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[This Document is the Property of His Britannic Majesty's Government.]
48
58
Copy No.
40
Printed for the Committee of Imperial Defence. February 1927.
SECRET.
771-B.
COMMITTEE OF IMPERIAL DEFENCE.
POSSIBILITIES OF EXERTING ECONOMIC PRESSURE ON THE NATIONALIST GOVERNMENT OF SOUTH CHINA.
(Previous C.I.D. Papers Nos. 681-B and 722-B.)
REPORT OF
Advisory Committee on Trading and Blockade in Time of War.
WE were requested to consider, and 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 also authorised by the Cabinet 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."
2. There are thus two separate questions to be considered; firstly, the immediate and local question of financial pressure on the Cantonese at Hankow, and secondly, the more general question of a blockade of China---in part or in whole.
I.--FINANCIAL PRESSURE ON THE CANTONESE AT HANKOW.
3. The closing of the Hankow branch of the Hong Kong and Shanghai Bank has, we understand, already caused a certain amount of embarrassment to the Chinese, and the question at issue is whether this embarrassment can be continued or intensified by any direct measures of financial pressure, either confined to Hankow or extending to other places in the Yangtse Valley, or even further afield.
We have had the benefit of the opinion of Sir Charles Addis on this question, and the conclusions which we put forward are to a large extent the result of a consideration of the views expressed by him.
4. Hankow is almost entirely an export port. Unless money is sent up-country, the goods destined for export do not come down, and the whole trade of the Port is suspended. The other non-Chinese banks in Hankow (the Chartered Bank, the Yokohama Specie Bank, the Russo-Asiatic Bank and an American Bank) are on a smaller scale and depend a good deal themselves on the Hong Kong and Shanghai Bank; they have not the requisite resources in the locality to enable them to take its place in financing the trade, at any rate till after the lapse of a considerable period of time. It follows that the closure of the British banks would, for the time being, dislocate all the financial work and cause considerable injury to the trading interests in Hankow. So far as it is part of Chen's policy to keep in with trading interests this would indirectly affect Chen; it would also directly affect him by depriving him of cash. How far cash is essential to him seems doubtful; Chinese soldiers are apparently paid at long and infrequent intervals. On the other hand, munitions must be bought, and money plays a large part in buying off opposition and promoting treachery in these civil wars. It is the opinion, however, of Chinese experts here that mere want of money would not prevent Chen and the Cantonese from continuing their operations.
5. On the other hand. the Chinese banks would gradually come into operation. The Chinese banking system is older than our own; it is very highly developed and
*The banks have now reopened. But we have thought it desirable to retain the passages in the Report dealing with the effect of the closing in case similar questions should arise in the future.
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