CO129-502-7 China- general situation 4-3-1927 - 26-4-1927 — Page 181

This Document is the Property of His Britannic Majesty's Government.

Printed for the Committee of Imperial Defence. March 1927.

198

SECRET.

COMMITTEE OF IMPERIAL DEFENCE.

Copy No.

6 t

Extract from the Minutes of the 222nd Meeting, held on March 4, 1927.

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(2.)-CHINA.-POSSIBILITIES OF EXERTING ECONOMIC PRESSURE ON THE NATIONALIST GOVERNMENT OF SOUTH CHINA.

(C.I.D. Paper No. 771-B.)

(Previous References: C.I.D. Minutes of the 218th Meeting, Minute 18 (A), and paragraph 3 (f) of C.I.D. Paper No. 764-B, which was taken note of at the 220th Meeting, Minute 9 (c).)

THE COMMITTEE had under consideration a Report of the Advisory Committee on Trading and Blockade on the possibilities of exerting economic pressure on the Nationalist Government of South China (C.I.D. Paper No. 771–B).

LORD BEATTY stated that the first part of the Report dealt with financial pressure and the conclusion reached was that nothing useful could be effected by this means. It seemed, however, that the chief consideration which had influenced this conclusion was that the Customs Revenues would suffer and therefore that interest on loans would not be forthcoming. He pointed out, however, that if the Nationalists gained complete control, interest on loans would probably not be paid in any case.

SIR AUSTEN CHAMBERLAIN, intervening, enquired on what grounds this view was put forward.

LORD BEATTY replied that Russia had repudiated her debts, and it might be expected that she would advise the Chinese Bolshevists to do the same.

Continuing, Lord Beatty said that Part II of the Report dealt with economic pressure. As far as a Pacific Blockade was concerned, the Committee had arrived at the conclusion that we should damage our own interests more severely and permanently than Chinese interests. This surely depended on the outcome. Our interests would be of no value if we were expelled from China, but if by any means we could beat the Nationalists and restore order, the enhanced prestige we should gain would help greatly towards the recovery of our position. The Nationalist movement was a military one and was dependent for its success on money and military material. The main flow of these essentials could be controlled by sea power and the reasons for not utilising this power appeared to be inadequate and to rest on the theory that our interests would best be served by doing nothing. He suggested that the idea of using economic pressure should not be discarded in spite of any inconvenience or loss we ourselves might sustain as a consequence. The question, however, of when the economic weapon could be used must depend on the date by which the evacuation of all our ships and personnel at present up-river could be carried out. In view of the complicated and involved nature of the situation he suggested that the views of the Commander-in-Chief and of our Representatives at Peking and Hong Kong should be obtained. There would be time to do this before our ships could get down-river.

SIR AUSTEN CHAMBERLAIN said that the Foreign Office had already telegraphed some indication of the contents of the Report to Sir Miles Lampson in order to get his preliminary observations. He agreed, however, that it might be

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