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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 advisable to send the Report out to China for the comments of the local authorities. He had not, however, been influenced in agreeing to this course by the observations of Lord Beatty, with a large number of which he was in disagreement. He thought it was highly improbable that the Nationalist Government of the South, or, indeed. any other Government which might find itself in power in China, would fail to satisfy the interest on the old secured loans of China unless the movement became purely Bolshevist. This, of course, was possible but very unlikely. There was at present an important conference taking place between representatives of the Kuomintang and of the North, and he thought it much more likely that agreement would bẽ reached between the two parties than that China would become Bolshevist.
LORD CECIL remarked that he also disagreed with most of what Lord Beatty had said. The Report by no means indicated that economic pressure would be useless in case of war, but it made clear two important points: firstly, that without belligerent rights a Pacific Blockade only would be possible, and that there seemed no prospect of the agreement with all the other Powers which would be necessary to carry it out; secondly, that, in view of the undeveloped character of the Chinese and of the enormous size of their country, a blockade would have far less effect on them than on a more highly developed State. They could in the last resort get on without any foreign trade, and leakage would be bound to occur to Russia and French Indo-China. The actual physical effect of a blockade was unlikely to bring the Chinese to terms rapidly, and might unite the North and South against us, which was a matter which required serious consideration.
MR. AMERY stated that he had telegraphed to Hong Kong for information on a series of questions arising out of the Report. He had just received a reply which indicated that the authorities in that place were in favour of taking action on the lines of a blockade. He commented on the fact that the Report appeared to assume an atmosphere of neutrality, so to speak, between the North and the South in the event of our attempting to exert economic pressure on the South. Surely in this case we should make it our business to co-operate with the North and to look to them for assistance against the South.
LORD CECIL explained that in the view of the experts on China, who had been questioned by the Committee, the course suggested by Mr. Amery was out of the question, since once a state of war arose the North would join forces with the South against us.
CONCLUSIONS.
THE COMMITTEE OF IMPERIAL DEFENCE agreed-~~-
(a.) To take note of the Report of the Advisory Committee on Trading and Blockade on the possibilities of exerting pressure on the Nationalist Government of South China. (C.LD. Paper No. 771–B.)
(b.) To recommend that copies of the Report should be sent by the Departments
concerned to-
(a.) The British Minister at Peking,
(b) The Naval Commander-in-Chief in China,
(c) The Consul-General at Shanghai,
(d) The Consul-General at Canton.
(e.) The Governor of Hong-Kong,
who should be asked to report their views
(3.)-SUPPLY ORGANISATION IN PEACE AND WAR.
(C.I.D. Papers Nos, 763-B and 777-B.)
(Previous Reference: C.I.D. Minutes of the 219th Meeting, Minutes 8 and 9.)
THE COMMITTEE had under consideration a Report of the Principal Supply Officers Committee on the subject of Supply Organisation in Peace and War (C.ID, Paper No. 763-B); together with a Memorandum on this subject by the First Lord of the Admiralty (C.I.D. Paper No. 777-B).
THE PRIME MINISTER congratulated Sir Noel Birch on having obtained unanimity on this most contentious question.
SIR NOEL BIRCH said that he had nothing to add to the Report, but there were certain points which he wished to emphasise. In the opinion of the Principal Supply Officers Committee it was essential that inter-Departmental machinery of the nature suggested in the Report should be set up with the least possible delay. The supply situation was more complicated than it had been before the war, owing to the fact that there were now three Service Ministries and to the vast increase in mechanisation. Sir Noel Birch added that he particularly desired to emphasise Paragraph 3 of the Report, wherein it was stated that the scheme would inevitably require adjustment and development in the light of experience acquired by peace investigations.
MR. BRIDGEMAN stated that the views of the Admiralty were expressed in C.L.D. Paper No. 777-B. The Admiralty were strongly opposed to the setting-up of a Ministry of Supply, as it did not consider that its responsibility for the design and inspection of naval war material could properly be allocated to another authority.
SIR SAMUEL HOARE was prepared to accept the Report as a whole, but thought that there might be certain details which would require adjustment after further Departmental investigation.
SIR PHILIP CUNLIFFE-LISTER said that, in his view, it was an extraordinarily good Report It was essential that a review-and a continuing review of the situation as regards raw materials and of manufacturing capacity should be undertaken and maintained. The scheme suggested by the Committee worked in very well with his own existing arrangements for keeping the Census of Production up to date. At the same time, if the Board of Trade were to have the further tasks of co-ordination indicated in the Report, it was desirable that this work should not be undertaken until the end of this year, partly for reasons The Census of Production work would of expense and partly for reasons of time.
finish towards the end of this year, and some of the staff would then be available for the new work indicated in the Report.
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