immediate breakdown of the "sphere of influence" pretensions, and American capital be permitted a clear field in China for other profitable railway investments ?
It may be urged that this is solving the difficulty with the dollar and unbecoming our diguity as a nation, but against this we must recognise that conditions have changed, and our bankers must now take over the financial load that London and Paris carried before the war, and we must now be prepared to reciprocate and co-operate with the others in China. This co-operation must come as a natural result of changed conditions, and no one combination of American capitalists should be permitted to preserve a financial monopoly in China, and dictate the terms to the others in such a delicate international problem. This is emphasised by the present situation, where the American International Corporation, having encountered difficulties in obtaining profitable lines in China, and having incurred great initial expenses, is in no mood to consider co-operation with the others, until such time as they can place their own bonds upon the market and recoup in part their heavy advances, And as this corporation seems to have a monopoly, it is evident that the financial field must remain closed to all others pending their willingness to discuss terms with others.
I have refrained from inentioning co-operation with Japan, taking the reasonable position that Japan has accumulated enough wealth out of the war to enable her to finance her own undertakings in China. It seems unnecessary also to include Russia, for the reason that the only Russian railway concession in China is purely political, and Russia is in no hurry to utilise it at this time, being content to keep it in "cold storage." Therefore our immediate problem is to find a way to work in harmony with Great Britain, France, and Belgium in China proper, and in contracts already entered into, and in which Japan has no direct interest or reason for objection.
If at the request of, or with the approval of, the State Department au American combination of bankers should guarantee an annual investment of 25,000,000 dollars in Chinese Government railway bonds for the next twelve years, at a reasonable rate of profit to themselves, and so permit our British, French, and Belgian Allies to carry out their contracts and obligations with the Chinese Government and thus preserve their prestige in China, it seems clear that, in addition to the regular bankers' profits on the loans, the American manufacturers would also profit from the sale of the materials, pending such time as the industrial establishments of the other countries can be reconstructed.
I feel sure that if the President or the Secretary of State should approve such a plan of co-operation the other interested Powers would soon modify their policies, and consent to some broader interpretation of their special agreements with China, which now restrict our independent action in the development of Chinese railways. Once there is some sign of industrial activity in China internal conditions will rapidly improve, the people will become more contented, and with employment and prosperity there will be an end to all these periodic domestic troubles which have their real origin in economic disturbances arising from the too acute struggle for existence in a densely populated agricultural country. If China is guaranteed fifteen years of respite from these international intrigues for railway concessions, and the harassed officials are relieved of the constant diplomatic contest with other Powers over those matters, it will enable the Chinese Government to devote its whole time and attention to the reform of other pressing domestic problems, and thus make for stability, internal peace, and ultimate strength.
It was this solution that I outlined to the British Minister at Peking, aud afterwards to the head of the Japanese official banking group (Mr. Inouye, president of the Yokohama Specie Bank) and to the officials of the British and French Foreign Offices, and which received their indorsement in principle with an expression of hope on the part of the British and French that this co-operation could be arranged before the expiration of the war, as obviously such co-operation at this time would tend to bind cur inutual interests in China more strongly together. The Japanese financial interests, after consultation with their Foreign Office, informed me that they could have no objection to any co-operation between American financiers and British and French interests in parts of China outside of Manchuria, where Japan considered she had a special political and commercial position. If such co-operation with British and French interests is not forthcoming, if no attempt is made at this time to solve the problem, if the solution is left to the discretion of the financial combination which precipitated the issues and ignored the policy of its own Government, and is now in no mood to discuss co-operation until their own bonde are issued, how can the people of the United States expect that the Governments of Great Britain and France will whole-heartedly support our present policy in China?
5
Naturally, if a solution is to be sought, the first move must be made at this end, and a basis must be found upon which the American bankers will consent to raise the annual allotment of 25,000,000 dollars for investment in Chinese railway bonds. This is not a question of the issue price or the interest to be fixed after the war is over, but simply the amount of underwriting profit the bankers will require to handle the bonds. The interest and issue price, especially the latter, will have to be governed by market conditions at the time of the various issues of the instalments of the loans and after the approval of the Chinese Government. Ouce the profit desired by the American bankers is ascertained, and a reasonable profit in the construction of the lines and the purchase of materials is provided for the European hokiers of the concessions, the plan must then be taken to Peking, and there presented to the Chinese Parliament, so that they can have a voice in the revision of the old contracts and decide upon suitable terms for extension to the British, French, Belgian, Japanese, and Russian contracts. It being understood that the Germans and Japanese by reason of their special understandings with the Chinese Government, automatically receive the benefit of the most favourable terms to cover their engagements.
The first step must then be made in the United States, and in my judgment it is a matter of such extreme importance to the future of American prestige in China that the arrangements should not be left entirely to the financial monopoly of the American International Corporation, whose officials have precipitated the present situation, and whose energies are now concentrated on finding lines on which they start work and issue their own bonds before other loans are placed on the market. It is decidedly a matter in which, for the preservation of American prestige in China and for the best interests of all concerned, the State Department is called upon to take action and lead the way, so as to avoid further misinterpretations of our policies.
I make the above statement advisedly, for the reason that the only justification of the Chinese for conceding the special terms to the Americans in reviving foreign participation in the profits of State railways (which surrendered the cherished policy of the nation) is because they were led to believe that the United States would protect the lines specified and defend the "open door" policy. The highest Chinese authority confessed that as the American Minister had been instrumental in organising the new American combination under the management of Mr. Carey, and that the Minister brought the official of the corporation to Peking and stood sponsor for them and acted as his adviser, the Chinese authorities had every good reason to believe that the Minister was acting under the instructions of his Government, and the United States would now defend the "open door" policy. It was for this reason, and this alone, that the Chinese were willing to pay the price in the terms conceded to the Americans, terms which overturned and surrendered the one policy for which they bad constantly and consistently fought for the last twenty years. To anyone conversant with Chinese politics it is clear that no official would dare to take upon his own shoulders, without reference to Parliament or the wishes of the people, the responsibility for again reviving foreign participation in the profits of Government-owned railways-a privilege that must now be extended to all-unless he could justify himself before the nation by obtaining some greater compensating benefit. The life of any official who would surrender the vital interests of the nation without receiving some greater advantage for the people would not be worth an hour's purchase. And when the time comes for this most important question to be debated openly in the Chinese Parliament, if Minister Tsao Ju-lin and the others who subsequently ratified the preliminary agreement cannot fully justify their action before the nation for surrendering its most vital policy, experience tells us that his head will pay the forfeit, unless his good friends the Americans balk the people of their prey by taking him under the protection of the American Legation and smuggle him out of Peking, as was done in the identical case of Sheng Kung-pao in 1911. And when this question comes up for public discussion, what will be the position of the American Government before the people of China?
The cherished State policy has been surrendered, and the rights conceded to the Americans must now be extended to all other nations. The Chinese have paid the price, but the Americans have failed to deliver the goods. Is it fair or honourable for the great Government of the United States to permit an American corporation to accept the price and force the complete revision of all China's railway contracts, and open the door for all nations to participate again in the profits and management of China's railways without the Chinese receiving in return what they paid for, or without the Chinese people being permitted a voice in designing a new railway programme? Is it fair or honourable, under these circumstances, for the United States Government to remain inactive while such a contract is pushed through without the people through their
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