One of the two Presidents of China--it is unnecessary to specify
which--recently stated that a renewal of the Anglo-Japanese alliance
meant a partition of China. In this division, Japan would take the
north and Great Britain the south. Probably the remark was not meant
to be taken literally in the sense of formal conquest or annexation,
but rather symbolically with reference to the tendency of policies and
events. Even so, the statement will appear exaggerated or wild to
persons outside of China, who either believe that the Open Door policy
is now irrevocably established or that Japan is the only foreign Power
which China has to fear. But a recent visit to the south revealed that
in that section, especially in Canton, the British occupy much the
same position of suspicion and dread which is held by the Japanese in
the north.
Upon the negative side, the Japanese menace is negligible in the
province of Kwantung, in which Canton is situated. There are said to
be more Americans in Canton than Japanese, and the American colony is
not extensive. Upon the positive side the history of the Cassell
collieries contract is instructive. It illustrates the cause of the
popular attitude toward the British, and quite possibly explains the
bitterness in the remark quoted. The contract is noteworthy from
whatever standpoint it is viewed, whether that of time, of the
conditions it contains or of the circumstances which accompany it.
Premising that the contract delivers to a British company a monopoly
of the rich coal deposits of the province for a period of ninety years
and--quite incidentally of course--the right to use all means of
transportation, water or rail, wharves and ports now in existence, and
also to "construct, manage, superintend and work other roads, railways
waterways as may be deemed advisable"--which reads like a monopoly of
all further transportation facilities of the province--first take up
the time of the making of the contract. It was drawn in April, 1920
and confirmed a few months later. It was made, of course, with the
authorities of the Kwantung province, subject to confirmation at
Peking. During this period, Kwantung province was governed by military
carpet-baggers from the neighboring province of Kwangsei, which was
practically alone of the southern provinces allied with the northern
government, then under the control of the Anfu party. It was matter of
common knowledge that the people of Canton and of the province were
bitterly hostile to this outside control and submitted to it only
because of military coercion. Civil strife for the expulsion of the
outsiders was already going on, continually gaining headway, and a few
months later the Kwangsei troops were defeated and expelled from the
province by the forces of General Chen, now the civil governor of
Kwantung, who received a triumphal ovation upon his entrance into
Canton. At this time the present native government was established, a
change which made possible the return of Sun Yat Sen and his followers
from their exile in Shanghai. It is evident, then, that the collieries
contract giving away the natural resources of the people of the
province, was knowingly made by a British company with a government
which no more represented the people of the province than the military
government of Germany represented the people of Belgium during the
war.
As to the terms of the contract, the statement that it gave the
British company a monopoly of all the coal mines in the province, was
not literally accurate. Verbally, twenty-two districts are enumerated.
But these are the districts along the lines of the only railways in
the province and the only ones soon to be built, including the as yet
uncompleted Hankow-Canton railway. Possibly this fact accounts for the
anxiety of the British partners in the Consortium that the completion
of this line be the first undertaking financed by the Consortium. The
document also includes what is perhaps a novelty in legal documents
having such a momentous economic importance, namely, the words "etc."
after the districts enumerated by name.
For this concession, the British syndicate agreed to pay the
provincial government the sum of $1,000,000 (silver of course). This
million dollars is to bear six per cent interest to the company, and
capital and interest are to be paid back to the company by the
provincial government out of the dividends (if any) it is to receive.
The nature of these "dividends" is set forth in an article which
should receive the careful attention of promoters elsewhere as a model
of the possibilities of exploiting contracts. The ten million capital
is divided equally into "A" shares and "B" shares. The "A" shares go
unreservedly to the directors of the company, and three millions of
the "B" shares are to be allotted by the directors of the company at
their discretion. The other two million are again divided into equal
portions, one portion representing the sum advanced by the company to
the province and to be paid back as just specified, while the other
million--one-tenth of the capitalization--is to be a trust fund the
dividends of which are to go for the "benefit of the poor people of
the province" and for an educational fund for the province. But before
any dividends are paid upon the "B" shares, eight per cent dividends
are to be paid upon the "A" shares and a _dollar a ton royalty_ upon
all coal mined. Those having any familiarity with the coal business
with its usual royalty of about ten cents a ton can easily calculate
the splendid prospects of the "poor people" and the schools, prospects
which represent the total return to the provinces of a concession of
untold worth. The contract also guarantees to the company the
assistance of the provincial government in expropriating the owners of
all coal mines which have been granted to other companies but not yet
worked. These technical details make dry reading, but they throw light
upon the spirit with which the British company undertook its predatory
negotiations with a government renounced by the people it professed to
govern. In comparison with the relatively crude methods of Japan in
Shantung, they show the advantages of wide business experience.
As for the circumstances and context which give added menace to the
contract, the following facts are significant. Hong Kong, a British
crown colony, lies directly opposite the river upon which Canton is
situated. It is the port of export and import for the vast districts
served by the mines and railways of the province. It is unnecessary to
point out the hold upon all economic development which is given
through a monopolistic control of coal. It is hardly too much to say
that the enforcement of the contract would enable British interests in
Hong Kong to control the entire industrial development of the most
flourishing of the provinces of China. It would be a comparatively
easy and inexpensive matter to provide the main land with a first
class modern harbor and port near Canton. But such a port would tend
to reduce the assets of Hong Kong to the possession of the most
beautiful scenery in the world. There is already fear that a new
harbor will be built. Many persons think that the concession of
building such railways etc., "as are deemed advisable for the purpose
of the business of the company and to improve those now existing" is
the object of the contract, even more than the coal monopoly. For the
British already own a considerable part of the mainland, including
part of the railway connecting the littoral with Canton. By building a
cross-cut from the British owned portion of this railway to the
Hankow-Canton line, the latter would become virtually the Hankow-Hong
Kong line, and Canton would be a way-station. With the advantages thus
secured, the project for building a new port could be indefinitely
blocked.
During the period in which the contract was being secured, a congress
of British Chambers of Commerce was held in Shanghai. Resolutions were
passed in favor of abolishing henceforth the whole principle of
special nationalistic concessions, and of cooperating with the Chinese
for the upbuilding of China. At the close of the meeting the Chairman
announced that a new era for China had finally dawned. All of the
British newspapers in China lauded the wise action of the Chambers. At
the same time, Mr. Lamont was in Peking, and was setting forth that
the object of the Consortium was the abolition of further concessions,
and the uniting of the financial resources of the banks in the
Consortium for the economic development of China itself. By an
ironical coincidence, the Hong Kong-Shanghai Bank, which is the
financial power behind the contract and the new company, is the
leading British partner in the Consortium. It is difficult to see how
the British can henceforth accuse the Japanese of bad faith if any of
the banking interests of that country should enter upon independent
negotiations with any government in China.
By the time the scene of action was transferred to Peking in order to
secure the confirmation of the central government, the Anfu regime was
no more, and as yet no confirmation has been secured. The new
government at Canton has declined to recognize the contract as having
any validity. An official of the Hong Kong government has told an
official of the Canton government that the Hong Kong government stands
behind the enforcement of the contract, and that Kwantung province is
a British Hinterland. Within the last few weeks the Governor of Hong
Kong and a leading Chinese banker of Hong Kong who is a British
subject have visited Peking. Rumors were rife in the south as to the
object of the visit. British sources published the report that one
object was to return Weihaiwei to China--in case Peking agreed to turn
over more of the Kwantung mainland to Hong Kong as a quid pro quo.
Chinese opinion in the south was that one main object was to secure
the Peking confirmation of the Cassell contract, in which case
$900,000 more would be forthcoming, $100,000 having been paid down
when the contract was signed with the provincial government. Peking
does not recognize the present Canton government but regards it as an
outlaw. The crowd that signed the contract is still in control of the
neighboring province of Kwangsei and they are relied upon by the north
to effect the military subjugation of the seceded province. Fighting
has already, indeed, begun, but the Kwangsei militarists are badly in
need of money; if Peking ratifies the contract, a large part of the
funds will be paid over to them--all that isn't lost by the wayside to
the northern militarists.[1] Meantime British news agencies keep up a
constant circulation of reports tending to discredit the Kwantung
government, although all impartial observers on the spot regard it as
altogether the most promising one in China.
[1] Since the text was written, the newspapers have stated
that the Peking Government has officially refused to
validate the agreement.
These considerations not only throw light on some of the difficulties
of the functioning of the Consortium, but they give an indispensable
background for judging the actual effect of the renewal of the
Anglo-Japanese alliance. By force of circumstances each government,
even against its own wish, will be compelled to wink at the predatory
policies of the other; and the tendency will be to create a division
of spheres of influence between the north and south in order to avoid
more direct conflicts. The English liberals who stand for the renewal
of the alliance on the ground that it will enable England to exercise
a check on Japanese policies, are more naive than was Mr. Wilson with
his belief in the separation of the economic and political control of
Shantung.
It cannot be too often repeated that the real point of friction
between the United States and Japan is not in California but in China.
It is silly--unless it is calculated--for English authorities to keep
repeating that under no circumstances does the alliance mean that
Great Britain would support Japan in a war with the United States. The
day the alliance is renewed, the hands of the militarists in Japan
will be strengthened and the hands of the liberals--already weak
enough--be still further weakened. In consequence, all the sources of
friction in China between the United States and Japan will be
intensified. I do not believe in the predicted war. But should it
come, the first act of Japan--so everyone in China believes--will be
to seize the ports of northern China and its railways in order to make
sure of an uninterrupted supply of food and raw materials. The act
would be justified as necessary to national existence. Great Britain
in alliance with Japan would be in no position to protest in anything
but the most perfunctory way. The guarantee of such abstinence would
be for Japan the next best thing to open naval and financial support.
Without the guarantee they would not dare the seizure of Chinese
ports. In recent years diplomatists have shown themselves capable of
unlimited stupidity. But it is not possible that the men in the
British Foreign Office are not aware of these elementary facts. If
they renew the alliance they knowingly take the responsibility for the
consequences.
May 24, 1921.