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contending Chinese factions, and therefore will in the long run heighten Britis reputation in China as that of the one Power that did not in any way participate in or make profit out of the civil war." I would qualify this statement by saying that our arms enbargo policy, if it does not prevent our being maliciously accused of favouring our Northern friends with assistance in the form of material supplies, at least enables us to repudiate such accusations absolutely, and to convince all decent sections of Chinese public opinion that our hands are clean. Should it, however, be decided that a change is to be made in our policy, I would recommend that we proceed in the first instance by repealing our King's Regulations, with an explanation that we propose in the future to control the arms trade from the United Kingdom by prohibition of export, except on production of "huchao
huchao" issued by any de facto Chinese Government with whom we are in friendly relation. Admittedly such a step would require a good deal of explaining away, but it would enable us to claim that we were continuing to prevent the supply of arms from British sources to irresponsible military leaders, and to control the trade in our general political interests. At the same time interference with foreign arms cargoes passing through British ports of call might well be dropped.
10. On the whole, however, while realising fully the drawbacks, and in many respects the futility of our present policy. I incline to the view that matters should be left as they are for the present.
I have, &c.
MILES LAMPSON.
Enclosure in No. 1.
Minute by the Commercial Counsellor.
I THINK the time has come when we should withdraw from the arms embargo, because
1. It has, owing to the lack of co-operation on the part of the other signatories to the agreement, entirely failed in its object, which was to put a stop to, or at least restrict, civil war in China.
2. It handicaps British merchants and manufacturers, and the sale of British goods, to the advantage of their competitors; and moreover, it operates unfairly as between British firms, i.e., some obey the strict letter of the King's Regulations and refuse all orders, while others take a wider view-which the Foreign Office have recently acquiesced in—and openly supply Chinese arsenals with materials for the manufacture of arms and ammunition. Vide the flourishing business Arnhold's and Jardine's are now doing in Mukden.
3. We have not in any way earned the gratitude or the respect of the Chinese by our self-denying ordinance, but are on the other hand cordially disliked by all parties.
4. If our present policy is to recognise the status of China as a sovereign State, a step in this direction being the application of Chinese laws to British subjects, then I consider that our refusal to allow British subjects to supply arms and ammunition. to the Chinese Government, when a permit has been issued by the Government for that purpose, may well be regarded as an unwarrantable interference with China's sovereign rights. An even less defensible interference is, in my opinion, the seizure of munitions of war carried in a foreign steamer in a British port, which are the property of the Chinese Government. By Chinese Government I mean either the Northern or Southern Government, or indeed any local government, whose permits are recognised by the Maritime Customs.
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