File No. 893.00/1505.

The American Minister to the Secretary of State.

No. 671.]

Sir: I have the honor to report that as far as outward appearances go, the political situation here is one of gradual improvement. It is still far from ideal, and no great promise for the future is present, but, upon the whole, the political outlook is better than it was a few months ago.

This improvement is largely evidenced by the single fact that Yuan Shih-kai is slowly but steadily increasing his hold upon the country. * * * By common consent all hopes for the future are largely centered in this one man. Unfortunately he is aging fast, and the fear is often expressed that he may break down, and the wonder is, what will happen if such a misfortune occurs; there is no man in sight to take his place. * * *

It may be said that the improvement I have noticed is largely superficial. That no constructive work of any great importance has been done and none is under way. That the fundamental question as to the relation of the central government to the provinces remains in determined. * * * This important question will probably not be settled until the permanent constitution is adopted. * * *

I think the over-shadowing fact remains that the country has settled down to the new order of things. The people, so far as they know anything about it, have accepted the Republic as an established fact. For a time I was afraid that there would be a great struggle for control, between the north and south, at the coming election, and that all kinds of trouble would ensue. But now that the opposition to Yuan has so largely disappeared, he may be regarded as the accepted leader, for the time at least. The crops this year have been uniformly good, except perhaps in a few districts subjected to unusual floods. This fact helps the situation very much; it brings not only comfort but confidence to the people; confidence, because the good crops show that Heaven was not so much displeased, after all, by the removal of the Emperor, and therefore, they may accept the new order with the assurance that it is all right from a religious as well as a political standpoint.

The difficult, the delicate and the dangerous problem with which the President is confronted, is how to get rid of the independent tutus or provincial governors, and also the military chiefs who defy all civil authority. Only one or the other of two ways is possible for the solution of this problem. The President must fight these men with armed [Page 88] force and thereby in all probability bring on a civil war, or he must buy them off with money. He doubtless thinks the latter course is the easiest and the cheapest. * * *

It is not meant that it shall be implied that there is no legitimate or other need for money aside from the specific purpose above named. The disbandment of the troops is the most prominent need, but the arrearages of the indemnity and other liabilities, and the supply of the actual expenses of the Government in many legitimate ways, require the borrowing of money to bridge the country over until the disrupted revenues resume their normal returns. Without considerable money the new Government cannot get on its feet, so to speak. The query in every one’s mind is how long the present condition of affairs will last; it cannot, in the very nature of things, last indefinitely. If Yuan is not supported, he will fail, anarchy will result, and armed foreign intervention, with all its complications and unforeseen consequences will surely follow.

I have [etc.]

W. J. Calhoun.