CO129-496 - Public Offices - 1926 — Page 525

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4. At Washington China was promised certain tariff increases. conference that was to grant them was to meet within three months, but for purely selfish ends France delayed ratification for over four years. By the time the conference met the whole atmosphere in China had radically changed. The Nationalist movement had made great headway and it was no longer possible to keep China in leading strings, even for her own benefit. Nevertheless, the Powers were determined to extend foreign control over the whole of China's customs revenues, even when vastly increased by tariff autonomy, and they refused to grant the very moderate tariff increases, known as the Washington surtaxes, except upon conditions which ensured that the proceeds of the surtaxes would be placed under foreign control and applied towards the liquidation of their own debts.

5. This has been the traditional attitude of the foreigner towards China, but, inevitable though it may have been up to even quite recently, it seemed to us that in adepting such an attitude now, the representatives of the Powers were blind to the true nature of the forces now at work moulding a new China-forces which are conveniently summed up in the word "nationalism." In this view we were supported by a large body of responsible opinion representing British commercial interests in China, and by expressions of opinion from sources so far apart as the "Economist," the "North China Daily News" and the Vatican. In a remarkable conversation with a member of the British Legation to the Holy See, Mgr. Constantini, Delegate Apostolic in China, expressed a conviction, formed after a long study of political conditions, that a new China was being born. He indicated that the recent action of the Holy See in consecrating a number of Chinese Bishops, was due to a recognition of the fact that any body which was indifferent to the national feelings of the Chinese was fated to lose any influence it might possess. He thought that the powers of resistance of the Chinese were extraordinary, that the national genius could be relied on to withstand both Russia on the one hand and Japan on the other, and that if there were frank recognition of the fact that China is no longer a colonial country" the perils of xenophobia would be immensely reduced.

6. We feared from the beginning that if the Tariff Conference failed to grant the Washington surtaxes Canton would seize them. She has now done so. We have therefore to decide whether we can continue to co-operate in the policy which the Powers wish to pursue. Their attitude in regard to foreign control and debt consolidation has been referred to above. It is diametrically opposed to our own views and if we join them in the attempt to impose this policy upon China the full brunt of China's resentment will fall upon us. With regard to the Canton taxes the policy of the Powers is to protest against this and every other breach of treaty rights, but they have no intention of backing their protests in any way. Considering that the Chinese can make out so strong a case, and that the treaties are admittedly out of date, it seems to us that such a policy, so far from preventing further violations of treaty will only exasperate the Chinese and perhaps cause a débâcle in which it may not be possible to save anything from the wreck.

7. We have reluctantly joined in a formal protest against the Canton taxes. Can we afford to continue this policy of joining in protests which the other Powers have no intention of enforcing? A recent telegrain from His Majesty's Acting Consul-General at Canton enables us to see what such a policy translated into practice would mean.

The Nationalist Government of Canton, he tells us, in their efforts to modernise their State are issuing a series of enactments dealing with such matters as the stamp taxes, quarantine, wireless, &c., which the consuls are asked to enforce on foreigners. They are all reasonable in form and are probably copied from similar legislation in other countries, but they involve breaches of extra- territorial and other treaty rights against which the consuls are obliged to protest and adopt an apparently unreasonable and obstructive action. In connection with the new taxes the Canton Government established a corps of inspectors" for the protection of the revenue and for the prevention of illegal and enemy activity." In the face of the protests of the consular body and customs administration, the Government have temporarily stopped the functioning of the inspection corps, but British interests predominate so vastly over those of other countries that in the eyes of the Chinese it is to British opposition alone that this check is to be attributed. Attempts are consequently being made to freeze out the British river steamers. Anti-British societies are trying to keep alive the boycott by intimidation of shop-

keepers, cargo coolie guilds, &c. The success of such attempts depends on the degree of toleration shown by the Government and that in turn is affected by our attitude towards the Government's measures.

8. Sir R. Macleay has told us-and his view is confirmed by all experienced observers that the nationalist movement for the abolition of the treaties is not confined to the Cantonese. It has come to a head more rapidly in Canton than elsewhere, but the problem in Canton is in essentials the same problem as confronts us in the whole of China. Mere barren opposition does not seem to be the right attitude to adopt towards such a movement as this. It might be checked for a time by force, but this is obviously out of the question. At a recent interview between the China committee of business-men and the Secretary of State the spokesmen for London and Lancashire on that committee did not support the use of force on behalf of British interests. None of the Powers are prepared to use force. Then what does the policy of the Powers amount to? Merely registering protests-pro forma or emphatic and then standing aside and watching the treaty position crumble away without any constructive idea how to save anything from the wreck. There is so little to recommend such a policy that it would seem as if the Powers who favour it had not thought out the problem of China and were deluded by words and formula.

Yet, if we concur, this is the policy that will be adopted in China with the certainty that the Chinese will hold us to blame for all the friction and ill-feeling that will result and will vent all their exasperation on us. It might mean the ruin of British interests in China, and we have therefore been driven to seek for an alternative policy.

9. The policy which we think should be adopted towards China may be outlined as follows :

(a.) We should abandon all ideas of forcing control upon China even for her own benefit. We need not relinquish the control we now exercise over her customs revenues, but the proceeds of any tariff increases should be at her own free disposal to squander even on civil wars if she is foolish enough to do so.

(b.) We should press for the immediate unconditional liquidation of the

promises made at Washington.

(c.) We should abandon the policy of ineffective protests over minor matters,

but try to make our protest effective where vital interests are at stake. (d.) We should no longer insist on the strict letter of treaties which are admittedly out of date. Each case of invasion of the privileged position hitherto held by the foreigner in China should be considered on its merits, and we should persuade the Chinese that in each case we are prepared to consider any reasonable proposals they may make, even if contrary to strict treaty rights, in return for fair and considerate treat- ment of foreign interests by them.

(e.) Applying these principles to the immediate problem of Canton-if the Powers agree to grant the Washington surtaxes immediately and unconditionally we should endeavour to regularise the Canton taxes on the basis of entrusting their collection to the Maritime Customs. If the Powers still refuse to grant the Washington surtaxes, British merchants should give every facility as regards the levy of the Canton taxes, and we should endeavour to arrange for the friendly assistance and co-operation of the Customs Administration in their collection. 10. The policy outlined above now has the general support of His Majesty's Minister in Peking. Sir Ronald Macleay, in his most recent telegram dated the 16th November, says:—

"I agree that under present conditions policy of unconditional grant of Washington surtaxes to provinces and various regional authorities is the right one, and that in making such a suggestion His Majesty's Government alone among the Governments of the principal Powers concerned seem to be really facing the facts of the situation, which are of course totally different from those which faced the framers of the Washington Treaties."

11. The Washington Treaties bind us to full and frank consultation with the other Powers. If, therefore, after mature deliberation, we have come to the conclusion that the policy hitherto pursued by the Powers in China is wrong, and

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