The Japanese were alive to this situation. Professor Hori was sent

to lecture on finance before an association which Liang Chi-chao had

helped form. The theme of his opening lecture was the bankruptcy of the

Western powers. China must rely on Japan for money. Following Hori came

a commission of ten officials from Tokyo to study Chinese financial

administration. Then came Doctor Kobayashi to act as Japan's expert

in China. Prominent posts, it was freely said, were to be created for

"currency reform," posts which would be held by Japanese. Later on

Baron Sakatani came, to study Chinese finance.

From Japan came loans and offers of loans. They lent 10,000,000 yen

through the Yokohama Specie Bank. This was merely an advance on a

future reorganization loan. Then a loan, labelled "Industrial," of

20,000,000 yen, was made through the Bank of Communications. Two

Japanese financial cliques sprang up and flourished. Liang sat at

the receipt of customs at the Ministry of Finance, dealing with the

Yokohama Specie Bank; the other clique, headed by Tsao Ju-lin and Lu

Tsung-yu, played in with the tri-fold group of the Industrial Bank

of Japan, the Bank of Chosen, and the Bank of Taiwan (Formosa). With

the loan dubbed "Industrial"--this to evade the provisions of the

reorganization loan--came Japanese advisorships in the Chinese Bank of

Communications. Not by the remotest chance would the loan be used by

the bank to strengthen its depreciated notes. It went for politics and

the military.

The Japanese financiers coolly calculated that the British and French

banks would fail to take up their option on the currency reform loan,

which they had held since 1911. That would leave the field clear for

Japan. The French and British legations got busy about this, and so did

we. As a consequence the American Government resumed its interest in

currency reform in China, and the sigh of relief was almost audible.

I called on Minister Liang. Did he not remember the Treaty of 1903

and America's long-continued interest in Chinese currency betterment?

There was the Jenks-Conant Monetary Commission; there were the long

negotiations conducted by Willard Straight, and the resultant Currency

Loan Agreement of 1911. "I remember all these things," Liang responded;

"America should lead in this matter. Our banknote issues are being

shot to pieces by local issuance of worthless paper. The Tuchuns have

bent the national banks to their purposes. The books of the banks must

be kept and made public. I suggest appointing three principal foreign

experts on a reform of the entire currency. Let them be an American, a

European, and a Japanese."

The currency loan option was extended until the following April.

But Japan had other shots in her locker. Suddenly the Japanese press

bristled with news of a projected "arms alliance" with China. It

sounded almost menacing. The Tai Hei Company, originally organized

by the Japanese Government to supply arms to Russia, was going to

furnish China with her armament. General Tuan said that he had long

been urged to buy a "limited amount" of war material from Japan.

The Japanese minister chimed in with the statement that, inasmuch

as the United States refused to sell steel to Japan--under the war

trade restriction--the time was come for Japan to control China's ore

deposits. "Japan is to sell China arms. Why may she not have the raw

materials for them?" he asked.

The disproportion involved in this demand served to amuse the Chinese.

The deposits on which Japan's eyes were fixed amounted to from forty to

fifty million tons of ore--enough to make several guns.

Along with these negotiations came proposals to establish Japanese

military and arsenal advisorships.

I asked the Premier about these reports. I told him we could not

object to the purchase of arms by China from any source whatever.

But in negotiations for loans and concessions the United States had

held unswervingly to the principle of the "open door" and no special

privileges. As it sought no control of this kind, it was equally

interested that none should be given to any other power.

"Have you not," the Premier asked me, "found me always candid and

true?" Most sincerely I assured him I had.

"Then," he replied, "we have bought of Japan 40,000 rifles, 160 machine

guns, and 80 field guns. There will be no incidental commitments. I can

rely implicitly on my military associates [General Hsu Shu-cheng, the

Vice-Minister of War; Ching Yun-peng, Acting Chief of Staff; and Fu

Liang-tso, Tuchun of Hunan]. They would not sanction such a thing."

But the next day I got positive evidence that they had. The

negotiations were in full blast for Japanese military advisorships,

control of the Nanking Arsenal, and rights to specific iron deposits.

I saw General Hsu, telling him everything before giving him a chance

to answer. I was not then solely concerned about the encroachment on

Chinese independence. American and European interests had been told:

"Hands off the national iron ore reserve; all remaining iron deposits

are to be held for the nation." Respecting this decision, we had told

our people that concessions for iron ores could not be obtained. We

could not in justice to them now consent to a change of policy, without

protecting our interests. Japan had already one half of China's iron

ore deposits. Was she to get the rest? Also, were Chinese armaments

to be standardized without consulting the experts of the Allied

Governments, so that the arms might be used in the present war?

"We have been hard pressed," General Hsu explained. "The Japanese

wished us to do something for them and we need the arms. They will be

of the larger calibre, such as China's armament now has. The Japanese

did demand the assignment of new ore deposits; they needed security for

the contract. They compromised by reducing the amount of ore we are

to furnish. But we must supply it under a contract of 1916, between

the Japanese and a company formed by Chow Tsu-chi, whereby a million

dollars was paid in advance on iron ores from deposits near Nanking.

This is the best we can do. They demanded at first the grant of new ore

deposits."

"I should like to visit you more often," General Hsu remarked later;

"but my movements are closely watched." I stated I hoped he entertained

no fear that would keep him from seeing the minister of a friendly

power at any time he wished.

The real trouble lay in the rivalries between the north and south.

The Premier and General Hsu were willing to barter the nation's

birthright in the form of concessions in order to impose an internal

unity of their own making. For China was torn. The situation in

October, 1917--how different from that of April and May, 1915, when

the twenty-one demands came to their climax! Then the Chinese people

and Government were united as one man. The sentiment of the nation was

now the same; nearly all the members of the Government were unchanged,

yet a small pro-Japanese minority were in the saddle. The men who

had Japanese funds under their control had the advantage over the

mass of officials. They succeeded in muzzling the Chinese press. By

Japanese insistence, aided in this case by the French minister--some

of the Chinese papers had criticized his attitude--news of diplomatic

negotiations had been absolutely suppressed. Without information,

the public was disturbed and confused. The editor of the Japanese

_Kokumin_, Mr. Tokutomi, in an interview in Peking, advocated still

more stringent press control. Japan was using the war to displace

the influence of her associates in China and to make her own power

predominant.

Bad as the situation was it might have been saved by an adequate loan

from America. Liang's first proposal was for a reorganization loan

of $200,000,000, which was vetoed by Europe; this shrivelled to the

mess of pottage of 10,000,000 yen offered by the Yokohama Specie Bank.

General Hsu had unfolded to me in September a comprehensive scheme of

equipping 500,000 soldiers, and providing for the immediate transport

of at least 500,000 to Europe, further detachments were to go as fast

as ships could be had. Later came more specific plans for 1,000,000

men, out of which the best contingents were to be sent to France. It

was planned ultimately to send the whole million, if needed. Then came

a modified proposal for outfitting 500,000 men and the completion of

the industrial plants needed for war materials and ships. The European

ministers were all anxious to secure China's active participation; the

French Legation, through its military attaché, was coöperating with

special energy in planning for the eventual use of Chinese forces. From

my conversations with the President, the Premier, and his most active

assistant, there was no doubt that the Chinese were in earnest. Now it

was all simmering down to a few millions of Japanese money, supplied

for politics and internal dissension, with Japan seeking special

advantages.

Work was to be done. The United States could still bring relief and

a strong call for united action into this troubled situation without

giving just cause for complaint or for taking offence. The French were

especially desirous of bringing the Chinese actually into the war.

The Belgians wished the mobilization of Chinese material resources,

particularly foodstuffs. The British were in general accord, though

they doubted whether Chinese troops could be soon transported to the

theatre of war. Dr. George Morrison who had just gone over the whole

situation with the President and cabinet, came to me saying: "The

Chinese will apply to you for advice. You have a freer hand than the

British minister."

But an event of profound significance was impending, and it interrupted

my efforts along these constructive lines. It was at this time that

the results of Japan's efforts to reach an agreement with the State

Department in Washington became known to China.

PART IV

LAST YEAR OF WAR AND AFTERMATH

CHAPTER XXVI

THE LANSING-ISHII NOTES

It was in rather an indirect way that I learned of the secret

negotiations which had been going on between the head of the State

Department in Washington and the Japanese Government. Since these

negotiations concerned some of the most vital problems in the whole

Chinese situation, it was surprising that everyone had been kept in

ignorance of them. I learned of them, I confess with mingled emotions,

from none other than Baron Hayashi himself. I called on him on the

evening of November 4th; and, after going over the matter of routine

which I had wished to take up with him, I remained chatting pleasantly

with him. In the course of our talk the Baron remarked: "I have just

received some information that is quite important, and I want you to

know about it. Let me get the cablegram."

He brought a paper and handed it over to me without comment. It

was a cablegram from Tokyo that informed him of the signing of

the Lansing-Ishii notes, and gave a summary of their text. The

first paragraph contained the vital clause: "The Government of the

United States recognizes that Japan has special interests in China,

particularly in the part to which her possessions are contiguous." This

naturally struck me in the face with stunning force, before I had time

to weigh its meaning in relation to the remainder of the declaration.

I read the dispatch twice and made an effort to impress its salient

points on my memory, and then turned to my Japanese colleague

attempting to retain my composure.

"Yes," I managed to say, "this is quite interesting. It is somewhat in

line with conversations we have had, yet differs in some respects."

I forced myself to remain a little longer and tried to continue the

matter-of-fact conversation which this astounding piece of news had

interrupted. When I finally took my leave, I was uncertain whether

Baron Hayashi did or did not know that I had been unaware of this

exchange of notes. Hurrying to the Legation, I dispatched a cablegram

to the Department asking that I be informed.

It had been agreed, so the cable from Tokyo had stated, that an

announcement of the parley should not be given out until November 7th.

But the Japanese minister had already informed the Chinese Foreign

Office on Sunday night; and early on Monday its representative called

to get my version of the matter.

No word had been sent me. It was inexcusable to fail to give the local

representative the earliest possible information, and I intimated as

much in my cablegram to the Secretary of State. As the Foreign Office

had been fully informed, I could only state to my visitor that I was

not authorized to deliver the text until later, and that I was myself

still considering the full import of the document, which in certain

respects followed lines of policy that had been discussed in the past.

As I could plainly see, the notes had been paraded in the Chinese

Foreign Office as yielding important concessions from the United

States and as a diplomatic triumph for Japan. I knew nothing of the

motives which had animated the President and Secretary of State when

they agreed to the paper. I could not explain its purposes; but when

my visitor asked: "Does this paper recognize the paramount position of

Japan in China?" I could and did answer with an emphatic "No." Beyond

that I said nothing.

All that day and the next reports streamed in from many quarters that

the Japanese were "crowing over their victory" in their talks with

the Chinese. More Chinese officials and many Americans applied at the

Legation for authentic word. But no help came from the Department of

State. Indeed no word reached me until the morning of the 7th.

It cannot be said that the American secrecy pledge was not

punctiliously observed--even to the extent of keeping in ignorance

the American minister, who would have to bear the brunt of the

consequences of this diplomatic manoeuvre. The Japanese, meanwhile,

had given the note not only to the Chinese Government several days in

advance, but--was it out of abhorrence for secret diplomacy?--even

before the notes had been signed their text was communicated to the

representatives of Great Britain, Russia, France, and Italy. This was

done at Tokyo.

It is not surprising that this procedure produced upon the Chinese the

impression that the Japanese had got what they wanted. They thought the

declarations made by the United States contained admission of a special

position held by Japan in China, not desired by the latter, but forced

through by the military and political power of Japan.

The reception given the note by Far Eastern experts and by the public

indicated that it would be interpreted in widely varying fashion. The

first impression only gradually gave way to a calmer judgment when

the specific terms of the notes were carefully read and the ambiguous

character of the instrument was realized. In the first place, the

Japanese Legation, in translating for the benefit of the Chinese

Ministry, had used for "special interest" a Chinese term which implied

the idea of "special position." Doctor Tenney's more direct translation

of the term was without this extra shade. The Department authorized

me to deliver an explanatory note to the effect that the interests

referred to were of an economic, not a political, nature. It referred

to "Japan's commercial and industrial enterprises in China"; these, it

added, "manifestly have, on account of the geographical relation of

the two countries, a certain advantage over similar enterprises on the

part of citizens or subjects of any other country."

I could not avoid the feeling that the form which the exchange of

notes at Washington had taken was unfortunate. It was indeed desirable

that the friendly attitude of the United States toward all Japan's

economic activities in China should be stated strongly. This had been

the tenor of the conversations between successive Japanese ministers

and myself, which had been communicated to the State Department. It was

necessary, if the Japanese really entertained it, to disabuse them of

the conception that the political influence of the United States was

being used to discourage close business relationships between China and

Japan, and to frown upon Japanese enterprises in China. On the basis

of such an understanding, it was hoped that Japan would join with the

United States in agreeing that special privileges in any part of China,

or any sort of economic advantage, would not be sought by political

means; that the Manchurian régime, to be more specific, would not

extend to other parts of China.

But the notes definitely stated that Japan would not use her special

interests in a way to "discriminate against the trade of other nations,

or to disregard the commercial rights heretofore granted by China in

the treaties with other powers." This might give rise to the idea that

"special interests" did not refer merely to specific economic interests

and enterprises. It might include also a certain political influence or

preference.

The Japanese minister, though disclaiming a reading which would imply

a paramount interest, evidently saw in the notes an endorsement of the

principle of spheres of influence. "The notes speak for themselves," he

said in an interview on the 8th of November; "they simply again place

on record the acknowledged attitude of the United States and Japan

toward China. They are simply a restatement of an old position. Even

the term 'special interests' is doubtless used in the same sense here

as in the past. Several other countries have territory that borders on

China; this fact gives them a special interest in these parts of China

which they touch. In exactly the same way, Japan has special rights in

China."

The non-official Japanese statements claimed much more than this. They

did "crow over" the Chinese. Was not here a vindication of distinct

priority enjoyed by Japan in China? In Japan the veteran Okuma, who

is never backward in airing his opinions in the press, also seemed to

have a rather broad idea of the notes. "Hitherto," he said, "America's

activities in China were often imprudent and thoughtless. For instance,

Secretary Knox's proposal to neutralize the Manchurian Railway was,

indeed, a reckless move. The United States also relegated Japan to the

background when she sent the note of June 7th to China, advising that

country concerning domestic peace. Thus America disregarded Japan's

special position in China. We may understand that she will not repeat

such follies, in the light of the new convention."

Of course, there is nothing in the notes to interfere with the

fullest and freest interchange of communications between the American

Government and the Chinese, on any topic whatever.

In reporting his conversation on the notes with the Japanese Minister

for Foreign Affairs before they were signed, the Russian ambassador

at Tokyo hit it off in this way: "Nevertheless, I gain the impression

from the words of the minister that he is conscious of the possibility

of misunderstandings, also, in the future; but is of the opinion that

in such a case Japan would have at her disposal better means than the

United States for carrying into effect her interpretation."

To show how different people were affected, I shall cite from some

letters. Dr. George Morrison wrote to a friend from southern China:

"Relays of Chinese have thronged to see the American consul, all

sounding one note--that they have been betrayed by America. After all

her valiant protestations, what earthly good did America gain by making

such a concession to Japan, giving recognition to that which every

American and Englishman in China had been endeavouring to prevent?

Carried to its logical conclusion this agreement gives recognition not

only to Japan's 'special interests' in Manchuria, but also to those

in Fukien Province which lies in 'geographical proximity' to Formosa.

Surely the British will now claim recognition of similar rights in

Kwangsi Province. It is all very deplorable."

Another Britisher, Mr. W.H. Donald, took a different view. "When I saw

the notes," he wrote, "I was delighted, because I read into them the

fact that America had, to use an Americanism, 'put one over' Japan.

Ishii went to America to get acquiescence in Japan's predominance in

China; to get America to admit Japan's hegemony of the Pacific. He

got neither. Instead, he had to reaffirm adherence to the previous

undertakings--undertakings which were discarded when Japan put in her

twenty-one demands."

The Chinese papers generally pronounced the notes inconsistent. The

_Chung Hua Hsin Pao_ saw no need for having the "special interests" of

Japan particularly recognized any more than those of other nations,

like Great Britain, France, Russia, and the United States, all of

which have territory adjacent to China. The paper thought that the

assurance that Japan seeks no special rights or privileges, should be

taken at its face value when the point of the whole agreement was the

recognition of "special interests" enjoyed by Japan. The tenor of the

note, therefore, appeared to favour "special interests," consequently

the division of China into spheres of influence--contrary to the

traditional policy of the United States.

Personally, from my knowledge of the situation in the Far East, I could

not see any urgent reason for making this declaration. I learned later

that the notes had been drawn up in consultation between the President

and the Secretary of State, without other reference to the Department

of State and without the knowledge of its staff. Also, the Secretary

had acted upon the belief and understanding that the first statement

concerning special interests was simply a self-evident axiom, but that

its restatement would clarify the situation. Certainly, on the other

hand, the positive affirmative pledge against "the acquisition by any

government of any special rights or privileges" was clearer and went

further than any previous declaration.

To safeguard its rights under any construction that might be given

to the document, the Chinese Government declared that it could not

recognize any agreement relating to China entered into between other

powers.

I have said that I could not see the need of these notes. Failing to

receive instructions which I sought from the Department of State,

I continued to take the position that the policy of the American

Government remained unchanged with respect to the existence of a

special position or special privileges on the part of any other

power in China. But the immediate effect of the notes on the Chinese

Government was to make its high officials feel that nothing very

positive could be expected from the United States by way of assistance

out of the nation's difficulties.

The general and continuing effect of the notes was seen in the

behaviour of the Japanese in China. The Japanese papers boldly

declared that Japan would interpret the term "special interests" in

a way to suit herself, and that it implied the supremacy of Japanese

political influence in China. The thrusting forward of this View did

not strengthen the government of General Tuan. Several more provinces

followed those which had declared their independence with acts that

made their allegiance at least doubtful. General Tuan's appointee as

military governor of Hunan suffered defeat at the hands of the southern

troops. The governors of the Yangtse Valley, under the leadership of

General Li Shun, addressed to the Government pointed inquiries about

financial dealings with the Japanese and the purchase of arms, which

was reported to involve an arms alliance.

As the attacks were directed at him personally, General Tuan felt that

he must resign. Notwithstanding an outward show of amity, General Feng

Kuo-chang and the Premier had actually not agreed. The Premier wished

to make war on the south and conquer it. The Acting President, on the

other hand, was in constant correspondence with southern leaders in an

attempt to bring about reconciliation. Tuan sent in his resignation.

The Japanese worked for his retention. The President did ask him to

reconsider, but his resignation finally took effect on the 20th of

November. General Wang Shih-chen, who was close to the President as

chief of staff, became acting premier. But Tsao Ju-lin, who headed the

Japanese clique, was retained.

Peace and unity did not result. The northern Tuchuns gathered at

Tientsin on December 4th, and decided to push the war against the south

with 200,000 men. This was to be made a pretext for getting more funds.

I kept in touch with General Tuan, in whose personal character and

honesty of purpose in wishing China to take part in the war I placed

reliance. Also his friend, Mr. Chu Ying-kuang, who had made a fine

record as civilian governor of Chekiang, had kept his eye mainly on

this goal. Through them I kept in touch with all of the Chinese who

fostered such action. If the Chinese of their own initiative should

create services for supplying urgent needs of the Allies, and should

train a model division for use on the battlefields of Europe, I

felt that the United States and her associates would find a way to

transport them to Europe. General Tuan was now free of politics. In

the conversations I had with the Premier and his associates, the idea

of a special organization for preparedness was talked over. The upshot

of this was the creation of a War Participation Office, with General

Tuan as its president. The Office was to make constructive plans for

developing resources useful in the war, and for training troops for

Europe.

Meanwhile, the Japanese were "cutting loose" in Shantung. Quite openly

they were trying to set up an administration in what they called the

railway zone. The agreements between China and Germany contained no

provision for such a zone. The Germans merely had the railway itself,

and certain specific mining enterprises, together with the port of

Tsingtao. A general priority in the mining districts within a zone

of ten miles along each side of the railway had been abandoned some

time previous to the war. Now the Japanese asserted in this "zone"

general administrative power, including policing, taxation, forestry,

and education. With this encroachment, the Chinese noted evidences of

Japanese toleration of revolutionary and bandit activities wherever

they served the purposes of the invaders.

People came frequently from Shantung to see me in order to lay before

me their complaints and petitions. They were distressed, but I could

not help them, save where American rights were involved. The Shantung

men reported that the Japanese were making the Lansing-Ishii notes the

basis of their propaganda, stating that Japan's special position had

now been recognized. This penetration into the interior of one of the

provinces of China proper by a foreign political administration was

undoubtedly the most serious attack ever made on Chinese sovereignty.

A member of the Chinese Foreign Office called on me on the 21st of

December, and spoke earnestly about the Japanese inroads in Shantung.

He said nothing could stop the Japanese. Their minister had stated that

it would be difficult to change an ordinance signed by the Premier and

sanctioned by the Emperor.

Among both Chinese officials and the general public all was

discouragement and depression. The first effect of the Lansing-Ishii

notes, the strong influence exercised by the pro-Japanese clique in the

government because of the financial backing they got, the knowledge

that such backing had to be bought with valuable national concessions,

the increasing disunion between north and south, the general despair

of any constructive and unifying policy being possible, made the

Chinese individually and collectively paralysed with doubt, fear, and a

feeling of impotence. It was plain that Japanese influences, making a

politico-commercial campaign in China, were everywhere actively taking

advantage of this demoralized state of the public mind and intensifying

it through their manipulations.

CHAPTER XXVII

AMIDST TROUBLES PEKING REJOICES

The Armistice meant the end of the Great War. Would it also mean the

end of sinister intrigue in China?

In the joy of the world victory everybody felt so. But when I returned

to Peking early in October, 1918, I found that things had gone from bad

to worse. Money had been squandered on war expeditions which had torn

the country, not united it. The unofficial Japanese financial agent,

Mr. Nishihara, a borer in the rotten trunk of Chinese finance, had

been at work all summer. The fact of his loan negotiations was denied

to the very last by the Japanese Legation. Suddenly, on October 1st,

Japan's Minister of Finance announced that his government had arranged

a number of loans to the Chinese. They involved commitments in the sum

of 320,000,000 yen, ostensibly to build railways and iron works; of

this amount 40,000,000 yen would be immediately advanced.

The earlier loans had all gone to the inept militarists. The advances

on these so-called industrial loans were in the same way dissipated

in partisanship, division, distraction. The new parliament had been

elected. It was to elect a new president. Money was poured into the

contest between Feng, the Acting President, and Hsu Shih-chang.

General Tuan had his army of small political adherents, who battened

on the funds supplied by the chief manipulators. They formed the Anfu

Club--from _An_hui, the province of the army clique, and _Fu_kien, the

province whence the navy drew most of its admirals.

The inner military ring was operating from the War Participation

Bureau, which had preëmpted the control of finance, natural resources,

and police. The ministries were powerless. The Government was debauched

with the easy money from Japan. With a sardonic grin, the Japanese

offered to lend China 200,000,000 paper yen, not redeemable, on which

the Chinese Government should base a gold-note issue. On this paper of

the Bank of Korea China should repay Japan, with interest annually.

Using the militarists, they tried hard to put it through. But the

foreign press, and such Chinese papers as dared, succeeded in laughing

it down. Redeemable in Korean or Japanese banknotes, which the Chinese

never use in daily trade, the proposed government gold notes could

not have been forced into circulation. They would only have worse

confounded the already existing monetary confusion.

The police terrorized and bullied the papers that opposed Japan's

loan negotiations and printed the facts about them. Nearly a dozen

were suppressed. The Anfu gang had cowed the Government and people in

north China. Without moral and legal authority, it made the Government

impotent in its prime functions, such as levying taxes and protecting

lives.

The diplomatic corps had to consider whether the customs and salt

revenues should be released to such a government. The best interests

not only of China, but of all the friendly nations, including

Japan herself, were being blighted. The prostitution of the War

Participation Bureau by the gold-lust of the militarists, with Japan

as pander, fostered the brawls of faction and disunion. Public opinion

was throttled and the corrupt elements found no organized popular

opposition.

Tsao Ju-lin, Minister of Finance, advocated the spurious gold-note

project, which had been dubbed the "gold-brick scheme." Tsao had

represented that the diplomatic corps had approved this scheme. Four

ministers jointly informed the Chinese Government that Mr. Tsao's

methods tended to destroy confidence between the Government and the

legations, and one minister said his legation would thenceforward

accept no statement coming from the Minister of Finance until the

Foreign Office had vouched for its truth.

The Finance Minister unblushingly tried to suspend the renewal of the

currency loan option until the foreign banks should consent to the

gold-note scheme. Here I protested, saying that under the Currency Loan

Agreement the American Government had a right to be consulted before

any such proposals could be considered.

His Excellency Hsu Shih-chang was elected President--a veteran

statesman of the old régime. In my first interview with him he

complained: "I am trying to deal with the south; but they have nobody

to bind them together and represent them. We are demobilizing most of

our superfluous troops, but I am worried because the Government lacks

financial support."

I talked with him again often. General Li Shun, of Nanking, had been

asked to mediate. The southern leaders needed to be "grubstaked" to pay

off their troops, then an agreement with them could be reached. The

President's solution smacked of buying them off. But this would not

end the militarist intriguing. President Hsu issued on October 25th a

peace mandate, taking President Wilson's statement about reconstituting

international unity as his point of departure. The President had cabled

this to Hsu when he was inaugurated. The press was reporting that the

British and American ministers were working for internal peace; our

mediation would have been popular. It would have pulled the leaders of

north and south out of their impasse. President Hsu cabled back to Mr.

Wilson: "Though we are separated by a great distance, yet I feel your

influence as if we were face to face."

President Hsu had gotten a report from Dr. George E. Morrison, who had

returned from investigations in south China. Doctor Morrison made the

point that internal strife must be ended if China was to do anything

in the Great War and to hold up her rights strongly at the Peace

Conference. I will quote this report somewhat at length:

China under the advice of several of her more powerful ministers looks

to Japan for guidance, Japan having in an incredibly short space

of time, by the energy and patriotism of her united people and the

wisdom of her rulers, raised herself to an important position among

the nations. But Japan is no longer one of the great world powers.

Japan lacks experience of modern war. Her army and navy are much out

of date. Her troops have no experience of the marvellous methods of

modern war. She has no submarine service, she has no air service.

Her government, created after the model of Germany, her kaiserism,

her Prussian militarism, are fast becoming obsolete. Compared with

the great powers of Great Britain, America, France, and Italy, the

strength of Japan is meagre. Japan at the end of the European war is

a third-rate power. Her government is the only military autocracy

existing in the world to-day, and for that reason Japan will occupy a

unique position at any peace conference. Japan is the only one of the

Allied nations who has failed to take any adequate part in the great

world struggle.

For China, a republic, to seek the guidance of the only existing

autocratic military government in the world to-day has at least the

appearance of inconsistency. Such action is viewed with suspicion by

all those in China who are aspiring to a democratic government--a

government by the people for the people.

If intervention is to be prevented, there must be early restoration

of democratic government, early reconciliation. As the simplest and

quickest way in which this can be effected, I suggest that your

Excellency invite the President of the United States to act as

mediator, to bring together representatives of the two great parties

of state in China that they may hear and weigh each other's view and

agree to a compromise. There is no loss of face in doing this.

During my recent visit to the south I gave expression to Chinese views

to all the leading men with whom I had the opportunity of discussing

the question of peace and reconciliation in China. All without

exception expressed their belief and confidence that an invitation to

the President of the United States to act as mediator would be a wise

act and one that promised the easiest solution of the grave conflict

which at present divides into hostile camps this fair land of China.

Japan persisted in her work, the United States remained indifferent.

The people of China got tired of all this. As a matter of fact, China

was divided only on the surface. Deep down into the life of the people

political controversies had not penetrated. They went on, placid and

industrious, regardless of the bickerings of politicians. Chinese

revolutions and declarations of independence might be bruited to the

world, which might think China had plunged into anarchy. As a people

the Chinese are freer from governmental interference than any nation

living. If the entire Central Government should suddenly disappear from

the face of the earth, it would make little difference in China. Yet

the long continuance of political conflicts lets foreign intrigue into

the national quarrels, and so reacts dangerously.

The people as a whole wished the nation to be a unit. But the

professional militarists had to be paid off. After the President had

issued his peace mandate, he asked that I see him. "If decisive action

for peace is taken," he asked, "may we depend on the United States

to back us in getting funds to pay off these large bodies of troops?

If not, will she not lead in a reorganization loan joined by several

powers?"

I asked the American Government for the funds desired. If they came

conditionally upon the reunion of China, the responsible military

governors and civilian leaders north and south would have the means

to be rid of the predatory and parasitic bands. Japan then roused

herself. She approached the governments of the United States, France,

Great Britain, and Italy on October 23rd, asking that they work toward

a peace settlement with the leaders both north and south. The American

Government approved, adding that China needed money, but that no funds

would be afforded her until a reunited government was seated.

Meanwhile, the temper of the Chinese people was sounded in a

gratifying way. John Mott asked the Y.M.C.A. in China to raise $100,000

for the War Works Drive. I sat at dinner one evening with Liang Shih-yi

and Chow Tsu-chi, and said: "A drive is going on in the United States

to aid all the war works undertaken for the benefit of the soldiers at

the front. Do you suppose that some of our friends in China would wish

to contribute?" They both replied: "Yes, we are sure they would."

Two days elapsed. Chow Tsu-chi called, told me they had formed a

National War Works Committee, and that local committees were being

formed in every provincial capital. They raised, not $100,000, but more

than $1,000,000!

It was the more remarkable because this way of contributing to a public

purpose had never been tried in China. Only the _Shun Tien Shih Pao_ of

Peking, Japanese-controlled, threw cold water on the movement, saying

that to be sending money to Europe while so many provinces in China

themselves needed aid was peculiar.

The representatives of the Associated Powers met on October 18th.

They felt that participation in the war had not united China; a

clique had perverted it to factional uses. Each representative, it

was agreed, should present instances in which the Central Government

or local officials had obstructed action or been remiss. At the next

meeting, on the 28th, I had prepared a memorandum of instances; this

was made the basis of a statement. A conference was to be held with

the President of China, to be quite friendly, but to make manifest

the grave shortcomings due to political vices. Thus, it was thought,

the responsible and conscientious elements in the Government would

be fortified against the clique that had invaded it. The Foreign

Minister, however, asked that the conference be deferred, in order that

the Government might strive to bring its action more completely into

accord with its real desire. There was no threat in our suggestion. But

publicists often overlooked its true object, and treated it as if it

had been a condemnation of China rather than of the controlling clique

in the Government.

Joy and cheerfulness greeted the news of the Armistice. The American

Legation Band was the first to celebrate, with a detachment of marines

it paraded the legation compounds; only the Japanese Legation sentinel

failed to salute it; he had failed to gather its purport. At Sir John

Jordan's personal invitation I joined the British Legation's impromptu

festivities that night, with some members of my staff. Responding to

Sir John's remarks of welcome, I spoke of the trinity of democratic

peoples, the British, French, and Americans, as destined to lead the

world to a fuller understanding of free institutions and popular rights.

In the continuous round of festivities and celebrations the foreign

and Chinese communities joined whole-heartedly, with dinners,

receptions, special meetings of societies, and finally a great national

celebration on the 28th of November. We gave a reception on the 20th

to the ministers of the Associated Powers. As each minister arrived,

the national air of his country was played by the Marine Band. When

the Russian minister came in, the band, without special instructions,

played the old Russian Imperial hymn. Prince Koudacheff was moved, for

this anthem was now outlawed in his country; he came to me in tears.

Next day he showed me a song with music which he had suggested for

adoption by the Siberian Government as the Russian national hymn. But

at the solemn service held on the Sunday following, when the national

airs of the different countries were played, when the turn came for the

Russian hymn a pause was noted. Those conducting the service had ruled

out the old Imperial hymn. As there was apparently no music available

as a substitute, poor Russia had to go unsaluted.

From early in the morning of the national celebration, Chinese troops

marched toward the Imperial City, where they lined the spacious

interior courts. The legation guards followed. Multitudes of Europeans

and Chinese flocked to the palace, where the diplomats were gathered,

all but myself resplendent in gorgeous uniforms. The neutral ministers,

too, were in attendance. The European adviser had found a precedent

among peace celebrations in Europe, such as that after the Danish War

and the Franco-Prussian War, in accordance with which the neutral

ministers might attend, though peace was not fully concluded. Also,

it was argued that the Chinese were celebrating the cessation of

hostilities, and the participation of friendly representatives might be

invited.

Whispered controversy was heard among the ministers. The representative

of France, seeing senior neutral representatives ahead of him, said

this occasion was different, and demanded that the rank of precedence

be changed. Time was too short for so thorny a problem. We agreed to

say nothing at all, but to walk in a group forming itself spontaneously.

We gathered in the pavilion of the Ta Ho-men, the gate which leads into

the court immediately before the main Coronation Hall of the Imperial

City. Here, in the very inner sanctuary of the thousand-year-old

imperialism of China, the victory of freedom was celebrated. The square

was massed with troops, Chinese and foreign. On the ascending terraces

stood thousands of guests, the military and officials in uniform; over

the balustrades waved forests of flags of the Associated Nations, as

well as long floating banners with Chinese inscriptions in gold.

After the President had ascended the steps to the music of bands

of the nations, bowed to all the flags, and made his address,

aeroplanes appeared, dropping innumerable Chinese flags and messages

of felicitation printed in gold on red; then they continued to circle

above the Imperial City. While the military were marching to the gate,

rockets were sent skyward; exploding, they released paper figures of

animals, as well as soldiers and weapons of war, which floated a long

time in the air. When the President left the Tung Hua Palace, where he

had received thousands of guests, the aeroplanes preceded him on his

ride to his own residence.

We celebrated Thanksgiving that afternoon in American fashion with

a religious service, the American colony and many British and

other Allied residents attending, as well as the ministers of the

Associated Powers with their staffs. Premier Chien Neng-hsun dined

the diplomatic corps and welcomed President Wilson's proposal for a

league of nations. President Hsu invited us on November 30th, and then

the French minister, who still was troubled with the question of the

non-belligerents, objected to the neutral ministers being there at all.

If they went, he said, he would not go. The British minister and I

devised, as we thought, a way out. Would the neutral ministers view the

Allied ministers as guests of honour on this occasion? The secretary

to the Foreign Minister was chosen to ask them. Unfortunately, the

neutrals took it as a demand rather than an inquiry. Then the fat was

in the fire--the neutral ministers would not attend the dinner. This

was the one discordant note in our celebrations.

In order to enable the Central Government to get along at all, the

diplomatic corps agreed to the release of surplus salt revenues to the

extent of $5,300,000. President Hsu on the 16th of November ordered

immediate cessation of hostilities in the Chinese interior. The

northern leaders were still war-like, but accepted his decision. The

British, French, American, Japanese, and Italian representatives and

myself met on the 22nd to uphold President Hsu's attitude. We took

up the Japanese proposals, deciding that identical representations

be made at Peking and Canton. My colleagues asked me to draft an

_aide mémoire_ which was to accompany the oral representations.

Japan objected to including in it the American suggestion that no

financial advances would be made now but that a reunited China would

get support from the powers. The Japanese banks had bound themselves

to make further payments to China, it was said. The _aide mémoire_

deplored disunion, disavowed wishing to intervene, and hoped that,

"while refraining from taking any steps which might obstruct peace,

both parties would seek without delay, by frank confidence, the means

of obtaining reconciliation." In the clause about obstructing peace

I had in mind such acts as the election of a northern militarist as

Vice-President. This, though in itself a peaceful act, would have

raised an insurmountable obstacle to peace.

Five powers were represented in an audience before the President on

December 2nd, the British minister speaking. The northern military

leaders had held a conference at Tientsin. If, as reported, they wished

to demand that Tuan be reinstalled as Premier, and that Tsao Kun,

Military Governor of Chihli, be elected Vice-President, it would have

embittered the south. The public therefore welcomed the representations

of the powers. The American reference to loans was omitted;

nevertheless, the situation produced made it no longer possible for any

one country to lend money to either faction without putting itself in

an equivocal position.

The Japanese felt moved on the 3rd of December to publish a statement

about Chinese finance. Japan could not discourage financial and

economic enterprises of its nationals in China, the statement read, "so

long as these enterprises are the natural and legitimate outgrowth of

special relations between the two neighbouring and friendly nations. At

the same time they fully realize that under the existing conditions of

domestic strife in China loans are liable to create misunderstandings

and to interfere with peace in China. Accordingly, the Japanese

Government has decided to withhold such financial assistance to China

as is likely in their opinion to add to the complications of her

internal situation."

This declaration left great latitude in the making of loans, yet

it did, in fact, acknowledge the appropriateness of the American

position. I asked Baron Hayashi about it. What exceptions would be

made? The Baron was not very definite but said _bona fide_ industrial

loans were meant. "Most decidedly," he added in reply to my continued

questioning, "I favour the strictest scrutiny of each loan, and mutual

information among the governments about such transactions." He gave

me plainly to understand that he did not approve, and had opposed,

certain deals attempted by his countrymen in the semi-official group.

I gathered his thorough disapproval of direct interference by the

military in international affairs; but the military were in power in

Japan, and its diplomats were helpless.

In accordance with its main suggestion, the American Government

followed with a memorandum about financing China, sent to Great

Britain, France, and Japan. It had already proposed a new consortium,

including virtually all parties interested in each national group. The

Currency Reform Loan should come first, with the shares of the British

and French groups carried by the Americans and Japanese so long as the

former could not furnish funds. Industrial as well as administrative

loans should be included, and thus removed from the sphere of

destructive competition.

The danger that industrial loans might be converted to political ends

was patent. Yet in my recommendations I felt it difficult to avoid

evils of monopoly, unless independent enterprises involving loans

should be admitted.

The British and French banking representatives plainly wished to have

America lead in the international financial reorganization of China.

Japan, as its minister often said, desired the United States to reënter

the Consortium--but he meant the old Consortium, in which Japan had

the leadership. Japan did not readily take to the idea of the new

Consortium. It declared that it favoured the proposal "on principle,"

but found it necessary to weigh every detail with considerable

minuteness. This caused great delay.

CHAPTER XXVIII

A NEW WORLD WAR COMING?

The old World War ended with the Armistice. Was a new one looming?

If one came it would break in China--of that we were convinced.

Unless it settled China's problems the Peace Conference would fall

disastrously short of safeguarding the world against a renewal of

its titanic conflict. In China the powers were rivals, each with its

jealously guarded sphere of influence. In the extravagant language

of fancy, Ku Hung-ming thus pictured to me the situation: "China's

political ship, built in the eclipse and rigged with curses black, has

been boarded by the pirates of the world. In their dark rivalries they

may scuttle it and all sink together, but not until they have first

plundered and burned civilization as we know it."

Should any action be taken which might be interpreted as a recognition

of a special position for Japan in China, whether in the form of a

so-called Monroe Doctrine or a "regional understanding" or in any other

way, forces would be set in motion that in a generation would be beyond

controlling. In comparison with this tremendous issue, even the complex

re-alignments of Central Europe fell into relative unimportance. The

same fatal result was sure to follow any further accentuation of

spheres of influence.

We in China realized this, and in deadly earnest we worked out a plan

of joint preventive action by the powers, which would unite them

instead of leaving them in fatal rivalry. The root of all evil is in

the love of money. It was local financing by single exploiting powers

in spheres protected by political influence that was the evil. If,

instead, the finance of the world could be made to back a united

China, there would be a great constructive development, from which all

would benefit far in excess of selfish profits garnered in a corner.

We planned a system of joint international finance. That, despite

its drawbacks, would destroy the localization of foreign political

influence. The plan in its relations to the Chinese Government was

worked out with everyone that we could reach competent to give advice.

There were the official and business representatives of Great Britain

and France; the Chinese cabinet ministers and other officials, and all

of the American representatives, including the commercial attachés

Julean Arnold and P.P. Whitham, and the American advisers, Dr. W.W.

Willoughby, Dr. W.C. Dennis, and Mr. J.E. Baker of the Department of

Railways. Day and night the conferences went on informally; by day and

night these matters were threshed out. Japanese experts, too, were

consulted.

The time seemed propitious. The Armistice brought the hope that the

powers would coöperate. The separatist political aims in China might

be overcome, together with the sinister intrigue for dismembering or

dominating that mighty nation of freemen. Could foreign financial

action and influence in China be gathered up into a unit? Could it be

made to build for the whole of China, not tear it down in its several

parts? At all events, we hammered out a plan to make this possible.

Foreigners had gone deeply into railway loans, making their chief

investments there. Hence we made the plan of unified financial support

apply, first of all, to the railway service. The operating of the

different Chinese lines according to the respective national loans

was a curse; it was evil politics, and it broke down the railway

service. Foreign experts, acting as servants of the Chinese Government,

might unify the Chinese railroads, though of this Liang Shih-yi,

Chow Tsu-chi, and Yeh Kung-cho--who knew most about Chinese railway

affairs--had their doubts. It would pile up the overhead expenses, they

thought. The railways could be managed thriftily only by the Chinese.

The foreign banking interests, too, might try to be depositories for

the railway funds, as they were already for the customs and salt

revenues. Thus Chinese capital would pay tribute to foreign capital. If

still other revenues were thus absorbed, as might be feared, national

economy would be fettered too much.

Therefore they proposed a Chinese banking group. It would help in the

financing and could be made the depository of funds.

These men sympathized, however, with the main purpose of the suggested

arrangement for unification. Foreign expertship on the railways, also,

was highly valued by Chinese railwaymen trained in the West. True,

Mr. Sidney Mayers somewhat frightened them by his proposals. This

British industrial representative of long experience in China proposed

internationalizing each separate line by putting on it an international

group of experts. The Chinese objected; it would mean giving all the

important positions to a large staff of foreign officials. Of this they

had had enough in the Customs.

It was necessary to dissociate banking from building; such a union

would mean monopoly and fierce attacks upon it by all outside

interests. With the financing separate, the contracting might be left

free to all competitors, bidding low and resting their bids upon their

repute and responsibility.

So long as it remained possible for different countries to acquire

special privileges in distinct spheres, promises of "integrity and

sovereignty" would be nothing but empty words. No matter how much they

might promise that they would not discriminate against the trade of

other nations, the fact remains that established position in itself

constitutes preference.

The favoured nations might more honestly say: "Give us our special

position and we will give you all the equal opportunity you ask."

Foreign influence could safely be wielded only as a trusteeship

for China and the world, without any vested political interests or

economic advantages secured through political pressure. But Chinese

administration was lax. I urged the Chinese officials to set their

house in order, to put their public accounting on an efficient plane;

even if necessary to employ foreign experts to do this. They said:

"Yes, if the United States will lead," for a long record of square

dealing had endeared our business men to the Chinese.

But Americans had been slow in China. Two years had fled, and the

Grand Canal was not yet restored as promised. The half million dollars

advanced had been spent on preliminary surveys. Silver had risen;

American gold bought only one half what it had before. Overhead expense

was high, and for the preliminary work more than the half-million was

needed. The Chinese were disappointed, grief-stricken; they began to be

suspicious.

The Japanese-controlled papers redoubled their attacks on Americans.

Pretty soon a Japanese journal at Tsinanfu assaulted the name and

character of President Wilson. I had an understanding with my Japanese

colleague that all press misstatement should be corrected. I saw him

about this attack on the head of a friendly nation. He promised to

look into it. After ten days I wrote inquiring again. Under the press

laws of Japan, he responded, a paper could indeed be punished for

libellous attack upon the head of a foreign state, provided that such

head happened to be in Japan at the time. As this paper was notoriously

under the domination of the Japanese authorities, amenable to their

very breath and whisper, I failed to see how the minister should find

it hard to bring it to book. I merely called for a retraction where the

Japanese, if a Chinese-owned paper so scurrilously had attacked the

Japanese Emperor, would have asked for total suppression. The Japanese

minister said he would "further consider the matter" and would see what

he could do. A mild apology and retraction were eventually published.

The action of the Japanese in China, official and unofficial, during

the war, had aroused the deepest resentment among the Chinese, who

were on the verge of despair. The Chinese people were being whirled

in the vortex of old and new. The old organization was beginning to

crumble; the new had not yet taken shape. It was easy to find spots

of weakness and corruption, aggravation of which would bring about an

actual demoralization of social and political life and the obstruction

of every improvement; bandits could be furnished with arms; weak

persons craving a stimulant could be drugged with morphia; the credit

of native institutions could be ruined; and the most corrupt elements

in the government encouraged. For the original weaknesses and evils the

outside influence was not responsible, but it was culpable for making

them its instruments for the achievement of its aims of political

dominion.

A vast system whose object was the drugging of China with morphia,

which utilized the petty Japanese hucksters and traders throughout the

country, was exposed in the "opium blacklist" published by the British

papers in China. Specific proof was adduced in each case. Often the

blacklist extended over two pages of a paper. Obviously these Japanese

druggists, photographers, and the whole outfit of small-fry traders

could not traffic in morphia without the connivance of the Japanese

Government and the support of semi-official Japanese interests. The

Japanese post offices were used for its distribution in China. Chinese

police interference with the thousands of Japanese purveyors was ruled

out under the exterritoriality agreements. In Korea, the Japanese opium

grown officially for "medicinal uses" was produced far in excess of

medicinal needs, and through the ports of Dairen and Tsingtao large

quantities of morphia came into China.

The Japanese-controlled press at first answered the blacklist with

charges of _tu quoque_; but when they defamed the American missionary

hospitals, alleging that they were centres for distributing narcotic

drugs, nobody among the Chinese paid further attention to them. The

blacklists mapped graphically the thickly sown morphia "joints"

around the police station of the Japanese settlement at Tientsin and

the responsibility was brought home to Japan. An official Japanese

announcement was evoked that no effort would be spared to stop the

"regrettable, secret, illicit traffic."

In Shantung Japanese civil administration had been set up along the

railway without a scintilla of right. It was later withdrawn for new

concessions and privileges wrung from the Peking Government. The

Japanese were old masters of this trick. Seize something which you

do not really want, and restore it to its owner if he will give you

something you do want. Then what you want you get, but it is not

"stolen," and can be kept with smug immunity. The arrangements in

Shantung were made secretly, riding roughshod over Chinese rights,

and intended to sterilize in advance the enactments of the Peace

Conference. If a foreign power should wish to own the Pennsylvania

Railway system, and should actually come into the United States and

occupy it, the parallel would be exact with what Japan did in Shantung.

After taking the Shantung Railway and holding it, the Japanese stoutly

claimed an "economic right" to it. The whole course of Japan in China

during the Great War alarmed both Chinese and foreigners. I may not

name the responsible and fair-minded writer of a letter from which I

quote:

It would be in the highest degree unfortunate if the present

fortuitous and temporary possession of the Leased Territory and

Shantung Railway by Japan should be confirmed by the final Treaty of

Peace, for not only would China's sovereignty in Shantung be in danger

of impairment, but the trading rights of Chinese, Americans, and

Europeans would undoubtedly be prejudiced.

Another consideration that has the greatest weight with the writer is

that the principles for which the United States entered the European

War and on behalf of which the United States, in common with the

whole world, has paid an unthinkable price in gold and blood, make

unbearable a continuance, not to say accentuation, of the old system

of foreign intrigue in China. It is unbearable that one result of the

victory bought in part with American lives should be the extension

of Japanese power in China, when such extension means the further

strengthening of the domination of a monarchical and imperialistic

foreign nation over China, a result constituting in its own sphere a

complete negation of the objects for which the United States devoted

its entire resources in the war against Germany.

Dr. Sun Yat Sen wrote me at Shanghai on the 19th of November, referring

both to internal and external troubles, and the union of militarists,

foreign and Chinese:

Through you alone will the President and the people of the United

States see the true state of affairs in China. Your responsibility

is indeed great. Whether Democracy or Militarism triumphs in China

largely depends upon Your Excellency's moral support of our helpless

people at this stage.

These words show the Chinese belief in the sheer force of public

opinion, and their wish that the Chinese situation be known and

understood abroad. This achieved, the evils under which China groans

and travails would shrivel.

We built up our solution of unity for China. In carefully weighed

dispatches I sent it to the American Government, and cabled the

President a statement of China's vital relation to future peace. I was

constrained to condemn Japan's policy, quite deliberately, summing up

the evidence accumulated in the course of five years. I had come to the

Far East admiring the Japanese, friendly to them--my published writings

show this abundantly. I did not lose my earnest goodwill toward the

Japanese people but I could not shut my eyes to Japanese imperialist

politics with its unconscionably ruthless and underhanded actions and

its fundamental lack of every idea of fair play. The continuance

of such methods could only bring disaster; their abandonment is a

condition of peace and real welfare. The aims and methods of Japan's

military policy in the Continent of Asia can bring good to no one,

least of all to the Japanese people, notwithstanding any temporary

gains. Such ambitions cannot permanently succeed.

A cure can come only when such evils are clearly recognized.

Lip-service to political liberalism might mislead the casually

regardful outside world. To those face to face with what Japanese

militarism was doing to continental Asia there was left no doubt of its

sinister quality. Japan herself needs to be delivered from it, for it

has used the Japanese people, their art and their civilization, for its

own evil ends. More than that, it threatens the peace of the world. If

talk of "a better understanding" presupposes the continuance of such

aims and motives as have actuated Japanese political plot during the

past few years, it is futile. What is needed is a change of heart.

Here is the substance of the memorandum upon which my cablegram to the

President was based:

In 1915, coercion was applied and China was forced by threats to

solidify and extend the privileged position of Japan in Manchuria

and Mongolia and to agree prospectively to a like régime in Shantung

together with the beginnings of a special position in Fukien Province.

After this there was a change of methods although the policy tended to

the same end--domination over China.

Instead of coercion, Japan applied secret and corrupt influence

through alliance with purchasable officials kept in office by Japanese

support. The latter insidious policy is more dangerous because it gave

the appearance that rights are duly acquired through grant of the

Chinese Government; no demands or ultimatums are necessary because

corrupt officials strongly supported by Japanese finance, acting

absolutely in secret channels, suppressing all public discussion with

the strong arm of the police, are able to deliver contractual rights

regular in form, though of corrupt secret origin and evil tendency.

Japan has used every possible means to demoralize China by creating

and sustaining trouble; by supporting and financing the most

objectionable elements, particularly a group of corrupt and vicious

military governors akin to bandits in their methods; by employing

instigators of trouble; by protection given to bandits; by the

introduction of morphia and opium; by the corruption of officials

through loans, bribes, and threats; by the wrecking of native banks

and the debauching of local currency; by illegal export of the copper

currency of the people; by local attempts to break down the salt

administration; by persistent efforts to prevent China from going into

the war and then seeing to it that China was never in a position to

render to the common cause such aid as would be in her power and as

she would willingly render if left to herself: finally, by utilizing

the war and the preoccupation of the Allies for enmeshing China in the

terms of a secret military alliance.

As a result of these methods and manipulations, Japan has gained the

following advantages: a consolidation of her special position in

Manchuria and eastern Mongolia, and the foundation of the same in

Shantung and Fukien; control in the matter of Chinese finance through

the control of the Bank of Communications and the Bureau of Public

Printing and the appointment of a high financial adviser together with

the adoption of the unsound gold-note scheme happily not yet put in

force. She has secured extensive railway concessions in Manchuria,

Shantung, Chihli, and Kiangsu; mining rights in various provinces;

and special monopolistic rights through the Kirin forestry loan, the

telephone loan, and others. Through the secret military convention

Japan attempts not only to control the military policy of China but

incidentally national resources such as iron deposits. All these

arrangements are so secretly made that in most cases not even the

Foreign Office is in possession of the documents relating thereto.

Together with this goes the persistent assertion of special interests

which are interpreted as giving a position of predominance.

This is a strong indictment and I feel the fullest responsibility in

making these statements. Fundamentally friendly to the Japanese as my

published expressions show, I have been forced through the experience

of five years to the conclusion that the methods applied by the

Japanese military masters can lead only to evil and destruction and

also that they will not be stopped by any consideration of fairness

and justice but only by the definite knowledge that such action will

not be tolerated.

As a steady stream of information from every American official in

China and from every other source as well as my own experience have

made this conclusion inevitable, I owe the duty to state it to the

American Government in no uncertain terms. Nor is this said in any

spirit of bitterness against the Japanese people but from the

conviction that the policy pursued by their military masters can

in the end bring only misery and woe to them and the world. During

all this period it has not been possible for the European powers

or the United States to do anything for China. The United States,

though assisting all other Allies financially, could not contribute

one dollar toward maintaining the financial independence of China

as undivided attention was needed to the requirements of the west

front. The Lansing-Ishii notes, undoubtedly intended to express a

friendly attitude toward any legitimate aspirations of Japan while

safeguarding the rights of China, were perverted by the Japanese into

an acknowledgment of their privileged position in China. Now at last,

when the pressure has been released, America as well as the European

countries must face the issue which has been created, that is, whether

a vast, peaceable, and industrious population whose most articulate

desire is to be allowed to develop their own life in the direction of

free and just government, shall become material to be moulded by the

secret plottings of a foreign military despotism into an instrument of

its power. If it is said that the aims of Japan are now but economic

and in just response to the needs of Japan's expanding population, it

must be remembered that every advantage is gained and maintained by

political and military pressure and that it is exploited by the same

means in a fashion, taking no account of the rights of other foreign

nations or of the Chinese themselves. Divested of their political

character and military aims the economic activities of Japan would

arouse no opposition.

Only the refusal to accept the results of Japanese secret manipulation

in China during the last four years, particularly, the establishment

of Japanese political influence and a special privilege position in

Shantung can avert the result of either making China a dependence of a

reckless and boundlessly ambitious military caste which would destroy

the peace of the entire world, or bringing on a military struggle

inevitable from the establishment of rival spheres of interest and

local privilege in China.

Peace is conditioned on the abolition for the present and future

of all localized privileges. China must be freed from all foreign

political influence exercised within her borders, railways controlled

by foreign governments, and preferential arrangements supported by

political power. If this is done, China will readily master her own

trouble, particularly if the military bandits hitherto upheld by Japan

shall no longer have the countenance of any foreign power.

The advantages enumerated above were gained by Japan when she was

professedly acting as the trustee of the Associated Powers in the

Far East, and they could not have been obtained at all but for the

sacrifices made by them in Europe. They are therefore not the

exclusive concern of any one power. With respect to Shantung the

German rights there lapsed, together with all Chino-German treaties,

upon the declaration of war. A succession of treaty rights from

Germany to Japan is therefore not possible, and the recognition of

a special position of Japan in Shantung could only proceed from

a new act to which conceivably some weak Chinese officials might

be induced but which would be contrary to the frequently declared

aims of international policy in China and which would amount to the

definitive establishment of exclusive spheres of influence in China

leading in turn to the more vigorous development of such exclusive

spheres by other nations. The present situation of affairs offers the

last opportunity by common consent to avert threatening disaster by

removing the root of conflict in China.

Never before has an opportunity for leadership toward the welfare

of humanity presented itself equal to that which invites America in

China at the present time. The Chinese people ask for no better fate

than to be allowed freedom to follow in the footsteps of America;

every device of intrigue and corruption as well as coercion is being

employed to force them in a different direction, including constant

misrepresentation of American policies and aims which, however, has

not as yet prejudiced the Chinese. Nor is it necessary for America to

exercise any political influence. If it were only known that America

in concert with the liberal powers would not tolerate the enslavement

of China either by foreign or native militarists the natural

propensity of the Chinese to follow liberal inclinations would guide

this vast country toward free government and propitious development of

peaceful industrial activities, even through difficulties unavoidable

in the transition of so vast and ancient a society to new methods of

action.

But if China should be disappointed in her confidence at the present

time the consequences of such disillusionment on her moral and

political development would be disastrous, and we instead of looking

across the Pacific toward a peaceable, industrial nation, sympathetic

with our ideals, would be confronted with a vast materialistic

military organization under ruthless control.

CHAPTER XXIX

JAPAN SHOWS HER TEETH

Mr. Obata had succeeded Baron Hayashi as Japanese minister in

December. He was a dour, silent man who had been much in China, as

consular officer and in the Legation. He had sat with Mr. Hioki in the

conferences in which the twenty-one demands were pressed on China.

He was known to be a very direct representative, in the diplomatic

service, of the militarist masters of Japan. His appointment was to

the Chinese ominous of a continuance of aggressive tactics. A wail of

indignation went up from the Chinese press, but Mr. Obata remained. In

my personal relations with this secretive man I thought I saw gradually

emerging a broader and more humane outlook.

The new Japanese minister called on the 2nd of February, 1919, at

the Foreign Office and expressed resentment at the attitude of the

Chinese delegation at Paris. The Chinese representatives had said they

were willing to publish all the secret agreements which the diplomacy

of Nippon had been weaving around China. Japan objected. The sacred

treaties between China and Japan were not to be divulged without the

consent of both parties. If China was so anxious to purge herself of

secret diplomacy, let her publish first the agreement of September

24, 1918, which gave the special privileges of Germany in Shantung to

Japan. The displeasure of the Japanese in Paris was reënforced by Mr.

Obata in Peking by what the Chinese took to be a veiled threat. "Great

Britain," said he, "is preoccupied with internal disorders. She cannot

assist China. But Japan is fully able to assist, as she has a navy of

500,000 tons, and an army of more than a million men ready for action."

The Shantung agreement had been the consummation of the

Japanese-controlled Minister of Communications. The Chinese Foreign

Office was not consulted when the Chinese minister at Tokyo signed it,

and it had not been ratified by the Chinese Government. The Chinese

people viewed it merely as a draft, and demanded its cancellation with

the return to Japan of the moneys received under it by the politicians.

Mr. Obata's threat, which the Chinese took to be an attempt to

intimidate the Chinese delegation at Paris, evoked a deluge of

telegraphic messages urging the President and the Government by all

possible means to back their delegates. These expressions came from

men of all parties. Chen Lu, Acting Foreign Minister, tried in vain

to minimize the effect of the interview. Called before the Chamber of

Representatives in secret session, he said that the newspaper reports

had been "somewhat exaggerated," and added: "In this time when the

right and justice of the Allied Powers have definitely destroyed

militarism and despotism, we Chinese, although as yet a weak country,

may consider every menace of foreign aggression as a thing of the past,

and accept it with a smile."

The Government at first cabled the Paris delegation not to make

the secret treaties public; they were not held to be valid by the

Chinese Government, and publication might lend them force. Later,

the Government cabled, leaving it entirely to the discretion of the

delegates. The diplomatic commission of the Chin Pu Tang recommended

this. Meanwhile, Mr. Liang Chi-chao had gone to France. He meant to go

by way of the United States, where I had prepared for him an itinerary

and letters of introduction. Then his intimate associate, Tang

Hua-lung, was assassinated in Vancouver. Liang, fearful of a similar

fate, went straight to France, evading the Kuo Min Tang sympathizers in

America. Ex-Premier Hsiung Hsi-ling told me that Liang was to inform

the Chinese delegates unofficially about the state of things in China.

This was so bad that the American recommendation that the powers keep

their money away from either party until China was reunited looked

more and more desirable. An influential and responsible Chinese, who

talked with me about the clique that ran the War Participation Bureau,

made this statement: "The danger to China is in the efforts of Tuan's

militarists. Japan is giving them money to build up an army. With this

they will try to overawe the President and force him to fall in with

their aims. The negotiations for peace with the south will cease; the

war with the south will go on."

One of the most burning questions both to private individuals and

the press was how to oblige Japan and her officials to cease their

support of the northern militarists by the sending of money and

arms. Certainly a fire was built under them. The Japanese minister

called on me on the 9th of January to say that his government would

now join in a declaration on financial assistance to China. He had

to make reservations about the loan of 20,000,000 yen, pledged in

connection with the secret military agreement, also as to the so-called

"industrial" loans. The secret loan arrangement had been made with

three Japanese banks: the Bank of Chosen, the Industrial Bank of Japan,

and the Bank of Formosa, by the War Participation Bureau. With this,

the minister said, he could not interfere. Also, his government was

in principle favouring a restriction of the sale of arms, as America

recommended; but it would be best for the powers to say nothing

about it, as their joint statement would be taken as an attempt to

restrain Japan, which was the only country able to furnish arms to

China. Besides, the War Participation Bureau had a troublesome private

contract for arms with the Tayeh Company, which the Government felt it

couldn't interfere with. So there you are, as Henry James would put it.

I told the Japanese minister that we were not proposing any platonic

arrangement as Americans were both able and willing to furnish arms

to the Chinese under legitimate contracts, if the American Government

would permit it. Moreover, as to the transaction of those three

Japanese banks--since the Government of Japan had an interest both in

them and in the munitions company mentioned, their alliance with the

War Participation Bureau would be dissociated with difficulty in the

public mind from the Japanese Government.

The War Participation Bureau clique was actually getting ready to equip

an army against the south while the North-and-South Peace Conference

was sitting at Shanghai. Tang Shao-yi, chief peace representative of

the south, formally remonstrated to the British minister, as dean of

the diplomatic corps, against such doings of this "Bureau" and its

Japanese support.

Now, the Bureau had been established as its name implied, to facilitate

participation of China in the Great War. Japan's financial support

of it was ostensibly given also in behalf of the other Allies. If it

were to be prostituted to the fomenting of civil war the others as

well could not escape responsibility. A meeting was held on the 12th

of February by the Allied and Associated ministers. Several strongly

urged that outside money continually given for recruiting of troops was

opposed to the aim of restoring settled conditions in China and to the

policy of the joint declaration of December. The Japanese minister was

silent. He said he must await instructions.

He informed me on February 21st that Japan had called a halt on the

shipping of ammunition and equipment to the War Participation Bureau,

but the payment of the balance of the loan could not be stopped. Just

then, as it happened, an American firm would soon be ready to begin

delivery of a certain amount of equipment in China, contracted for in

good faith during the previous August. America had proposed a joint

declaration against the furnishing of arms, which Japan had blocked. As

the declaration had not been made, I could not then stop the American

delivery though I did so later. But America would still be only too

glad to join in the declaration as proposed.

As the Japanese were still paying the loan funds into the War

Participation Bureau, another diplomatic "indignation meeting" was

held about it on March 6th. The Japanese minister said his banks could

not help paying over those funds, but he had suggested to the Chinese

Government that it might be well, in the circumstances, to refrain from

drawing the money; Japan could not object to this. Forthwith one of the

ministers spoke up: "Then let us all make this recommendation which

Japan has made."

At this the Japanese minister was taken aback, almost shocked. He had

always argued that the War Participation Bureau was a Chinese internal

affair, not one in which the powers that had helped form it should

presume to dip. But the suggestion was quickly adopted. As a result,

the representatives of Great Britain, France, Italy, and the United

States, all solemnly called on the Minister for Foreign Affairs,

expressing their opinion that to draw the war participation funds was

not advisable, as it constituted an obstacle to internal peace.

But Japan's advice had been merely for the record, not at all to

be acted upon. Soon there came over to Sir John Jordan an informal

memorandum from the Foreign Office, taking the Japanese line of thought

that the War Participation Bureau was China's internal affair. It

might be construed as an intimation that we were meddling. Indeed, two

Chinese of high position told me that the President and the Premier had

held up the memorandum for several days for fear that it might give

offense, until the Minister of War absolutely insisted upon its being

sent.

Through these two men I sent a quiet intimation to the President that

withdrawal of the memorandum would prevent unpleasant feelings among

men who were sincerely friendly to him and to China. The memorandum was

pulled back without delay; thereupon all the Chinese officials, except

the few directly connected with the War Participation Bureau, rejoiced.

The five representatives who signed the original declaration of

December met again on the 11th of March, because the French minister

had instructions favouring action upon the Bureau. The Japanese

minister advanced his arguments about its being China's business,

not ours. But the others took the view that as it was an Allied war

institution and Japan had dealt directly with it, it was quasi-external

in character. "Is it not quite clear," protested the Japanese minister,

"that the loan was purely a commercial affair, made by certain banks,

and not controlled by the Japanese Government?" How, then, it was asked

in reply, does it happen that in connection with this loan, officers of

the Japanese army had been assigned to the War Participation Bureau as

advisers and instructors; was it customary to make such extraordinary

arrangements in connection with a purely commercial transaction?

"I am not sufficiently informed," Mr. Obata responded evasively. "I

shall have to refer to the reports of these transactions."

The position of Japan in this matter was so patently equivocal that

it was amusing. We decided that we should make it plain that as this

bureau was created to further our common purposes, we could not

acquiesce in any political action or in the use of any money which

would tend to prolong internal strife.

The Japanese minister on the 1st of March had notified the Chinese

Government that no further deliveries of arms would be made to the War

Participation Bureau pending the termination of the North-and-South

Peace Conference at Shanghai. We proposed to follow this up with joint

action. Certain representatives were uninstructed, though they favoured

frowning on the arms imports. Finally eight powers united "effectively

to restrain their subjects and citizens from importing into China arms

and munitions of war until the establishment of a government whose

authority is recognized throughout the whole country." This included

the delivery of arms under contracts already made but not executed. I

could then warn the American firm not to execute its contract for the

time being, and I did so.

From time to time, since the early spring of 1918, Baron Sakatani,

Japanese ex-Minister of Finance, had been in Peking. Mr. Liang

Chi-chao, when as Minister of Finance he made his Japanese loans, had

held out the possibility of the appointment of a Japanese financial

advisor. The Baron was an old acquaintance of mine and I held him

in high regard; but, in view of the fact that I could not consider

this time a proper one for settling the matter of the financial

advisorships, I had to distinguish between my personal feelings for him

and the official stand which I might have to take. A Japanese friend

wrote me in connection with Baron Sakatani's visit to China: "A section

of our capitalists have been given every facility to make money and

to lend it to China; with the money squeezed from them, the military

bureaucrats have been corrupting party men and sending them to China

and elsewhere, to exploit the warring nations while they are busy with

the war. The civilian officials and militarists cannot think anything

except in terms of German fear or admiration. If such Japanese are

employed by the Peking government, it will forever alienate Chinese

sympathies from anything we may propose."

Baron Sakatani from the first had nursed the ambition of being made

currency adviser to the Chinese Government; by January, 1919, it

appeared that his wish was to be fulfilled. The Japanese minister

announced that the other nations had agreed to the Baron's appointment.

I had not agreed to it. I had heard nothing whatever about it and had

consistently and energetically opposed any action of this sort. I

considered that it would permanently determine the course to be taken

with regard to currency loans, and would preclude the possibility of

any consultation with the United States. I requested the Minister of

Finance to defer the appointment until I could consult my government.

The next development came on the 20th when the Japanese minister

handed me a memorandum which referred to the personal goodwill I had

expressed to Baron Hayashi and which went on to state that the proposed

appointment of Baron Sakatani had been sanctioned by Mr. Lansing in

Washington.

I cabled to Washington, receiving therefrom on the 30th instructions

saying that the appointment of a currency adviser should be settled

only after full consultation by all concerned, and that Mr. Lansing had

not committed himself to any other understanding. I sent a note to the

Minister of Finance, stating that as one of the parties to the Currency

Loan Agreement, the United States wished that action be postponed

until further consideration could be given. I was immediately assured

that the position taken would be considered as final. As a personal

friend I regretted that Baron Sakatani could not be retained, but in

so important a matter it was impossible to stand aside while action

was rushed through which would be prejudicial to the long-established

interests of the powers who were, at the time, preoccupied with

after-war problems.

CHAPTER XXX

BANDITS, INTRIGUERS, AND A HOUSE DIVIDED

There is a phase of Chinese life which I should touch upon if the

picture I am trying to give of the China I knew is to be complete.

Brigandage is an established institution in China, where it has

operated so long that people have become accustomed to it and take

it for granted as a natural visitation. At this time there was a

vicious circle around which brigands and troops and rich citizens and

villagers were travelling, one in pursuit of the other. The brigands

were recruited from disbanded soldiers--men who had lost connection

with their family and clan. Often their families had been wiped out

by famine, flood, or disease, or had been killed in the revolution.

At other times the individual may have lost touch through a fault

of his own causing him to be cast out. It is very difficult for an

isolated person, without family and clan connections, to reëstablish

himself. The easiest way is to enlist in the army. If that cannot be

done, he becomes a brigand. Brigands foregather in provinces where the

administration is lax or in remote regions difficult to reach. They lie

in ambush and seize wealthy persons, who are carried off to the hills

and released only when ransom is paid. In this way, a considerable

tax is levied on accumulated wealth. This money the brigands spend

among the villagers where they happen to be. Meanwhile, the Provincial

Governor bethinks himself that a certain brigade or division has

not been paid for a long time and therefore might cause trouble,

so he announces what is called a "country cleansing campaign." The

situation is so intolerable that the general sees himself forced to

go to extremes, and to send his troops with orders to exterminate the

brigands. They proceed to the infested regions; the brigands, having

meanwhile got wind of these movements, depart for healthier climes,

leaving the troops to quarter themselves on the villagers, who are by

them relieved of the money which they have made out of the brigands.

Some brigands may be unfortunate enough to be caught; some will be shot

as an example, and others will be allowed to enlist. When the soldiers

have dwelt for a while among the villagers, they report that the

bands have now been fully suppressed and that the country is cleaned.

They are then recalled to headquarters; their general reports to the

governor, and is appropriately rewarded. Meanwhile, the brigands return

from their safer haunts and begin again to catch wealthy people, whom

they relieve of their surplus liquidable property. And so the circle

revolves interminably.

A little more efficiency in China would deliver it of much of its

intriguing and all of its banditry. Returning to Peking from a trip

to the Philippines I found that Mr. Kyle, an American engineer on the

Siems-Carey railway survey, and Mr. Purcell, another employé, had been

seized by bandits in a remote part of Honan. The bandits took a large

sum of silver these men were carrying to pay off the surveying parties

farther up toward Szechuan, then they decided to hold Kyle and Purcell

for ransom.

Doctor Tenney, the Chinese secretary, was in Kaifengfu, stirring up

the provincial governor to hurry the release of the men. The company

was quite ready to pay the ransom, and I could easily have induced

the Chinese Government to pay it. I was advised that this would be

the only certain way of rescuing the men, but I felt it would be

a dangerous precedent; as the bandits would then go on taking and

holding foreigners for ransom. Mr. Kyle was neither young nor robust.

I feared for the strenuous life and the worry he was undergoing, but

waited two weeks for the Central and the Provincial Government, which

I made responsible, to get them back. One night, Mr. Purcell escaped.

I then through Doctor Tenney notified the Governor-General that he

must surround the entire region where the bandits were, telling them

emphatically that if anything happened to Mr. Kyle the band would be

hunted down and exterminated.

The threat was "got across" to the bandits, and with it a promise that

those instrumental in restoring the captive would escape punishment

and in some way be rewarded. After a week's further suspense Mr.

Kyle was delivered to the pursuing troops and forthwith returned to

Peking. The chief of the band was rewarded with a commission in the

army; his henchmen were enlisted as soldiers. But those who had no

part in the delivery were one by one caught and executed. So, in the

end, a salutary example was set to keep bandits from interfering with

foreigners.

Mr. Kyle moved with the band every night in their mountainous and

inaccessible region. Over divides they went from valley to valley. Mr.

Kyle kept his normal health, but complained that they had not let him

sleep. He snored so loudly, the bandits told him, that they feared he

would attract the notice of the troops; so, during the final ten days,

he had not had a solid hour of sleep. But he made up his mind that he

would keep his mental equipoise and his physical fitness in order to

live through the experience.

Two woman missionaries had been taken at about the same time by bandits

in Shantung Province. But they were released after a few days. The

missionaries of the society they belonged to circulated a pamphlet

somewhat later, pointing out the superior efficacy of prayer over

diplomatic intervention. In response to prayer these two teachers had

been freed within a week; whereas all our diplomatic efforts had not

yet secured the release of the American engineer.

Fear of foreign displeasure lost the Chinese the chance to get the

services of a great engineer. Before going to the Philippines I had

been visited by Mr. Ostrougoff, Minister of Railways in Kerensky's

time, who had inaugurated the Russian agreement under which Mr. John

F. Stevens was given the task of helping to reorganize the Russian

railways. The work had been prevented by disturbed conditions. Admiral

Kolchak, together with Alexis Staal, had also called on me, with

others who had faith in the beginnings of a representative political

organization in Siberia. I recall Kolchak's fine, serious face, and his

manner which was that of a man under the strain imposed by duties that

transcend any mere personal interest. On my return, John F. Stevens

came to Peking for a month. He was discouraged by the Russian and

Siberian situation. The general breakdown, the social revolution, and

the establishment of soviets had demolished the chances for carrying

out his railway plans in Russia. No organized authority had backed

him. In Peking he studied the Chinese railway situation. In his quiet,

thorough-going way, he looked into the whole question for China; it was

not long before he had great confidence in its possibilities. I felt

it would be a godsend if a man of his genius for original planning and

constructive work, proved in the great Panama Canal project; a man,

moreover, who had intimate experience of American railway operation,

could work out with the Chinese a systematic plan for developing their

railway service. The Chinese would have eagerly welcomed this chance,

but they were not free. The engagement of one foreigner would have

brought demands to employ many more.

This was in the spring of 1918. I called on Mr. Liang Shih-yi to greet

him on his return from exile. "The urgent thing," he said, "is to

put a stop to military interference with the civil government. The

question of a parliament is not quite so important, but, as it has been

put to the fore, it must be solved first. My solution is to elect a

new parliament under the old law. Then reduce the army and separate

military from civilian affairs."

Liang described to me the characteristics of the nine chief southern

leaders. They were rivals, they had their hostilities; no three leaders

would agree. Two would come to an understanding, and the rest would

turn and rend them. Finally, he predicted that Hsu Shih-chang would be

the most likely candidate for President, Tuan having declined.

In Hunan the northern and southern troops were still fighting and

inflicting suffering on the people there; General Chang Chin-yao,

in particular, an opium-smoking gambler and corrupter, the military

governor of Hunan; his troops destroyed certain property belonging to

missionaries. American and British residents of Changsha, the capital,

petitioned the British and American ministers for protection to foreign

life and property. I had learned that the governor put no bridle on

his troops. With my British and Japanese colleagues I insisted that

commanding officers be held personally and individually responsible

for injuries to foreigners. We pointed out that Chang, especially,

was under observation. The Minister for Foreign Affairs delivered

a warning, and Admiral Knight, whom I had fully advised, ordered a

gunboat to Changsha.

Meanwhile, the War Participation Bureau, created to aid the Associated

Powers in the Great War, was watched by Japan. Because of it they made

their special military convention of which General Tuan had spoken

to me, using the revolution in Russia and the rise of Bolshevism as

their pretext. The Japanese militarist element in the Government was

active and urgent, and General Aoki at Peking and General Tanaka at

Tokyo were leaving no stone unturned to aid them. They sought at first

a general military alliance. The Chinese would not consider anything

so sweeping. Then the unrest in Siberia was made the basis of more

limited coöperation. In March a preliminary entente was formed; China

and Japan would consider in common the measures to be taken to cope

with the Russian situation and to take part in the present war, and the

means and conditions of coöperation would be arranged by the military

and naval authorities of both countries.

War participation in general was thus put into the purview of mutual

agreement between Japan and China. While no general military alliance

was concluded, nevertheless the Japanese could now control what was to

be done by China in the war. It meant that China would do nothing.

The terms of the military and naval conventions on methods of

coöperating, concluded the 16th of May, flexibly permitted Japan in

certain circumstances to control Chinese railways and resources. The

whole thing was managed secretly. The public became suspicious of the

results, since the chief arrangements were made not by the cabinet or

the Foreign Office, but by the military and naval representatives.

Would China longer freely coöperate with the other Allies? Would she

not be under Japan's strict leadership? Was not this the entering wedge

for a complete control of Chinese military affairs by Japan? Would not

Chinese militarism be strengthened and made obedient to Japanese policy?

Japan's acts in Shantung gave these questions pertinence. There she was

expropriating by eminent domain; in Tsingtau the Japanese authorities

thus acquired about twelve square miles of land, including the shore

of Kiaochow Bay for several miles, which gave control of every land

approach and every possible steamship and railway terminal in this

port. Plainly, Japan was carrying out a policy of permanent occupation.

While the Chino-Japanese entente was being negotiated,

Japanese-controlled papers in China were preaching enmity to the white

race. In May a Japanese parliamentary party visited China, making

speeches calculated to stir racial feeling. The burden of the appeals

was that, after the war, European nations would try to fasten their

control more firmly on China, hence the yellow race should now unite in

timely opposition.

Mr. Nishihara, close associate of the Japanese Premier, General

Terauchi, was unofficially doing the financial business of Japan in

China. The Japanese Legation could deny that negotiations were going

on, while Japanese interests were actively influencing the financial

measures of the Peking Government. A large loan was proposed, to be

secured on the tobacco and wine revenues. They were the security for

the existing American loan, with option for further advances. I asked

Tsao Ju-lin, Minister of Finance, about this and his answer was: "The

United States is not giving to China the assistance she gives to her

other associates in the war. The American bankers have not completed

their contract. It is necessary for China to look elsewhere."

Mr. Tsao said he would at any time consider American proposals and give

them as favourable treatment as to any other nation. I asked assurances

that before anything further was done on the basis of the tobacco and

wine revenues, the American bank have a chance to consider a proposal

from the Chinese Government under its option. The minister had denied

that the revenues were now in any way involved; but at this request he

sidestepped. I made the most of his denial, placing it on record in a

note to the Foreign Office. The French minister took action similar

to mine. Tsao was not only Minister of Finance; he was concurrently

Minister of Communications. Both departments, therefore, were under the

thumb of Japan.

I have rather rapidly sketched the state of affairs within China up

to July of 1918. I wished a personal discussion of the situation

with the officials at Washington--my first since America's entrance

into the war. I left Peking for the United States after another long

interview with General Tuan, who had become Premier. On June 27th the

Premier stated to me his policy and motives with frankness. "If we stop

military action," he said, "that would be interpreted as weakness. The

south would only make more extravagant demands, and further encroach on

northern territory. Force that is adequate--that answers the question.

For this we need money. If home revenues are not enough, then we must

have foreign loans. That will restore national unity, which, in turn,

will make repayment easy. The army will be reformed. The people will

get protection, and the country will prosper."

This policy was wise, inevitable, he thought. But it suited a class of

inept generals who systematically made war at home, with only moderate

risk of actual fighting. Their methods involved money more than

bayonets.

"When you return from America," Tuan said at parting, "everything will

be settled, and the south will recognize our authority."

A sea-borne war expedition, sent to conquer the south, was in his mind.

I could not but express my conviction of the impossibility of such an

achievement but he was obstinate.

I divided my time in America between Washington and New York, save for

a visit to my mother. In four weeks I saw representatives of most of

the great interests, public and private, involved in China. I by no

means stopped with the State Department. I saw the Secretary of War

and the Adjutant General, on questions dealing with the recruiting

of troops to be stationed in China; the Intelligence Division of the

War Department and of the Navy, as well as the Committee on Public

Information; the Secretary of Commerce, and officials of the War

Trade Board and War Industries Board, about restrictions on commerce

and American commercial developments in China, together with the men

of the Shipping Board about trans-Pacific lines. Among great private

organizations I conferred with members of the National City Bank; J.P.

Morgan & Company; the Guaranty Trust Company of New York; Kuhn, Loeb &

Company; the General Electric and American Locomotive companies; the

Standard Oil Company of New York; the International Banking Corporation

and American International Corporation; the Chase National Bank;

the Siems-Carey Company; Pacific Development Corporation, and the

Continental & Commercial Bank of Chicago.

The American policy with respect to Russia and Siberia had not been

determined, and in interviews with President Wilson the Siberian

problem, to which I had been very close, as well as Chinese finance,

were subjects of particular attention. I showed to the President how

the Chinese got loans for alleged industrial purposes; then, with the

connivance of the lenders, instead of building railways and telephone

systems, they diverted them to political or partisan ends. Thus Chinese

credit and the authority of the Government were progressively weakened.

Then foreigners would encroach, and in some fields American opportunity

was in danger of being restricted or lost entirely. I wished to see

the United States backing financially a sound programme of Chinese

reorganization. That would accord with our traditions. But jealousies

and friction were to be eliminated, hence I favoured the forming of an

International Public Loan Consortium.

This would support the credit of the Chinese Government and put Chinese

finance on a sound basis. Such a consortium would claim priority in

making all administrative or political loans; but monopoly should

be avoided by leaving contracts for building and supplies open to

competition, and by letting outside financiers make industrial loans.

Of course, the Consortium as the chief backer of China should have full

information about industrial loans, and each government should engage

to scrutinize all loans made by its nationals for industries. All this,

at his request, went to the President in a memorandum submitted on the

14th of August.

With respect to Siberia and Russia, my information led me to believe

that the Russian people might still be influenced to remain friendly

to the Allies, so as to prevent the growth of German control. I had in

mind, not intervention, but economic assistance. I urged a commission

that would aid the Russian people to import the commodities they

needed most. The Russian Coöperative societies were anxious for just

such assistance; thus, their leaders believed, further unfavourable

developments could be prevented. I knew the Russians to be universally

friendly; any movement initiated by America would be received with

extreme goodwill.

President Wilson seemed to wish something like this to be carried

out. He even discussed with me what men were most likely to succeed

in organizing so huge an enterprise. But he feared to place a

representative of "big business" in such a position; men would suspect

selfish national motives. I felt that he wished America to lead in

giving the Russian people such aid in reorganizing their economic life

as would permanently benefit them and preserve them for our common

cause.

After many, many departments and boards were consulted, I found they

were not thinking of China. Their chief problem was to train the

American army and transport it to the western front. They did not care

to get Chinese contingents there. This was the critical moment of

the war. By comparison other interests shrivelled. As for financial

advances to China, the Government found that China entered the war

after the law authorizing advances was passed. A new law would be

needed. To propose it would bring up the whole question of war policy.

The temper of the day was to concentrate every effort on the greatest

immediate show of strength on the west front. I appreciated all this,

but I deeply regretted that a tiny rivulet out of the vast streams of

financial strength directed to Europe could not pass to China. Even

one thousandth part of the funds given to Europe, invested in building

up China, would have prevented many disheartening and disastrous

developments. For every dollar tenfold in value would have been gained

in fortifying Chinese ability to help in the war and in the post-bellum

recovery.

CHAPTER XXXI

YOUNG MEN IN PEKING, OLD MEN IN PARIS

A crowd of students appeared before the legation gate on the 5th of May

clamouring to see me. I was absent, that day, on a trip to the temple

above Men Tou-kou and so missed seeing them. Their demonstration, as

it turned out afterward, was the first step in the widespread student

movement which was to make history. Their patriotic fervour had, on

that morning, been brought to the boiling point by the first inkling of

the Paris decision on Shantung.

The first reaction of the Chinese people as a whole to this news was

one of dumb dismay. It was a stunning, paralyzing blow. It seemed

that all the brazen intrigue through which Japan had been seeking to

strengthen her hold on Shantung, all the cunning by which she had

prepared the basis of her claim to permanent possession of the German

rights, had been endorsed by the Versailles Conference.

The Chinese people, discouraged in Peking, had centred their hopes on

Paris. When hints of a possible acceptance of Japan's demands were

received in Peking, the first impulse of the students was to see the

American minister, to ask him whether this news was true, and to see

what he had to say. I escaped a severe ordeal.

When they were told that I was absent there was at first a hum of

voices, then came the cry: "To the house of the traitor!" They meant

the house of Tsao Ju-lin, where the schemers had assembled to make the

contracts which China hated. Tsao Ju-lin, the smooth little plotter

whom most people regarded as the guiding spirit of the humiliating

business, was the most despised; but they associated with him Chang

Ching-hsiang, who had been Chinese minister at Tokyo when the secret

treaties were drawn up. The students rushed over to the house and

broke down the door and trooped inside. They found both men there. No

time was lost, either on the part of the students or their prey. The

students breaking up chairs and tables and using pieces of them for

weapons went after the two diplomats. Tsao, still smooth and slippery,

managed to escape through a window and into a narrow alley where he

eluded his pursuers. Chang, however, was beaten into insensibility.

Lu Tsung-yu, the other plotter whom the students would have "treated

rough", was not to be found.

For four days we were without foreign news. The first brief telegraphic

intimation of the Paris decision was followed by the cutting of the

wires; Japanese agents, the people surmised, did this to prevent the

universal Chinese protest from influencing the decision or causing its

review.

Primarily the cause of the student violence lay in the proximity of the

fourth anniversary of the Japanese ultimatum of 1915; but they were

also anxious and stirred because of the reported action of the old men

at Paris.

While other telegraphic communication was cut off I got information of

what was actually done by wireless. I found it hard to believe that

President Wilson would be compliant to the Japanese demands, in View

of the complete and insistent information the American Government had

had from me and all other American officials in China as to what would

result from such action. The Shantung decision constituted a wrong

of far-reaching effect; no general benefits bestowed by a league of

nations could outweigh it. Indeed, as I stated to the Government, it

destroyed all confidence in a league of nations which had such an ugly

fact as its cornerstone.

To any one who had watched, day by day, month by month, the

unconscionable plotting for these claims, the decision was a lamentable

denial of every principle put forward during the war. President Wilson

brushed aside the unanimous opinion of the American experts, it would

seem, for two reasons: first, he believed that if only the League were

established, all difficulties of detail could easily be resolved; and,

second, he had not given enough attention to the Shantung question to

realize that this was not a matter of detail, but a fundamental issue.

President Wilson tried to make himself and others believe that with the

acceptance of the Treaty and Covenant, the Shantung question would be

solved through fulfilment by Japan of its promise "to restore Shantung

Peninsula to China with full sovereignty," reserving only economic

rights. This was his primary misconception. The ownership by a foreign

government of a trunk railway reaching from a first-class port to

the heart of China could not be correctly termed an economic right.

Political control of such "economic rights" was exactly what American

policy had tried to prevent for decades. The President submitted, also,

in the apparent fear that Japanese delegates might follow the lead of

the Italians and leave the Conference. Colonel House, it appears, was

frightened into this belief and communicated it to President Wilson;

the two believed the League was endangered, and that every sacrifice

must be made to save it.

The fear was quite unfounded. I had seen indications enough, of which

I had told the Government, that the Japanese set enormous store upon

their membership in the Conference and their position in Paris. As a

military, naval, and financial power, Japan could certainly not be put

in the first class, notwithstanding the tactical advantages which the

war had brought her. She would never forego the first-class status

bestowed by the arrangements of the Peace Conference. The Japanese had

not the remotest idea of throwing these advantages to the wind. The

impression they produced on Colonel House simply proved their capacity

for bluffing. Had President Wilson taken the trouble to understand

the situation, he could without difficulty, by the use of friendly

firmness, have secured a very different solution. As a matter of fact,

it is now well known that the Japanese were ready to agree to an

arrangement whereby the German rights in China should accrue to the

Allied and Associated Powers jointly with an early reversion to China.

Probably nowhere else in the world had expectations of America's

leadership at Paris been raised so high as in China. The Chinese

trusted America, they trusted the frequent declarations of principle

uttered by President Wilson, whose words had reached China in its

remotest parts. The more intense was their disappointment and

disillusionment due to the decisions of the old men that controlled

the Peace Conference. It sickened and disheartened me to think how the

Chinese people would receive this blow which meant the blasting of

their hopes and the destruction of their confidence in the equity of

nations.