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To this recommendation the delegates add the proviso that, if and when conditions in China so far improve as to justify investment in, or expenditure on, one or some of the projects named, the Board may consider itself at liberty to take the appropriate action. One wonders where to look for an impartial railway expert who, in the conditions now obtaining in China, would care to make a pronouncement that the Hankow-Canton Railway, if and when completed, would be able to earn such returns as to justify its being regarded as a safe investment for Trust funds. But at this point I venture to repeat the recommendation, which I placed before you in my secret despatch of the 20th May, that, as regards the projected completion of the Canton-Hankow Railway, an essential preliminary step is the construction of a junction line at Canton to connect the southern section of that railway with the Kowloon-Canton Railway. The construction of this loop-line, at most only 4 miles long, would at once connect 112 miles of railway from Kowloon to Canton with 140 miles of railway from Canton to Shiu-kwan. "It would be an immediate benefit both to this Colony and to the British and Chinese Corporation; and it would make further construction of the Canton-Hankow Railway from Shiu-kwan northwards more economical. This loop-line is of vital importance to the future of Hong Kong, and I earnestly recommend that the small sum necessary for its construction should now be set aside from Boxer Indemnity funds, in order that, so soon as political conditions at Canton permit, the work may be taken in hand, and that instant advantage may be taken of any favourable opportunity which may present itself.
8. Turning once more to the Report, I find that, apart from its one constructive suggestion, namely, that the Indemnity Fund should be handed over to a Board of Trustees which His Majesty will not appoint and over which His Majesty's Govern- ment will have no control whatsoever the rest of the Report, except in so far as it is an account of the Deputation's journeyings in China, merely offers advice which may or may not be accepted. In view of the present condition of China, it was impossible that such recommendations as the Deputation decided to put forward should take any other form. Were the Deputation in the Yangtze Valley at the present moment, its members would find great changes in the political situation since they visited it in April last. But 1 submit, nevertheless, that tue general condition of China is essentially the same now as it was then, and that a more determined endeavour on the part of the British members of the Deputation to get a grasp of the Chinese situation might have enabled that body to make suggestions of more practical utility. As it is, if the proposed Board of Trustees should be accepted by His Majesty's Government, the Advisory Committee will have either to offer no advice whatsoever (to say, in effect, to the Board: "Here are 114 millions sterling, do what you like with them") or to endorse the Deputation's advice which, by the time the pronouncement is made, may be, and indeed probably will be, even more remote from the reality of circumstances in China than it is at present. But it appears from the authorised statement by the Statutory Committee and the Secretary of State for Foreign Affairs, as quoted by the Deputation from the Peking and Tientsin "Times" of the 26th May last, that Iis Majesty's Government has already agreed to confer on the proposed Board complete power to apply the Indemnity Fund and make investments in accordance with the general scheme and principles to be laid down by the Advisory Committee.
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9. There is, as I have previously stated, no central Government of China. On the 6th October, 1926, the North China Daily News published a leading article entitled The Vacuum in Peking," from which I quote the following :—
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Every Chinese, great and small, knows that there is no Government in Peking, therefore that there is no cabinet. The Minister of Finance controls no finances except the revenie which is collected under the supervision of foreigners.
The Minister of Communications controls no railways, the militarists having helped themselves to rolling-stocks, roadbeds and ticket offices. The Minister of the Interior cannot appoint a single civilian_official without first obtaining the consent of some militarist. The Minister of Foreign Affairs now finds all his real functions performed by local commissioners of Foreign Affairs, while he is a sort of radio-broadcaster to tell the world that things are not what they seem and are untrue, anyhow, no matter what one may say on the subject. The Premier has no authority at all, while there is no President. Parliament or Constitution."
These statements cannot be controverted, and there is not the slightest sign that this state of affairs is merely transitory. On the contrary, everything at the moment seems to point to greater provincial and local independence. "Marshal Sun Chuan
Fang's representatives, Dr. V. K. Ting (a member of the Indemnity Deputation) and Dr. Hsü Yuan, recently negotiated the Mixed Court settlement in Shanghai with a committee of local Consuls and without the assistance of Peking. The British Consuls at Chungking and Ichang and the Commissioners of Foreign Affairs at these places seem to be settling the Wan-hsien incident without any interference from Peking. Mr. Eugene Ch'en has called off the Canton boycott without advice or assistance from the acting Premier; and the Canton Government is now asserting its right to levy both "consumption" and "production taxes defying at the same time foreign nations
on its own citizens, integrity of the sacrosanct Maritime Customs." The Canton Government is asking to raise the bugbear of infringing the the Chinese Customs service to co-operate in collecting the proposed taxes, in order to avoid confusion and consequent aunoyance to trade; but it adds that it can, of course, create its own entirely independent organ of collection if necessary.
10. Apart from the consideration that, the Canton scheme succeeds, local tariff autonomy will probably follow in every port of China, which might mean, incidentally, that no more Indemnity contributions would be paid, surely facts of this kind make it doubtful whether the Government of Peking will continue to exist much longer even in name; whether, indeed, the next phase in the Chinese turmoil will not be a general disintegration of the Chinese Republic. This is at least a view which being more and more widely accepted out here, and it has penetrated also to the London press. A leading article on China which recently appeared in the "Spectator" contains the following:-
So far as we can see, it grows less and less likely that the great agglomera- tion of races and tongues, of civilizations and distant provinces, which we call China, will ever own one Government again. We cannot even find a cement which would bind together the federation of provinces.”
And it is at this juncture that the British Parliament is to be asked to hand over 114 millions sterling, due to the British tax payer, to a Board of Trustees which is to be appointed by a Government existing only in name, to a Board, moreover, which is apparently to be accountable to no one, not even to the phantom Government to which it would owe its origin. And this handing over of British funds is to take place at
once.
11. It is, of course, obvious that the Board, or, at any rate, the Chinese members of it, though it may be nominally appointed by the Chinese Government (if there should happen to be at the moment a Cabinet in Peking), will actually be nominated by the particular War Lord who happens at the time to dominate the capital. It is equally obvious that the Board, when once nominated, will be allowed to function only just so long as it carries out the wishes of the War Lord in question. It is not very difficult to prophesy what the wishes of such a War Lord with regard to the Indemnity money are likely to be. The conditions being what they are, and what they seem likely to continue to be, it is hard to believe that any Englishman of standing would agree to serve on the Board. It would, even in normal times. be difficult to organize the effective working of a Board which will presumably consist of persons scattered all over China, but which will have to deal with the investment of large sums of money, to say nothing of the question of grants. I do not say that Englishmen would necessarily object to working under a Chinese Chairman, for the Chairman is practically certain to be a Chinese, on a Board in which they were in a minority, provided that they had confidence in the Chairman and were generally assured that the business of the Board would be honestly and efficiently conducted. But the Chairman is not to be specially selected and appointed by an outside authority, but is to be elected by the Board: and the general conditions, under which the Board will be established and would work, are such as to make any confidence in it impossible. It is. in my opinion, utterly unreasonable to expect Englishmen of standing to allow themselves to be placed in the position which those who allow them- selves to be appointed members of the Board will undoubtedly occupy. But I consider the whole proposal to be fantastic.
12. Reverting to the objects on which it is suggested that the funds of the Indemnity should be spent, it is clear that not one of the schemes of which the Deputation has approved can, under existing conditions, be materialized. The money might be assigned, but, were there any attempt to spend it, it would undoubtedly find its way into the pockets of the militarists. One of the Deputation's suggestions is the establishment of a scientific institute on which, in its opinion, no less a sum than 18 million dollars might be spent with advantage. But this recommendation has been made without any consideration of the work which is
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