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General Remarks on the Effect of Economic Pressure against China as a whole.
42. The conditions of trade in the three principal areas of China and the effect of economic pressure on South China have already been discussed.
The same considerations largely apply in the case of a blockade of China as a whole. Broadly speaking, the immediate effect on the Chinese from a material and physical point of view would be as follows:- Stoppage of:-
(1.) Import and movement coastwise
of foodstuffs
(2.) Import and movement coastwise
of raw materials
(3.) Import of textiles and movement coastwise of Shanghai textile products
(4.) Import of machinery, &c.
area
(5.) Import and movement coastwise of semi-luxuries, e.g., cigarettes, some foodstuffs, &c.
(6.) Exports
Curtailment would affect :-
The lower classes.
Manufactures,
in
the
particularly Shanghai area, resulting in unem ployment and distress amongst the labouring classes.
All classes.
Middle and upper classes and to a less
extent the labouring classes.
All classes, the middle class most
severely.
Curtailment would cause congestion in China, reduced prices and confusion in the trade.
43. Apart from the physical effects enumerated above, the merchant and middle classes who are at present well disposed towards the British would, from a trading and financial point of view, be more severely injured by a blockade than any other class. A further effect would be increased activity and employment on inland trade
routes.
Explosives.
44. The question of munitions generally has been dealt with in paragraphs 35 and 40, but there are certain considerations affecting the manufacture of explosives which deserve attention.
Sulphur.-It would appear that China is short of sulphur for the manufacture of explosives. Statistics show that at least 3,000 tons were imported in 1925. At the same time she possesses a pyritiferous shale which, with suitable plant, could be utilised for the manufacture of sulphuric acid. Information is not available as to whether or not such plant is in existence in China. The same consideration applies to the process of converting zinc concentrates into zine. With suitable plant, the freed sulphur can be converted into sulphuric acid.
45. Nitrates. It is doubtful whether China has an industry for extracting potassium nitrate from soil, and, failing the possession of synthetic plant, it would appear that she would be dependent on the importation of nitrates for the production of nitric acid, which is a prime essential for the manufacture of explosives. Little is known as to the plant which may be available for this purpose, but it may be assumed with some confidence that the stoppage of imports of sodium nitrate, which in 1925 amounted to over 2,000 tons in addition to over 1,000 tons of saltpetre would cause considerable embarrassment so far as the manufacture of explosives is concerned.
46. Glycerine and Cellulose. There is a large number of soap and candle works in China, but so far as can be ascertained these soap works are small and do not have the special plant which is necessary for purifying crude glycerine to dynamite or nitro-glycerine quality. On the other hand, a satisfactory propellant can be provided from cellulose in the form of nitro-cellulose which would eliminate the necessity for glycerine, the imports of which in 1925 amounted to about 800 tons, as compared with about 1.600 tons in 1924. This may indicate that the Chinese use a nitro-cellulose powder as a propellant, and their requirements of cellulose could be met in the form of cotton, independently of imports.
47. Toluol and Phenol. These products are found in coal gas, coke oven gas, and coal tar. China, therefore, has a potential source of supply of toluol and phenol.
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Although special plant is necessary for the recovery of these products, it is possible that such plants exist. In any case, under Russian guidance, new plants could be erected.
48. Summary-Sulphuric and nitric acids are essential individually for the manufacture of explosives. The effect of cutting off the supply of sulphur and nitrates depends very largely on what plant already exists in the country for the production of these acids from raw materials available in China. Subject to these considerations, nitrates and sulphur appear to be the commodities, a stoppage of which would cause the maximum effect. The subject, however, is a very intricate one and is greatly affected by the industrial conditions throughout this vast country. We have not considered it advisable to delay our report whilst further enquiries are being made.
49.
The Effect on British Interests of a Blockade of China.
We have set forth in paragraph 15 the general effects of a Pacific Blockade, and these observations apply equally to a blockade enforced in a state of war. Although it may be said with some truth that the effect on British interests of a blockade would be practically indistinguishable from the inevitable consequences of a state of war, there are certain aspects of this question which merit attention. Restrictive measures would certainly bear hardest on British subjects over whom our control is greatest, even upon the hypothesis of international co-operation. Leakage would in any event take place, and goods would reach the Chinese through indirect channels, e.g., vià French Indo-China or Corea; and this process, continued for a lengthy period and conducted by other nations, would, if and when China became tranquil, permanently injure our commercial "goodwill." Indeed. it even seems worth consideration-taking the longest view-whether it may not be to our ultimate interest to permit a trade, limited both in area and in regard to the nature of the articles concerned, especially if these were of little importance and could be easily procured in China itself.
if
50. Hong Kong. As regards Hong Kong, we have already referred (paragraph 31) to the lack of co-operation which may be expected from the Chinese inhabitants of Hong Kong in the event of a blockade being instituted against South China. Should North China also be included in the blockade. the embarrassment which Hong Kong must suffer would be greatly intensified.
51. It will be observed that we have given a more or less detailed description of the three trade areas of China, viz., the Yangtse Valley, the Canton Delta, and Tientsin and the North, without attempting to follow up in detail the effects of the stoppage of individual items of commerce. Our reasons for this course are twofold. Firstly, the subject is one of great magnitude and at this juncture we feel that what is required is a more or less well-defined picture of the trade situation, together with the conclusions we have arrived at after examining the various figures which have been before us. In the second place, since the Chinese are self-supporting in vital essentials, it appears to be unnecessary now to attempt to indicate the degree of embarrassment which might be caused by a shortage of individual commodities.
THE POSITION OF H.M. SHIPS ON THE UPPER YANGTSE.
52. Although the matter is not strictly within our province, it may be desirable to conclude this Report with a reference to the position of H.M. Ships on the Upper Yangtse. A Memorandum by the Naval Staff on this subject is attached as Appendix No. 3. It will be seen that nine vessels are immobilised above Wuhu until various dates which range between the middle of February and the end of April, unless a sufficiently large freshet" raises the level of the river over shallows for long enough to enable them to move. Even in this event, they might have to jettison their guns, &c, and to do without pilots.
53. While these ships remain up river, we are informed that they can be fed and fuelled to an extent which would depend on the measure of success of the craft taking up supplies in running the gauntlet of attack from the banks. The gunboats and destroyers themselves are vulnerable to attack by field guns. As soon as the Yangtse was blockaded, supplies of food and oil from the shore would undoubtedly be cut off, and it is probable that fire would sooner or later be opened on the ships.
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