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that British interests were gratified at the prospect of persuading the Chinese to spend the returned indemnity funds in British workshops. Otherwise it is difficult to understand why the British Government, which in 1926 had fully accepted the principles recommended by the Willingdon delegation and Lord Buxton's Advisory Committee, was ready in 1930 to cast them aside and adopt a new policy. A reference has already been made to the explanation offered by Mr. Arthur Henderson (then Foreign Secretary) in the memorandum of Novem- ber 14th, 1930, prefixed to the Exchange of Notes. That explanation is to the effect that the emergence of a reconstructed National Govern- ment which desired to cultivate friendly relations with Great Britain had changed the aspect of the Indemnity question. His Majesty's Government were no longer dealing with a China distracted by civil war and by the claims of rival Governments." (This reads curiously in the light of the events of the following year, when a rival Government, claiming to be the true National Government of China, was set up in Canton. Moreover, a civil war of unusual severity, which nearly brought about the collapse of the Nanking Government, was being waged against rebellious Northern leaders at the very time when the indemnity settlement was being negotiated at Nanking!) Majesty's Government, says Mr. Henderson, had recognised the significance of the nationalist movement "and had declared their intention to meet it with sympathy and understanding. This question of the Indemnity provided a test case. It would clearly have been inconsistent to revert to the provisions of the 1925 Act and insist upon these important revenues being controlled in London. Nor did the compromise measures suggested in 1926 appear to be suitable to the altered circumstances, for although the organisation and administration of the funds would be carried out in China, the control in the last resort would still remain with His Majesty's Government. In the event of differences of opinion arising between the Board of Trustees and the British authorities, friction and ill-will might be engendered out of an act which aimed at promoting friendly relations and a good understanding between the two peoples. The only logical alternative appeared, therefore, to consist in handing over full control of the funds to the National Government of China and to rely upon their appreciation of our action in order to obtain fulfilment of the original intention of our policy, viz. that the proceeds of the Indemnity should be devoted to projects equally beneficial to China and Great Britain."
It will be seen from this quotation that the ostensible cause of the change of policy was Great Britain's recognition of the alleged
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fact that even under "the measures suggested in 1926" (that is to say the recommendations of the Willingdon delegation which had been accepted by the British Foreign Office) the ultimate control of the funds would still remain with His Majesty's Government; and that changed conditions in China had rendered it desirable that such ultimate control should be surrendered. Now this is a puzzling statement; for the outstanding feature of the Willingdon proposals was, as we have seen, that the British Government "should cease to exercise any control over the funds or the disposal thereof ", and the very reason why the British Government's acceptance of the proposals was declared at that time to necessitate fresh legislation was that the existing Act of 1925 kept ultimate control in the hands of the Secretary of State and would therefore have to be repealed.
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It has already been pointed out that a new Bill which was intended to repeal the 1925 Act is believed to have been actually drafted; and though we cannot refer to its precise terms it was presumably drafted in full accordance with the Willingdon recommendations (already accepted in principle by His Majesty's Government) whereby control was to be taken out of British hands and given to the Board of Trustees. If the Bill was not drafted on these lines it cannot have been the Bill which the Secretary of State had in mind when he said that his acceptance of the Willingdon recommendations would make it necessary to amend the Act" of 1925. If the Foreign Office could be persuaded to produce the Bill drafted in 1926-7 but never introduced into Par- liament, we should know whether as a matter of fact it provided that "control in the last resort would still remain with His Majesty's Government". If it did, it was not the Bill which the acceptance of the Willingdon recommendations required; if it did not, it is difficult to see what Mr. Arthur Henderson meant when he declared that under the Willingdon proposals "although the organisation and administration of the funds would be carried out in China, the control in the last resort would still remain with His Majesty's Government ".
It seems unlikely that he had in mind the recommendations of the Willingdon delegation (see pp. 159-161 of their Report) that at the end of each financial year the Board of Trustees should prepare a report of receipts and expenditure and submit a copy to each of the Governments of China and Great Britain, and that the two Gover- ments should each be allowed to send an observer to attend the meetings of the Board. These recommendations were not intended to imply that any control over the funds was to be exercised by either Government. It is more probable that Mr. Henderson referred
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