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CHINA REPORT
SITUATION CREATED BY EXCHANGE OF NOTES
9
II.
THE SITUATION CREATED BY THE EXCHANGE of Notes of SEPTEMBER, 1930, AND THE CHINA INDEMNITY (APPLICATION) ACT, 1931.
The second of our terms of reference has bearings on a matter of such fundamental importance that we propose to deal with it first. In it we were directed to "consult with the Board of Trustees
as to the steps to be taken to give effect to Dr. Wang's undertaking 'to apply the bulk of the funds to the creation of an endowment to be subsequently devoted to the educational purposes mentioned in the Report of the Anglo-Chinese Advisory Committee published in 1926' This quotation from Dr. Wang (then Chinese Minister for Foreign Affairs) will be found in paragraph z of his Note to H.M.'s Minister in China dated September 19th, 1930. (White Paper, China No. 3, 1930.)
In accordance with these directions, we consulted members of the Board of Trustees and others on this subject, and we attended by invitation a meeting of the Standing Committee of the Board at Nanking. We regret to have to report that the present situation with regard to the powers and authority of the Board of Trustees and the question of an endowment fund can only be described as profoundly disturbing and unsatisfactory.
To make our position clear it is necessary to go back to the events that followed the passing of the China Indemnity (Application) Act of 1975.
A statutory Committee was appointed under that Act to advise the Secretary of State for Foreign Affairs regarding the allocation of the outstanding portion of the "Boxer" indemnity which Great Britain had decided, in 1922, to remit to China for purposes mutually beneficial to the two countries. This statutory (or advisory) Com- mittee (the chairman of which was the Earl Buxton) decided to send a delegation of its members to China to ascertain Chinese opinion on the various matters under consideration, to investigate on the spot the practicability of the numerous proposals which had been put forward for the utilisation of the money, and to make general and specific recommendations.
Into the proceedings of the delegation, which under the chairman- ship of Lord Willingdon spent several months in China during the spring and summer of 1926, it is needless to enter, as they are fully described in the "Report of the Advisory Committee" which, together with the Report of the delegation, was published as a blue-book (China No. 2, 1926) and presented to Parliament at the end of that year. All that is necessary for our present purpose is to state as briefly as possible the main outlines of the recommendations made by the delegation with regard to the application of the funds, the proposed endowment scheme and the important question of "administration
control.
and
The delegation recommended (see the summary on pp. 162-164 of the published Report) that a sum of £350,000 per annum should forthwith be allocated, in specified proportions, to the main heads of agricultural education and improvement, scientific research, medicine and public health and other educational purposes. They advised that arrangements be made to set aside a large sum of money (not exceeding £5,200,000 and not less than £3,500,000) as an endowment fund the money to be invested "in some constructive work in China beneficial to the people; the proceeds from such investment to be devoted to the purpose of carrying on in perpetuity, after the complete amortisation of the China Indemnity in 1945, the educational and other work which it is proposed to subsidise, support or encourage". They advised that the work in question should be railway construction- preferably the completion of the Hankow-Canton line; but they added that in their opinion no railway or other scheme should be definitely adopted until it had been favourably reported upon by impartial experts as feasible, as a reasonably safe investment for trust funds, and as likely to produce a steady and adequate return on the capital invested. If the impartial experts gave unfavourable reports, or if it were considered that "political or other conditions in China were such as to make the proposed undertakings "unduly speculative", it was recommended that the money should at once be invested in approved trustee-stock in China or abroad. Finally, the delegation advised that a Board of Trustees should be established in China "
to control, administer and allocate the indemnity funds in general conformity with the principles laid down" in their Report; that its constitution, functions and responsibilities should be in accordance with a certain draft plan; and that after the Board had been organized the Advisory Committee in England should be dissolved.
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The draft plan in question, as drawn up by the Willingdon
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