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to the Board's obligation to be guided by "the general scheme and principles laid down by the Advisory Committee", and assumed that if at any time they failed to act in accordance with the scheme and principles in question, the British Government would have the right to exercise "ultimate control". He explicitly says, indeed, that by what he describes as "the compromise measures suggested in 1926" (by which he means the recommendations of the Willingdor delegation) the Secretary of State "would have reserved, in the last resort, the power to withhold future payments from the Board if they should violate the terms of their trust" and that "an important degree of control would therefore have remained in British hands ". But no such reservation was contemplated by the Willingdon delegation or mentioned in their Report. If the Board of Trustees had committed or were thought to have committed a breach of trust, the obvious course to be adopted by those who held that their interests were prejudiced by such breach (including either the British or the Chinese Government) would surely have been to bring an action against the Board in a Chinese law-court. It is difficult to see by what authority the British Government could have assumed the right to decide when a breach of trust had been committed, or how they could have ordered a suspension of future payments except in accordance with the judgment of a Chinese court.
It cannot be contended that the Willingdon proposals were supposed to be distasteful or humiliating to China because they pro- vided for the handing over of the funds to a Board of Trustees instead of to the Chinese Government itself. The Board was to sit and exercise all its functions in China, it was to consist of members of whom a majority would be Chinese from the beginning and who in a few years' time were to be wholly Chinese if the Chinese majority so desired, and it was to be entirely independent of Government control, whether British or Chinese. There could be nothing derogatory to Chinese dignity in handing trust-funds over to the control and administration of a body of trustees, especially a body that was to be appointed in the first instance by the Chinese Government itself and afterwards to fill vacancies by co-optation. As far as we are aware no complaint whatever has been uttered by the Chinese Government with regard to the control and administration of the American indemnity funds "China Foundation by the body of trustees who hold office under the for the Promotion of Education and Culture". No doubt China would have felt insulted or aggrieved if it had been provided that the trustees were to be subject to the authority of a foreign Government; but in spite of Mr. Arthur Henderson's statement about ultimate
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control still remaining with the British Government, it was never for a moment suggested or intended by the members of Lord Willing- don's delegation or by Lord Buxton's Advisory Committee that the Board of Trustees should look to the British Government as their ultimate source of authority.
We are therefore strongly of opinion that no sufficient reason has been adduced for the change of policy which dictated the settlement defined in the Exchange of Notes and the Act of 1931; that the British Government should have adhered to their statement of May, 1926, in which they expressed their concurrence in the Willingdon recom- mendations and promised to secure the necessary legislative authority to give effect to them; and that such material advantages as Great Britain may have secured through the spending of the indemnity money in British factories will be far outweighed by the losses to both Great Britain and China-grave losses of a material and economic as well as of a less tangible kind-which the drastic modification or abandonment of the measures proposed and agreed to in 1926 is only too likely to involve.
As far as we could ascertain during our tour in China, no admira- tion or appreciation has been felt or expressed by the Chinese people or by any section of them, with regard to the manner in which Great Britain has chosen to solve the long-outstanding problem of the remitted indemnity. We have had eight years in which to find a solution-it was as long ago as 1922 that we announced our intention of remitting the debt-and surely in that time it should not have overtaxed the ingenuity of British statesmanship to find a solution of which our descendants might have been proud, and for which the people of China would have given us more than the perfunctory thanks of diplomatic usage. The settlement embodied in the Exchange of Notes of 1930 may have given satisfaction to a few persons who at that time occupied responsible posts in the Chinese Government. Those men have already ceased to hold office, and it would be difficult to find any others who shared or now share their satisfaction, except those who derive personal advantage from the transactions of the Purchasing Commission or from the application of a portion of the funds to industrial enterprises.
In his Memorandum Mr. Arthur Henderson says that if the proposed measures of 1926 (the Willingdon recommendations) had been carried out, differences of opinion might have arisen between the Board of Trustees and the British authorities and friction and ill-will" might have been "engendered out of an act which aimed at promoting friendly relations and a good understanding between
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