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the investment of private funds from diverse sources, but especially from Chinese individuals, in new industries, and they have a special section of the Department of Economics which is charged with this encouragement. They are equally anxious to obtain the help of foreign capital and of foreign advisers a considerable number of whom are already helping them but there are, as far as I know, practically no British experts in the industrial sphere, if the Salt Administration is excepted. I append a note(") got out for me by Mr. Yün on the Ministry of Economics and the National Resources Commission.
88. One other aspect of this matter is well worth bearing in mind. It was put to me by one of the best of the younger men in the Ministry of Finance whom the Minister lent me when my secretary fell ill at Chungking, and who after accompanied us to Sinkiang, Mr. C. L. Hsia (brother of the man of the same name in the Chinese Embassy in London). He said that one of the principal traditions of behaviour of the Chinese was to remember with gratitude those who had helped them or done them a favour, and that the future relations of China with foreigners and foreign Governments would to a great extent be determined by what those Governments or nationals now did to help the Chinese in their hour of need. It would be of no use for the nationals of those countries who had not helped China to expect any particular advantages or opportunities in the future, when the time of extensive and wholesale reconstruction came.
89. In spite of the splendid work and great popularity of the present British Ambassador to China, it is impossible to gain any other impression than that the Chinese are gravely disappointed at the way in which Great Britain has failed to give active help, and has tried to appease Japan at the expense of China. America and Russia are both giving, either officially or through their nationals, a very great deal of help, and are very prominent in the bigger cities of the west. This means that in the future these two countries will reap the harvest of their assistance in their participation in China's reconstruction on favourable terms, whereas other foreigners may be left out in the cold. It is extremely easy to raise up feeling in China against foreigners because of the tradition of foreign exploitation of China, and, if there should come, for any reason, a breakdown of the Central Government of China, the one common ground upon which it will be possible to unite the Chinese people will be an anti-foreign campaign. Then, as more than one Chinese has said to me, woe betide the unfortunate foreigners if that day should ever come.
90. The attitude of many representatives of British firms in Western China seems to be merely a continuance of the old spirit of selfish exploitation. They do not seem yet to have realised that there is a new spirit and a new determination in China upon this matter, and that their future if any-lies in assisting the Chinese and co-operating with them upon equal or subordinate terms even though the Chinese may seem to them inefficient or difficult to work with. Some of the younger representatives that I have met do seem to have grasped this idea but there are as yet no definite practical signs of its being put into effect. I should like to add here a word of high commendation of the consul-general at Kunming and of the consul and his staff at Chungking, all of whom realised the new situation and are doing their best to advance British interests in difficult circumstances.
91. It would not be of assistance to set out here in detail accounts of the actual productive units that have been put into operation in Western China. They are pitifully small compared with the magnitude of the task. When it is remembered that the population of Szechuan is about the same as that of Germany, it will be realised how great is the task. Though small in extent, however, a very real and good beginning has been made, and the work being done both by the Chinese managing technicians and by the workers is of excellent quality and accuracy. A certain degree of planning is to be found in the arrangement of the new factories; for instance at Kunming the new electric power station has been placed close to a copper refinery and a cable manufacturing plant, to both of which it supplies power. Other factories have been similarly grouped, where the safety factor allows of this, and regard has been had to the accessibility of labour and transport. In one area to the west of Chengtu, which I was not able to visit because of the distance and the time occupied, a regular factory estate has been laid out for a number of factories of different kinds. At the same time, however, a certain confusion and waste is in evidence due to
(*) Not printed.
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