citizen had been involved in the incident of the 28th August the United States Government were asked whether they wished to associate themselves with His Majesty's Government. The State Department, however, intimated that they would be unable to do so.
11. In the meantime, the Cantonese northern expedition had made good progress. They took possession of the Province of Hunan and reached the Yang-isze, capturing Hankow (where there are foreign concessions) and Hanyang (where there are ironworks and an important arsenal), and advancing north of the Yang-tsze into the Province of Hupeh. It was feared that the establishment of the Cantonese forces on the Yang-tsze would lead to an extension of the Canton boycott to British trade in the Yang-tsze valley, but though there is some evidence that attempts were made to organise a boycott the movement made no appreciable headway, though there was of course considerable dislocation of trade. There was also some indiscriminate firing by the Cantonese forces upon foreign vessels on the river.
12. On the 10th September Mr. Brenan addressed two notes to the Cantonese Government. In one of these, sent on the instructions of His Majesty's Minister at L'eking, he requested that immediate orders should be sent to the army commanders on the Yang-tsze to put an end to the firing on British ships. In the other, sent at the request of the Governor of Hong Kong, he enquired, in connection with a recent speech by Sun Fo, who is a member of the Canton Government, whether it was the policy of the Canton Government to support the strikers and to develop the anti- British boycott throughout China. On the 12th September he reported that he had come to an arrangement with the Minister for Foreign Affairs, by which the river and the British wharves would be patrolled by Chinese police, and the pickets them- selves prevented from functioning. In return for this, he agreed that British naval activities should temporarily cease, but that if the undertaking were not carried out liberty of action would be resumed. He further recommended that the negotia-
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