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(c.) Canton. The problem as to the defence of the Shameen is as set forth in paragraph 10. Its evacuation should be the necessary preliminary to the institution of a blockade. The measures to be taken for the protection of Shameen or for its evacuation can only be decided in accordance with the situation at the moment and must be left to the men on the spot.
(d.) Chinkiang.—At Chinkiang the Naval Forces available are sufficient for the maintenance of order, but in the event of the arrival of Chinese Nationalist troops the Concession might have to be evacuated.
(e.) Tientsin.--At Tientsin the Allied Forces are sufficient only for the maintenance of order in times of popular disturbance, and would be in a position of grave danger if exposed to attack by a large organised Chinese force. It is doubtful if they could keep open communications with the Legation at Peking in any grave circumstances. In the event of serious trouble threatening, reinforcements can only be obtained from Japan.
Our Naval Forces cannot co-operate, as Tientsin cannot be reached by water.
(3.) In cases where evacuation of Concession ports is necessary, the Navy will undertake the arrangements. The moment of evacuation or of prepara- tion for evacuation must be left to the men on the spot, who will act in accordance with the circumstances prevailing at the moment.
(4.) Shanghai.
To protect the Concessions at Shanghai by military means against Nationalist troops that might be brought against it in the near future, a force of at least one division and one squadron of aeroplanes would be necessary, and would have to be despatched without delay. This should be an international force, with a preponderance of Japanese, and commanded by a Japanese Officer, in view of the fact that Japan alone can provide large forces at short notice. In the present circumstances we must in fact rely primarily on Japan to protect our interests in Shanghai. Owing to the magnitude of British interests, British participation on the scale of a mixed brigade, with a proportion of naval aircraft, although it may be late, is essential. These forces should be additional to those required to control the population.
Such steps for the protection of Shanghai might involve war with China, the consequences of which cannot be foreseen.
(5.) Military Reserve in the Far East.
The present situation clearly shows the necessity for a strategic military reserve in the Far East, which, we think, should be at Singapore. (6.) Economic Pressure.
It is recommended that the Advisory Committee on Trading and Blockade should be assembled at once to report on all the possibilities of economic pressure on the Nationalist Government of China, whether by international action or in the last resort by the British alone.
(7.) General
The importance of securing international co-operation in any action against China, whether economic or military, cannot be too strongly emphasised."
3. This report was examined by the Cabinet at a meeting held at 3:45 P.M, on the 12th January, 1927, when the following conclusions were formulated (Cabinet 1 (27), Conclusion 2) :—
(a.) That the Secretary of State for Foreign Affairs should telegraph a summary of the Report of the Chiefs of Staff Sub-Committee and the full text of the conclusions to Sir Miles Lampson, at Peking, for his information.
(b.) That the Secretary of State for Foreign Affairs should instruct Sir Miles Lampson to do his utmost to obtain definite undertakings from his diplomatic colleagues at Peking that their respective Governments will take their proper share in sending to Shanghai reinforcements already arranged for. at Peking (Peking telegram No. 57.* dated the 10th January, 1927) as soon as the Local authorities consider necessary (telegram No. 22* to Peking),
(c.) That the Secretary of State for Foreign Affairs should instruct the British Ambassador at Tokyo to enquire whether the Minister for Foreign
* Not printed.
Affairs shared the desire of the Japanese General Staff, as set forth in telegram No. 7 from Tokyo, for conversations between the British and Japanese General Staffs in regard to the situation at Shanghai,
(d.) That the Chief of the Imperial General Staff should be ready to advise the Secretary of State for Foreign Affairs as to the instructions to be sent out for the use of the British Military Attaché in the event of a favourable reply from the Japanese Government.
(e.) That the Chief of the Imperial General Staff should have authority to make preliminary arrangements, including enquiries as to shipping transport for the movement of a mixed Brigade to Shanghai as quickly as possible; but that, until the co-operation of other Powers in a scheme of reinforcement had been obtained, it was of the utmost importance that no hint should be made public that we were considering any large military movement, and that, in any necessary outside enquiries the War Office should make every effort to secure the preservation of secrecy.
(f) That the Trading and Blockade Sub-Committee of the Committee of Imperial Defence, of which the Chancellor of the Duchy of Lancaster is Chairman, should assemble forthwith, in accordance with the suggestion made separately by the Loid President of the Council and the Chiefs of Staff Sub- Committee, to report on all the possibilities of putting economic pressure on the Nationalist Government of South China, by blockade or by other measures, whether by international action or, in the last resort, by the British alone. The Chairman was authorised to consult Sir Charles Addis, the Chairman of the Hong-Kong and Shanghai Bank, and was asked to discuss with him, inter alia, the question of how far it was feasible and desirable to continue to use the closing of British banks at Hankow as a lever for securing the return of the Concession.
(g.) That the Secretary of State for Foreign Affairs should be authorised to send the following telegram (which he drafted during the meeting to give effect to the views of the Cabinet) to Sir Miles Lampson :--
'We also should like to insist on return of concession before entering on any negotiations. You and Mr. O'Malley will be the best judges whether this is possible or whether it would lead to immediate breakdown of the conversations and complete breach with the South. You will bear in mind that forcible reoccupation of the concession is not a possible operation."
(h.) To take note that the Chief of the Imperial General Staff would ask the Secretary of State for War to bring before the Committee of Imperial Defence, in due course, proposals in regard to the recommendation of the Chiefs of Staff Sub-Committee in favour of a strategic military reserve in the Far East. (i.) That the Cabinet should hold themselves in readiness to meet at short notice during the next few days if Sir Miles Lampson's reports of Mr. O'Malley's conversations should render a meeting desirable.
4. In accordance with Conclusion (f) above (see paragraph 3) the Advisory Committee on Trading and Blockade met at 11:30 A.M. on the 13th January, to consider the reference set forth therein. At this meeting the Committee had the benefit of the opinion of Sir Charles Addis, Chairman of the Hong Kong and Shanghai Banking Corporation, on the possibilities of exerting financial pressure on the Cantonese at Hankow by means of maintaining the closure of the British banks. The Advisory Committee held a further meeting at 11-45 A.M. on the 17th January, which was attended for part of the time by Mr. J. T. Pratt, C.M.G., late Acting Consul-General at Shanghai. In the afternoon of that day (the 17th January) the Chairman informed the Cabinet provisionally of the conclusions of the Advisory Committee, which may be summarised as follows:-
(1.) Financial Pressure by Maintaining the Closure of the British Banks at Hankow. This pressure, though to some extent effective for the time being, would diminish with the passage of time, and cannot be relied on as a permanent means of affecting Cantonese policy. (ii.) A General Blockade, assuming a State of War.-Here, at first sight, the situation appears favourable, since the foreign trade of South China could be stopped. But China, has, in the past, got on without any foreign trade. Moreover, sooner or later. trade would find its way
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