CO885-11 — Page 149

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PUBLIC RECORD OFFICE

Reference :-

C.O.882/11

PUBLIC RECORD OFFICE, LONDON

| ALLY WITHOUT PERMISSION OF THE

BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO

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if, on the other hand, we formally agree to the levy of the new taxes, introduced in this irregular way, our action will be equiva- lent to an unconditional grant of the Washington surtaxes, as well as certain export taxes not hitherto contemplated, and their surrender to the de facto Canton Government, and then, as a logical consequence, to all other local or regional authorities.

16. We should, moreover, obtain no quid pro quo for a con- cession such as no Chinese Government has hitherto obtained from any Treaty Power except the removal of the boycott which is itself a defiance of our treaty rights. The Canton Soviet believes that it has found in the boycot, as enforced by armed "strike pickets," a very successful anti-foreign weapon, and it will be confirmed in that belief if by this means it does in fact extort from us the complete surrender of our treaty rights which is involved in the new taxation proposals. We may, therefore, if we now acquiesce either tacitly or openly, expect the repeated use of this weapon for extorting concessions and destroying treaty rights, and the outlook in that case for British trade in China and for the Colony of Hongkong would be black indeed.

17. There is a further point which must be borne in mind in considering this problem, namely, that the present Canton Soviet may prove to be short-lived and may be destroyed by the northern War Lords. No Government established at Canton since the Revolution of 1911 has lasted for more than a very brief period, and the -present Government is surrounded by many enemies both inside and outside the Province. Is it, therefore, sound policy to make a most valuable concession which, once granted, could not be revoked, and which would be used as a precedent all over China, in favour of a provincial Government which may prove to be like its predecessors merely ephemeral? The Canton Soviet under Bolshevik guidance is now at war with the anti- Bolshevik forces in China. Is it wise, therefore, to make now a concession which would certainly be regarded by the northern War Lords, who are opposed to the Russian intrigue in China, as a material assistance to their southern and Bolshevized enemies? If in the end the northern War Lords win, would they not bear us a bitter grudge for taking such action just at the time when the southern campaign was in the flush of success? Would not this action amount in fact to a reversal of the policy hitherto pursued by His Majesty's Government, namely, not to identify ourselves in any way with any one of the various conflicting factions and parties in China? And, as the position of the Canton Soviet is by no means assured, might not the conse- quences of such a commitment become exceedingly embarrassing, not to say dangerous?

18. The Colony of Hongkong is most anxious to be rid of the anti-British boycott in Kuang-tung and would view with the gravest apprehension any extension of that boycott to other Chinese provinces. The Colony of Hongkong is also most anxious to restore and maintain the traditional relations of friendship which existed between ourselves and Canton, until the

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recent Bolshevik intrigue began. But we consider that the future of this Colony will be seriously jeopardised, if the present Canton Soviet is allowed by skilful use of an anti-British boycott to destroy British treaty rights in Kuang-tung and elsewhere. We were willing to negotiate with the Canton Government for a settlement of the boycott and we were willing, as an earnest of our goodwill towards Kuang-tung, to make an industrial loan to that Province under proper financial safeguards and for pur- poses mutually beneficial to Hongkong and to Canton. Such a settlement would, in our opinion, have been honourable to both sides. But the settlement now proposed is, we think, dishonour- able and fraught with future dangers.

In par-

19. I have repeatedly advocated in my secret despatches to you that the diplomatic fiction of the existence in Peking of a central Government of all China should at long last be abandoned, and that instead we should recognise the regional Governments now actually exercising authority in various parts of China. ticular I have advocated, and still advocate, that the Canton Government should be recognised de jure in the territory which it effectively controls. Please see in this connection my secret despatches of the 27th June* and 16th August.† But I have always held that the condition precedent to such recognition must be an undertaking by the Canton Government to maintain the integrity of Chinese Maritime Customs and to accept a propor- tionate liability for all obligations hitherto borne by the central Chinese Government. I also understood from Mr. Brenan that

the Canton Government would be willing to accept such pro rata liability; please see my secret despatch of 3rd August. Should this prove to be the case, it appears to me that our proper course is first to negotiate with the Canton Government direct as to the terms upon which we will recognise it, and then to discuss with that Government any modifications of existing treaties which it may desire. The preliminary step must, however, in such case be the complete cessation of all anti-British manifestations in all territory controlled by the Canton Government.

20. I consider, therefore, that our plan of action should be as follows:-

(a) Reinforce the China squadron. In this connexion the speedy arrival of the aircraft carrier H.M.S. Hermes is very important. This will alarm the Canton Soviet and make it more inclined to listen to reason.

(b) If then the anti-British boycott is removed on or before the 10th October, well and good. If not, we should next day present an ultimatum to the Canton Government requir- ing all anti-British manifestations to cease forthwith in all - territory which it controls, failing which we shall take suck

steps as to us seem proper.

(c) Unless the military situation changes before the 10th October to the great advantage of the Canton Government, I fully expect that the threat so made will suffice. If it does not, we should, I submit, take the naval action recommended

* · 15072 26; not printed. †C.17965. 28 ; not printed. C.17101 26; not painted.

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