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the Chinese Minister for Foreign Affairs. Owing to a recrudescence of internal political troubles the negotiations were then suspended. In the autumn of 1931 the Japanese launched their attack on Manchuria and the whole question of extra- territoriality has remained in abeyance ever since.
4. Since 1931, in spite of their external difficulties, the Chinese have made great progress in political and constitutional matters. Their Central Govern- ment is now a reasonably efficient administrative machine and its authority is generally recognised over the greater part of China. Even the long-standing division between North and South has recently been healed. There has also been great progress in the codifying of the laws and in judicial administration generally. Finally, Japan, whose aggression was a considerable factor in unifying China, seems to have abandoned coercion for conciliation and may now be found willing to deal with China on a footing of friendliness and equality. 5. At the recent plenary session of the Kuomintang a resolution was passed in favour of taking up the extra-territoriality negotiations once more. No action has as yet been taken by the Chinese Government on this resolution, but the subject is being ventilated in the press in China, and Sir H. Knatchbull-Hugessen has had some conversations with the Minister for Foreign Affairs. He is strongly of opinion that we should be sympathetic to any approach made to us by the Chinese Government. Copies of the three telegrams Nos. 106, 114 and 116 which we have received from Sir H. Knatchbull-Hugessen are annexed hereto (Annexes III, IV and V). In their Aide-Mémoire of the 30th March last (Annex I), the United States Government expressed the view that negotiations on the subject of extra- territoriality might be taken up, and enquired whether, in our opinion, it would be better for the foreign Governments to take the initiative in approaching the Chinese Government, or whether it would be better to await proposals from the Chinese Government. An interim reply was sent to the United States Embassy on the 14th May (Annex II) favouring the latter course and promising a further communication as soon as a decision had been reached on the important points of policy involved.
6. It has been the consistent policy of successive British Governments to assist China in every way possible in the political and economic development of their country; and if any request is now made to negotiate on the subject of extra- territoriality, it would not be either wise, or indeed possible, to depart from the friendly and sympathetic attitude that was adopted in the previous negotiations, or to withdraw substantially from the policy of the 1931 draft. In view of the greater degree of unity and stability that China has achieved since 1931, it is probable that, as stated in the United States aide-mémoire, the Chinese will now insist upon an agreement of a more far-reaching character. It would seem best, however, to begin negotiations on the basis of that draft, and defer consideration of details until after negotiations have actually begun.
7. The draft treaty of 1931, of which a copy is annexed hereto, Annex VI, contained a number of safeguards designed to protect the persons, property and vessels of British subjects, on coming under Chinese jurisdiction, against the arbitrary exercise of power or uncertainty as to the law to be applied.
8. The principal safeguards were that British subjects were to be subject only to the modern Courts of Justice and to the duly promulgated laws, ordinances and regulations of China; cases involving British subjects as defendant or accused were only to be tried in the modern courts at certain selected centres, and foreign legal counsellors with watching and advisory functions were to be attached to these centres. Provided the safeguards of the 1931 draft could have been exercised without offending Chinese amour-propre, it seems probable that the arrangements of the draft treaty would have proved a satisfactory substitute for the present system. China has, indeed, now reached the stage when. as in other countries, diplomatic representations would probably be the best protection for British subjects against even the unfettered exercise of Chinese jurisdiction, but as public opinion not ready for such a root and branch solution, it would seem best, when negotiations begin, to endeavour to secure the consent of the Chinese Government to as many of the safeguards of the 1931 draft as possible.
9. The greatest difficulty arises out of the peculiar position of the Inter- national Settlement at Shanghai, the foreign administration of which depends very largely upon the continued enjoyment of extra-territorial privileges by the
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Powers chiefly concerned. In the 1931 draft, the whole area of Greater Shanghai, namely, the International Settlement and the neighbouring areas, which are largely inhabited by foreigners, was excluded from the operation of the treaty. Foreign control of the International Settlement in face of the Chinese determination to undermine it, is becoming more precarious, and British predominance in the municipal administration of Shanghai tends to involve us in disputes between Chinese and Japanese which are not really our concern. is by no means certain, therefore, that the exclusion of Chinese authority from the Settlement should continue to be an object of British policy. In view, however, of the complexity of the problem of Shanghai and the multiplicity of the national and other interests involved, it will be best to insist now, as in 1931, on complete exclusion so as to afford time for further negotiations. In the 1931 draft (article 16) Shanghai was excluded for ten years and Tientsin for five years. The United States Government, while willing to throw in Tientsin altogether, considered that the time limit for Shanghai was a mistake. It may be difficult to secure the assent of the Chinese to the indefinite exclusion of the whole area of Greater Shanghai. On the other hand, it is obviously unsatisfactory that nego- tiations should be carried on under pressure of a time limit, and we might, therefore, accept the American view on that point.
10. If the Cabinet approve of the adoption of a policy on the lines recommended above, a further question arises in relation to Japan. It would seem to be desirable, in view of the present conciliatory attitude of Japan, to propose to them to adopt the same attitude as ourselves and the United States over the question of extra-territoriality. His Majesty's Ambassadors at Peking and Tokyo are being consulted by telegram on this point and also on the subsidiary points as to time and method, namely, whether it would be better to approach Japan now or wait until actual proposals on the subject of extra-territoriality are made by China, and whether the approach should be made in Tokyo jointly with the Americans or separately in London and Washington.
May 25, 1937.
(Strictly Confidential.)
ANNEX 1.
Aide-mémoire.
A. E.
THE Department of State has for some time been giving thought to the question of the possible practicability of there being made by the American Government an approach to the Chinese Government suggesting resumption of the extra-territorial negotiations which were interrupted in 1931 and have since been in abeyance. It has been the view of the Department of State that the practicability of making such an approach should be considered in terms of the possibility of the approach being made simultaneously and on parallel lines by the American and the British Governments. It has been felt that the question of the opportuneness of such action at this time largely depends upon the question whether the resumption of such negotiations would be likely to have a disturbing effect upon the general situation in the Far East with special reference to Sino- Japanese relations and the question of the likelihood of the Chinese Government being willing to accept a draft of a treaty following substantially the lines of the American draft of the 14th July, 1931. (The American draft is similar to the British draft of the 6th June, 1931, except for article 16: Reserve Areas, a copy of which article, together with a copy of the Department's memorandum was enclosed in Mr. Atherton's letter of the 25th July, 1931, to Mr. Orde.)
2. The United States Embassy in China has reported that during the recent plenary session of the Central Executive Committee there was adopted a resolution calling upon the Chinese Government to conduct negotiations for the abolition of extra-territorial jurisdiction. This resolution quoted in an instruction to the Executive Yuan on the 6th March, was published in the National Government Gazette of the 9th March, but otherwise it has received little publicity. The United States Embassy has received no intimation as to what action the Chinese Government will take in the matter.
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