CO129-451 - Public Offices - 1918 — Page 280

[This Document is the Property of His Britannic Majesty's Government.]

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In view of the possibility that the release of German and Austrian prisoners by the present Russian Government may lead to a large influx of enemy subjects into China, it is considered of special importance that the Chinese Government be persuaded to accept the principle of deportation forthwith, and for this reason Mr. Balfour desires me to express the hope that it may be leund' possible to sanction in principle and at an early date the assumption by His Majesty's Government of such part of the expenditure as may fall to their share.

The number of enemy subjects to be deported is believed to be in the neighbour- hood of 4,000,

I am, &c.

W. LANGLEY.

AFFAIRS OF CHINA.

CONFIDENTIAL.

[2521]

7053

REC REAR & FEB 1&1

[January 4.]

SECTION 1.

Sir J. Jordan to Mr. Balfour.—(Received January 4, 1918.)

(No. 345. Secret.) Sir,

Peking, October 30, 1917. AS my telegrams will have indicated, there is a growing belief here that Japan is acquiring a dominating position in this country, and her attitude has been severely criticised not only by the foreign and native press in China, but by a considerable portion of the opposition papers in Japan. The air is full of rumours, and reports of fresh negotiations between the two countries, the accuracy of which it is impossible to test, appear almost daily in the newspapers.

The American Minister, however, who is much concerned at these developments, and who has apparently been actively engaged in trying to thwart them, is convinced that a so-called "arms alliance" has virtually been concluded between some members of the Cabinet and unofficial Japanese agents, and that it carries with it the right to nominate a few Japanese advisere, nominally to see that the arms are not used against the South, but in reality to gain a footing for the exercise of eventual control in the military administration of China. Another enterprise which is said to be included in the scope of these negotiations is the acquisition of the large iron area of Fong-huang- shan, about 20 miles from Nanking. The Japanese, it is pointed out, already control nearly one-half of the iron deposits in this country, and are in possession of all the iron mines and works that employ modern machinery, and should they secure this fresh concession it is considered that Japan would have a virtual monopoly of all the iron that China produces. It seems that the Japanese acquired some sort of a claim to this mine by the usual process of an advance of money made in the closing days of the Yuan Shih-kai régime.

It is perhaps not unnatural that, at a time when other foreign markets are closęd to China owing to the war in Europe, Japan should seek to acquire a position of financial supremacy at Peking, but the methods which she has adopted for the attain- ment of her object are certainly, in some cases, open to criticism, as not being conceived in the true interests of China herself. For instance, as pointed out in a previous despatch, the so-called first instalment of the Second Reorganisation Loan, amounting to 10,000,000 yen, which was lent by Japan alone, has, as must have been foreseen from the outset, been practically wasted, and the further loan of 20,000,000 yen negotiated by Tsao Ju-lin, whose Japanese sympathies are well known, to prop up the insolvent Bank of Communications will doubtless go the same way. So also with the advance of 2,000,0001. which the Ministry of Finance has asked the banks to make in connection with the Currency Loan. The Japanese are understood to favour compliance with this demand, but they must know as well as we do from previous experience that all these advances are thoroughly unsound, and are only made as a means of securing eventual political control. They know also that the appreciation of silver and the postponement of the indemnity payments, not to mention the release from her obligations to enemy nations, have placed China in a better financial position than she has enjoyed for years past, and that a prudent use of her resources should enable her to dispense with foreign assistance. And yet this is chosen as the moment to place large and uncontrolled sums of money at her disposal.

Unfortunately, as was clearly foreshadowed in Mr. Alston's telegram No. 97, Secret, of the 1st March last, the Government of this country has largely fallen under Japanese influence, and trusts in a great measure to that influence to see it safely through its struggle with the South. The Minister of Communications, Tsao Ju-lin, is an avowed agent of Japan, and the Minister of Finance, Liang Ch'i-Chao, has lived many years as an exile in Japan, and has intimate associations with that country. The Chinese Government, as it stands to-day, is a weaker edition of the military autocracy established by Yuan Shih-kai which may last for a year or two but lacks the element of permanence. Its position in the country is not improved by its open

reliance upon Japan, and many of its acts would probably not be attempted and certainly not ratified were there anything in the nature of a Representative Assembly in Peking.

[2767 d-1]

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