The Minister in China ( Reinsch ) to the Secretary of State

No. 3001

Sir: I have the honor to enclose a review of conditions in China during the quarter ended June 30th, compiled in response to standing instructions.

. . . . . . .

I. Political Information

a. domestic

(1) Observations and developments.

The important domestic political developments of the quarter were to such an extent interwoven with matters of foreign policy that it is not easy to deal with them apart from a general discussion of Chinese foreign affairs. The Domestic Peace Conference which had been adjourned on February 28th following the resignation of the Northern Delegation and the presentation of an ultimatum by the Southern Delegation, was finally reconvened on April 9th [7th]. The difficulty in regard to the province of Shensi, which was the chief cause of the earlier dissolution of the conference, had been dealt with by the appointment of a neutral demarcation commissioner to determine the territorial position of the Northern and Southern armies in that province, in the hope of removing further friction on this score. The labors of the demarcation commissioner were not entirely satisfactory to either the Northern or Southern governments and there continued to be mutual charges of a violation of the armistice even after the conference had reconvened. The actual position of the affairs in Shensi appears to have been that there were irregular forces on both sides practically indistinguishable from bandits who continued operations and consequently from time to time precipitated counter movements. The Shanghai Conference remained sitting until May 15th. While it is presumed that some progress was made in regard to problems of reconstruction, more particularly the disbandment of troops, during this second session of the conference there was a marked pessimism displayed in both the North and the South as to its ability to solve the questions before it.

As a result of questions of foreign policy to be dealt with later during late April and May the Northern government came almost [Page 360] entirely under the control of the Anfu party, an organization dominated by the Peking militarists and closely associated with Japanese influence. (“Anfu,” a combination of Anhwei, the province of the militarists, and Fukien, the province of the naval people.) It was well known both in Peking and in the South that the Anfu party was opposed to a peace made by the conference: the Anfu leaders themselves still appeared to favor a peace achieved by the forcible suppression of the Military Government at Canton, although in the light of subsequent events it may be doubted whether their aims went further than to prevent a peace negotiated on the Northern side by a delegation which they considered did not adequately represent the military party. In any case the Southern delegation appeared finally to come to the conclusion that the Peking Government—by which is meant the cabinet rather than the President—was determined to make it impossible for the conference to adopt a compromise settlement, and presumably actuated by this motive and supported by the popular wave of indignation against the pro-Japanese elements in the government consequent on the publication of the terms of the Shantung settlement, the Southern delegation on May 13th presented a series of eight demands. These covered the abrogation of all secret agreements entered into between China and Japan during the war, the disbandment of the troops of the War Participation Bureau and Northwest Defense Bureau, the two leading military organizations under the direct control of the Peking military party, the refusal to accept the Shantung settlement proposed by the Paris Conference, and the recognition of the Southern Parliament as the legal parliament of China. The demands made a great concession in offering to recognize President Hsu as the de facto President of China. As the acceptance of these demands would have amounted to the complete overthrow of the then existing Peking government, it is obvious that the Southern delegation had no expectation that they would be accepted or even seriously considered. The immediate result of their presentation was the suspension of the conference and the resignation of both Northern and Southern delegations. The conference did not again meet during the quarter.

The second suspension of the conference sittings marked the final failure of the President’s peace program, and the triumph in Peking of the pro-Japanese military party. While the Southern government at Canton failed to show any sincere desire to accept a compromise settlement, there can be no doubt that the main responsibility for the failure of the conference rests on the Northern military party.

[Page 361]

Mention has been made above of the Anfu Club or party, and as this group came to dominate Peking politics during the quarter under review it may be interesting to note the inception and composition of this club. The origin of this club may be traced back to the elections for the present Peking parliament which took place some eighteen months ago. At that time Mr. Tsao Ju-lin was Minister of Finance and Mr. Wu Ting-ch’ang was Vice Minister. Gen. Hsu Shu Cheng was then second in command of the Fengtien troops, and received from the Ministry of Finance through the collusion of the Minister of Finance the sum of $10,000,000 ostensibly for the payment of these troops. It is alleged that this sum was spent in manipulating the elections for the new parliament. Thus, when the new parliament came into being there was a large group of members under obligation to General Hsu Shu-cheng and his coterie. Mr. Wang Yi Tang was the most prominent of the parliamentarians affiliated with Gen. Hsu, and his residence in the Anfu Street became the meeting place for this group of parliamentarians; hence the name Anfu Club. The club undertakes the payment of from $300 to $800 per month to any member of parliament who will record his name as a member; nominally at least no party lines are drawn in regard to applicants for membership. The principal members of the parliament who are members of the club are Mr. Li Shen-to, President of the Senate, Mr. Wang Yi-tang, Speaker of the House, and the chief, secretaries of the Senate and the House. In the cabinet Mr. Kung Hsin Chang, Minister of Finance and acting Premier, is at least nominally a member of the Anfu club although he is not on particularly intimate terms with some of the Anfu leaders. Mr. Chu Shen, Minister of Justice, is a prominent member of this club, as are also Mr. Tseng, Vice Minister of Communications, and Mr. Li Shih-hao, Vice Minister of Finance. Other prominent personages closely identified with the club are Mr. Tsao Ju-lin, lately Minister of Communications, Mr. Lu Tseng-yu of the Currency Bureau, Gen. Wu Ping-hsiang, chief of the Metropolitan Gendarmerie, Mr. Chang Hu, formerly Vice Minister of Finance and director of the Salt Gabelle, and a great number of prominent military officers. Gen. Tuan Chi Jui, ex-Premier, although he has been repeatedly urged to place himself at the head of the Anfu club, has always refused to have any formal connection with it. The whole organization is under the immediate control of Gen. Hsu Shu-cheng, who is the recognized leader of the military party in Peking. Through Mr. Tsao Ju-lin and certain of his intimates the club has maintained close relations with the Japanese, who, as the Department is aware, have provided the necessary funds to enable the Northern military party to retain its hold over the government. Actually the Anfu Club has [Page 362] constituted the government, in the English sense, since the latter part of April. There has been no organized opposition to the Anfu Club in Peking, although the President and his following, which has but little representation in the cabinet or in parliament, is strongly opposed to most of the policies of this party. During the early part of the year before the Shantung settlement was made and when it was confidently expected in China that the Paris Conference would decide this controversy in favor of China, the President who was commonly reported to be receiving the support of the American and British Legations, yielded [wielded?] a very considerable influence and was able in fact to force certain matters despite the opposition of the Anfu party. The most notable of these successes was the calling of the internal peace conference and the appointment of Mr. Chu Chi Chien, a personal friend of the President’s and an opponent of the Anfu club, to be the chief Northern delegate. Immediately the fact became known that the Paris Conference had endorsed Japan’s claims, the Anfu Club which as has been noted represents that element in Chinese politics which favors an understanding with Japan, rose to the power which it still enjoys.

As has been noted the Anfu club is under the direct control of Gen. Hsu Shu-cheng; as the club now controls Chinese policy to a large extent, the personal views and influence of Gen. Hsu are worthy of some consideration. He is commonly credited with being openly pro-Japanese. This however I venture to doubt. It is believed to be the case rather that Gen. Hsu has formed his Japanese alliance of political necessity as he feels dependent on Japanese financial and political support to enable him to maintain his position. Did he feel that American, British, or other foreign support would accomplish the same end I am inclined to believe that he would prefer it to the Japanese assistance which he now enjoys. He is an able and intelligent man, active, forceful and unscrupulous in his methods, and it is not conceivable that he does not realize the danger to China as well as to his own political future of depending on a nation whose policies in China are equally unpopular both at home and abroad. Unfortunately however Gen. Hsu’s domestic policies stand for all to which America objects, the domination of the government by military force and the perpetuation in the provinces of an obnoxious tuchun system. In view of Gen. Hsu’s active and enterprising mind this is a matter of real regret.

It will be recalled that the National Defense Bureau and the armies organized thereunder were one of the chief grounds of complaint made by the South which rightly regarded these forces raised nominally for national defense to be but the instrument for enforcing the will of the military party. The abolition of these forces [Page 363] has been a constant demand of the South. In view of the approach of peace, whereupon the anomaly of a special national defense force would become apparent, the Northern military party created a new bureau which was to take the place of the National Defense Bureau, the name and nominal object of the bureau doubtless being suggested to the ever-alert Gen. Hsu by the greatly exaggerated reports of the Bolshevik menace to Mongolia and the designs of Ataman Semeonoff against that country. Gen. Hsu is the active head of this new bureau and of the troops, numbering between 7,500 and 10,000, under its orders. During the quarter there was a persistent rumor that the bureau was about to despatch a force to Urga. Actually troop movements did not begin until the following quarter. All reports from Urga agree that there is no necessity whatever for the despatch of Chinese troops there at present, as Mongolia is perfectly peaceful,—indeed is in marked contrast with the chaotic conditions obtaining in China. From a number of conversations with Gen. Hsu it appears that he has in mind a very large scheme for the settlement and development of Mongolia, and it is no doubt in furtherance of this plan that he has sought the occasion of the Bolshevik and Semeonoff movements to justify his entrance into Mongolia. In connection with Gen. Hsu’s Mongolian plans he has already taken steps to form a bank, the lack of adequate banking facilities being one of the principal handicaps to commerce or industrial development in Mongolia. The General plans to build trunk roads for use by motor transport, to build stations on these roads supplied with artesian wells, to establish model farms in the neighborhood of such stations and generally to facilitate the development of Inner Mongolia by Chinese settlers. He realizes however the prime importance of maintaining friendly relations with the Mongols, and according to his own statements has been unexpectedly successful in doing so. Ultimately the General plans to build an extension of the Kalgan railway to Urga and to Chinese Turkestan, although he realizes that these are developments of the distant future. The success of Gen. Hsu’s Mongolian schemes will be watched with much interest.

There were two Cabinet changes during the quarter. Mr. Tsao Ju-lin, Minister of Communications, resigned his post during May, as a result partly of the “loss of face” occasioned by the attack on his residence by students, and partly of his extreme unpopularity throughout the country. No successor to Mr. Tsao was appointed during the quarter and as a matter of fact he continued to direct the policy of the Ministry of Communications through the Vice Minister, Mr. Tseng, who became Acting Minister on his resignation.

On June 13th Mr. Chien Neng-hsun, the Premier, resigned his post. It is believed that his resignation was occasioned directly by [Page 364] the untenability of his position as a result of the continued opposition of the Anfu party. Alone of the cabinet Mr. Chien was recognized to be a supporter of the President. He shared responsibility with the President for the convocation of the Domestic Peace Conference and the selection of Chu Chi-chien as Chief Delegate. The breakdown of the Conference in May as already remarked marked the breakdown of the peace policy pursued by the President and Premier and no doubt was one of the elements responsible for Mr. Chien’s resignation. Further he had been made the subject of a bitter attack in Parliament by the Anfu Club during April. This latter party endeavored also to throw the responsibility for the decision as to the signature or non-signature of the German peace treaty on the Premier. Faced with difficulties at home—the unrest and anti-Japanese boycott resulting from the student activities to be discussed below—and abroad, and without any organized support in either the Cabinet or Parliament, Mr. Chien’s resignation surprised no one. While an amiable gentleman, Mr. Chien displayed little force of character or statesmanship during his tenure of office. The nomination of a successor to the Premiership became the occasion for a display of strength by the Anfu Club, which stated its intention to refuse Parliamentary ratification to the appointment of any but an Anfu premier. The President, and ex-Premier Tuan Chi-jui, titular head of the Military Party, agreed on Mr. Chou Shu-mu for the post but had to abandon his nomination in the face of the opposition mentioned. The Anfu Club were unable to suggest any suitable candidate, bringing forward such names as Governor Ni Ssu-chung of Anhui, a pronounced reactionary and of the most objectionable Tuchun type, Mr. Chu Shen, the youthful and inexperienced Minister of Justice, and other prominent party men, none of whom would the President consent to nominate. Ultimately Mr. Kung Hsin-chang, Minister of Finance, who had consented to take the post of Acting Premier for ten days, agreed to continue to function as such pending the appointment of a substantive premier.

(2) Attitude toward the peace conference.

At the beginning of the quarter as a result of a very general discussion in the press consequent on the reports received in China of the presentation to the peace conference of China’s claims and position in relation to Shantung the belief had become general throughout the country that the conference was disposed to regard China’s representations favorably and would no doubt make its decision in regard to Shantung in harmony therewith. This belief in many circles amounted to conviction. The first reports to reach China of the decision [Page 365] of the conference to embody Japanese pretensions in regard to Shantung in the peace treaty therefore were received with incredulity. Later when these first reports were fully substantiated by official messages a storm of popular indignation swept over the country which is without parallel since the days of foreign intercourse with China. Missions of the friendly powers were deluged with petitions, resolutions and proposals from every conceivable source. The students early assumed the leading role in organizing the opposition throughout the country. It should be noted that there was no popular condemnation of the United States and but little of England and France, the wrath of the country being directed first against those Chinese officials who were responsible for the secret agreements with Japan on which the Paris conference appeared to have acted, and secondarily against Japan on account of its predatory policy in China.

The first incident to attract general attention was an attack on the residence of Mr. Tsao Ju-lin, Minister of Communications and leader of the pro-Japanese party, by a mob of students. The student organizations in Peking had decided on a demonstration and marched through the streets in an orderly way with the object of calling at the several allied Legations and presenting to each a petition. They were prevented from entering the Legation quarter by the Metropolitan police; consequently being unable to accomplish their original purpose they decided to make a demonstration in front of the residence of Mr. Tsao. Upon arrival there the orderly procession had degenerated into a mob of irresponsible and highly excited young men. Mr. Tsao’s gateway was forced and fire set to his residence. Fortunately he himself was not at home, but the students discovered in his waiting room Mr. Chang, ex-Minister to Japan, who had actually signed two of the most obnoxious of the secret agreements between China and Japan. Mr. Chang was accompanied by a Japanese. The Japanese was permitted to leave unharmed but Mr. Chang was beaten until he became insensible and was left for dead. Fortunately he recovered ultimately. No very drastic action was taken by the authorities in relation to this incident, and the activities of the students continued to flourish. A very effective propaganda appears to have been organized as the movement spread rapidly to all parts of the country. The object of the campaign at first was limited to the removal from office of the “national traitors” Tsao Ju-lin, Lu Tsung-yu, who had been closely associated with Mr. Tsao, and Mr. Chang, ex-Minister to Japan. This object was accomplished, but in the meantime the movement had assumed a distinctly anti-Japanese character and resulted in a boycott of Japanese goods, which even now (September) remains more or less in force. The [Page 366] mobilization of an active public opinion, definite in its aims, was a new development in Chinese political life.

In general the boycott appears to have been conducted in an orderly manner without personal violence to Japanese, despite occasional cases of provocative action on the part of individual Japanese. In Canton, however, during the early phases of the movement a few Japanese were attacked and injured, and in Shanghai a very critical situation arose. The Municipal Council, actuated by a desire to maintain order in the settlement, undertook to prohibit all outward manifestations of this national movement. Locally this tended to produce an anti-foreign sentiment, which was only prevented from assuming active form by the good sense and restraining influence of the leaders of the student movement who realized that it would be fatal to their cause to alienate the sympathy generally felt for them by well-informed foreign opinion throughout the country. A regrettable incident occurred in connection with efforts of the police to prevent a demonstrating procession from entering the settlement. The police were not in force at the point at which entry was sought and the endeavors of one or two constables to turn the procession resulted in an attack on the police, who firing in self-defense killed one Chinese and wounded one or two others. There also became prevalent in Shanghai a rumor that the Japanese were poisoning wells. While there is no ground whatever for the belief that such actually was the case, it appears to be established that for some unknown reason there were many cases of Japanese publicly sprinkling harmless white powder over foodstuffs exposed for sale. There were several instances of attacks by ignorant Chinese on supposed Japanese, who generally proved to be Chinese from other parts of the country. One Chinese died as the result of such an attack. Ultimately normal conditions were restored.

During the latter part of the quarter the boycott was very strictly enforced and included a refusal to ship goods or to take passage by Japanese steamers. Along the Southern coast in particular it appears that the boycott was well organized, the chambers of commerce as well as the student bodies taking an active part in the direction of affairs. Fines were imposed in numerous cases on Chinese dealing in Japanese goods. On the Yangtsze the merchant bodies do not appear to have taken any prominent part in the movement. It is impossible to estimate accurately the amount of the damage suffered by Japanese trade in consequence of the boycott, but from both Japanese and Chinese statements it is certain that it was very large. Some estimates stated that Japanese trade was reduced by seventy per cent during the period in question.

[Page 367]

The government appeared to have been taken by surprise by the action of the peace conference and had not formulated any policy to meet the situation created. The first inclination was to sign the treaty with reservations if possible but if not to sign it in any case. It is believed that instructions in this sense actually were sent to the Chinese delegates. The government as usually [sic] continually vacillated, and followed this first instruction by a second instruction practically leaving China’s course of action to the discretion of the Chinese delegation. In view of public opinion in China and of the bitter popular attacks on those officials responsible for the Sino-Japanese agreements, the delegation naturally was unwilling to accept the responsibility of signing the treaty without reservations as this would have meant the termination of the official career of every man concerned, and the possibility of physical violence on a return to China. When it became clear that the delegation would not accept the responsibility of signing, the President is reported to have sent instructions to the delegation not to sign the treaty. Different sources, both of which should have been well-informed and reliable, disagree completely on this point, as the Legation was informed positively that such an instruction had been sent and equally positively that no such instruction had been sent. In any event it is believed that the Chinese delegation would not have signed for the reasons indicated above even if instructed to do so. There is no doubt that the final decision not to sign received popular approval throughout the country. In this connection it is curious to note that for five days after it was known that the peace treaty had been signed no word was received in China as to whether or not the Chinese delegation had signed. The first news of China’s refusal was contained in an intercepted wireless message published in Peking in a French paper.

China’s position in relation to Shantung has been the subject of so many telegrams and special reports that it will be sufficient to indicate it very briefly here. In the first place China holds that the agreements entered into between China and Japan during the war were extorted from China by threats of force and that consequently they are not entitled to recognition as binding acts. In the second place it is held that the settlement embodied in the peace treaty actually gives to Japan far greater rights in Shantung than ever were enjoyed by Germany, in other words that Japan instead of merely succeeding to German rights in Shantung has been granted certain privileges and rights at the direct expense of China, and that the return of Kiaochau provided for by the treaty is entirely valueless, the abstract question of sovereignty never actually having been in question as China had never relinquished sovereignty [Page 368] over the leased territory. Instead of a limited leasehold, Japan would have a permanent settlement together with control of the port terminal facilities and railway.

At the conclusion of the quarter the Chinese Government had not yet come to any decision as to the next step to be taken in regard to peace with Germany. There appeared to be some vaguely formulated idea of giving Chinese adherence to the League of Nations by acceptance and signature of the treaty with Austria, and thereafter bringing before the League the question of the violation of China’s rights by Japan in Shantung. Generally speaking, however, it would appear that a policy of inactivity is still being pursued.

b. foreign

(1) Relations with foreign countries.

In discussing China’s attitude toward the peace conference, occasion has already been had to refer to Sino-Japanese relations in some detail. It will have been noted (1) that the government in Peking, by which is meant the group controlling the cabinet, and the Anfu club, was on the whole well disposed toward Japan or at least ready to do business with Japan in default of any one else who would, and was in receipt of support from Japan, and (2) that a bitterly anti-Japanese spirit was aroused in the country at large by the proposed Shantung settlement. There remains but little to add in regard to Sino-Japanese relations. From Shantung comes a constant stream of complaints from Chinese of the arbitrary and overbearing action of the Japanese military authorities there. Chinese have been arrested repeatedly while on railway property by Japanese railway police either for being in possession of Chinese nationalistic literature—which it may be explained is generally inferentially if not specifically anti-Japanese—or on suspicion of being concerned in anti-Japanese demonstrations. A number of these arrests have been brought to the attention of the Legation in detail owing to the connection of the arrested persons with Christian churches in Shantung. The action of the Japanese residents in Shantung in passing a series of resolutions calling for a further display of the “mailed fist” policy in China has not tended to improve the feeling between the two countries. It is curious to note from the Japanese press and from other reports reaching China that the Japanese generally attribute their unpopularity in China to propaganda on the part of Americans and British, particularly the former. While it would be flattering to believe that the American residents in China were able to influence public opinion to this extent, as a matter of fact the anti-Japanese feeling now manifested [Page 369] in China is a direct result of the overbearing and arrogant attitude of the Japanese government and authorities in all parts of the country.

(2) Attitude toward America and Americans.

American prestige, which stood very high during the first quarter of the year, declined during the quarter under review particularly among Peking politicians. Among the people, the attitude of Americans toward the national movement and the refusal of the Legation to allow them to be drawn into action [active] opposition to it, caused great credit to be given. The pessimistic found in the triumph of Japanese diplomacy at Paris ample substantiation for their forecasts that the policy outlined by the United States during the preceding year would not receive sufficient support to become effective. Failing a reconsideration of the Shantung settlement, the one remaining chance rapidly to rehabilitate America in Chinese eyes is to put through the much-discussed consortium scheme without further delay. If the Japanese succeed in wrecking the consortium project and if the United States does not thereupon afford active financial assistance itself in China, the position which the United States has been building up for the past few years as a Power actively interested in China will be lost and she will again be relegated by popular opinion to the position of a benevolent but impotent spectator.

There still exists a preference for American financial assistance and cooperation, a number of concrete instances of which will be mentioned under the appropriate headings below.

It is believed that the great majority of the cabinet officers are personally well disposed toward the United States and would be glad to seek American assistance in preference to Japanese, but that” they have no faith in the intention of America to afford active assistance to China. In point of fact the Peking government would have to be reorganized before it could be considered to be entitled to support by the United States.

c propaganda

(1) Enemy propaganda.

As noted in the last quarterly report, all enemy propaganda has now ceased.

From confidential sources the Legation learns that an arrangement was made sometime ago between the authorities in Hongkong in charge of the British propaganda work there and the Chinese Postal Administration whereby Allied propaganda matter franked through the Hongkong Post Office is accepted for free distribution [Page 370] by the Chinese Post Office. It appears that the British publicity committee plans to make use of this privilege to circulate to Chinese firms British trade propaganda matter. In order that American interests may benefit by the same arrangement the Legation has approached the Chinese postal authorities with a request that a similar privilege be accorded Allied propaganda matter franked through the American post office at Shanghai. It is believed that the Legation’s request will be granted. The postal authorities state however that all such privileges presumably will cease so soon as China formally makes peace with Germany and Austria.

(2) Anti-American propaganda.

The violence of the anti-American propaganda appearing in the Japanese-owned or controlled Chinese press noted in previous reports has continued unabated. From consular reports received there appears to be ground for the belief that in certain places at least this anti-American Japanese press campaign is carried on with the full approval, if not under the direction, of the Japanese consular authorities concerned. In Amoy and Foochow particularly this appears to be the case. It is of course impossible to secure proof sufficiently detailed to justify representations to the Japanese authorities. As has been noted heretofore, this anti-American propaganda is so extremely violent as practically to defeat its own ends.

There has also become increasingly evident an anti-British propaganda carried on in the same papers, directed principally against British policy in Tibet. Great Britain is charged with a desire to annex parts of Szechuan and Sinkiang.

During May there was offered to the Legation for purchase a photograph of the rough draft of a pamphlet charging the American Minister, amongst other things, with having misappropriated the proceeds of the United War Work campaign and having devoted them to the financing of the recent student movement. It is stated and is probably true that thousands of copies of this pamphlet were distributed throughout the country. It was claimed that the original draft was in the handwriting of Mr. Tsao Ju-lin, ex-Minister of Communications. The Legation submitted the photograph to a number of competent judges, who, however, were unable to agree as to whether or not the writing actually was that of Mr. Tsao. It seemed to be generally conceded that the document undoubtedly originated from the pen of some member of the New Communications clique, as the style [of the] composition was closely modeled on that of Mr. Tsao, if it was not actually his own. In view of the inability definitely to establish the authorship from the handwriting nothing was done in regard to this matter.

[Page 371]

A particularly objectionable piece of anti-American propaganda appeared in the Tsinan Jih Pao on May 17th in the form of a violent and scurrilous personal attack on President Wilson. The text of the article may be found in the first sentence, “Mr. Wilson the American President is a boaster and a hypocrite.” While the Legation has not found it politic as a rule to take any notice of the inspired Japanese press attacks on Americans and the United States it seemed that this, article, which in most cases would have laid the editor open to a charge of criminal libel, was too insulting to be passed over, and it was therefore brought to the attention of the Japanese Minister. As a result of the exchange of a number of notes the editor of the paper was severely “admonished” and about a month later published a statement withdrawing the leading article of which complaint was made. The Japanese Minister in discussing the case stated that there was no provision in the Japanese penal code which made a personal attack on the head of a foreign state the basis of an action for criminal libel unless the head of the foreign state happened to be on Japanese soil at the time. Mr. Obata in his turn complained of the activities of the Chung Mei News Agency, an American-owned concern. A careful investigation by the Legation failed to disclose any libelous attacks on Japan or things Japanese, although certain articles sent out by the agency, which in fact were written by a Chinese employee afterwards discharged, were found to be couched in the strong language which at the time characterized Chinese expressions of opinion regarding Japanese policy in Shantung. In the course of the correspondence with the Japanese Minister occasion was also had to refer to a series of libelous articles purporting to be telegrams from Tokyo accusing the American troops in Vladivostok of being highway robbers, of being exclusively interested in the leading of lewd and dissolute lives, etc. While the Japanese press in China continues to be extremely abusive of things American, the official complaints on these two occasions appear to have discouraged the Japanese Foreign Office from making further complaints to the Embassy in Tokyo in regard to the unfriendly attitude of American papers and news agencies in China toward Japan.

While not directly related to propaganda, in this connection may be mentioned a further incident involving Japanese-American relations in China. Mr. S. W. Glass, an American citizen, on April 15th arrived at the Chinese town of Paimencheng (Manchuria) by train. He was walking from the station to the town accompanied by his interpreter when overtaken by two mounted Japanese officers preceded by a private on foot. The Japanese private struck Mr. Glass’ interpreter—according to the Japanese version pushed him from the [Page 372] road—and then ordered Mr. Glass aside. Mr. Glass paid no attention, whereupon he was seized by the arm by the soldier, who attempted to force him to one side. Mr. Glass thereupon struck the soldier in the face and a fight ensued. The fight was stopped by one of the officers who dismounted, and on its conclusion Mr. Glass, according to his own statement, was arrested and taken to the Japanese police station, being subjected to an assault while en route. He was held at the police station for some hours, was then released, and was subsequently rearrested and taken to the Japanese soldiers’ barracks. He was again released and the following morning learning that the Japanese were about to effect his arrest again he left Paimencheng by train. While the matter was not settled during the quarter under review, it should be mentioned here for the sake of clarity that the Japanese deny effecting any arrest, but stated that Mr. Glass was requested to accompany them. The incident which originated this affair was in itself trivial and one in which Mr. Glass was not without blame. Inasmuch however as the town of Paimencheng is not within the Japanese railway zone it is clear that the Japanese had no shadow of right to effect the arrest of an American citizen. This the Japanese admit inferentially by the statement that he was not arrested. The settlement of this case will be reported under the events of the ensuing quarter.

II. Economic Information

a. actual economic conditions

Economic conditions throughout a large part of the country remained most unsatisfactory due to the causes noted in previous reports, namely, the disturbed condition of the country as a result of the civil war and the increase in brigandage consequent upon the loosening of governmental control. In Fukien in particular conditions appear to have gone from bad to worse. The capture and looting of villages by bandits or by the people’s army, a semi-independent bandit force allied with the Southern government, continue to be matters of common occurrence. In a number of cases foreign mission property has been attacked. Fortunately there were no attacks on Americans during the quarter under review. In Shensi and Hunan similar conditions exist.

On April 17th the Foreign Office addressed identic notes to the various missions in Peking stating that, the Anglo-Chinese Opium Agreement having expired, the importation of any opium whatever thenceforth was prohibited. In acknowledging the receipt of this communication the several missions took occasion to call the attention [Page 373] of the government to the continued cultivation of opium in the interior of China. In particular the province of Shensi was pointed out as a flagrant example of retrogression from the standard of the complete prohibition of opium culture. That opium cultivation is being carried on extensively over a large part of China is beyond a doubt. Consular and missionary reports prove conclusively not only that opium is being grown but that in many districts it has received official sanction in the nature either of taxation or of the issue of permits against a cash payment. It is reported and believed to be true that the military governor of Shensi derives the greatest part of his financial support from the taxation of opium culture. There seems to be no likelihood that any effective measures of suppression will be undertaken so long as the tuchun system of provincial administration continues, for the reason that these military governors find themselves obliged to seek revenue from every possible source in order to cover their military expenses.

The question of the disbandment of superfluous troops remains the leading economic problem of the immediate future. This has been fully discussed in the two preceding quarterly reports and it is sufficient here to note that no steps have yet been taken to put it into effect and that it is not likely that anything can or will be done until a large foreign loan can be raised to cover not only the immediate cost of disbandment but also the capital expenditure on account of public works to be constructed in connection therewith.

During the quarter the Legation was approached by the Provincial Government of Fengtien with a view of interesting American capitalists in the completion of the harbor works at Hulutao. Hulutao is a natural ice-free port at the northern end of the Gulf of Chihli (Liaotung), and was the projected deep water terminus of the Chinchow-Aigun railway, for which a concession was granted in 1909 to an American-British syndicate, but which has never been constructed. In 1910 the provincial authorities of Fengtien undertook the construction of the harbor works at Hulutao with the object of providing an ice-free port in Manchuria outside of the sphere of Japanese influence. The work progressed favorably during the first year, a branch railway line some seven miles in length from the Peking-Mukden line to the port having been completed, a considerable number of offices and other buildings having been built, and a commencement on the breakwater having been made. In 1911 the revolution broke out and from that time on the Provincial Government found itself unable to provide the funds necessary to carry out the plan of harbor construction. Under the terms of the Chinchow-Aigun railway concession above mentioned the American [Page 374] financing syndicate interested in this railway was granted an option for providing the funds necessary to the development of Hulutao should the Chinese Government find itself unable to finance that work. The provincial government therefore in approaching the Legation inquired whether or not the American syndicate holding this option desired to exercise it, and intimated that if the syndicate did not care to take up the option the government would be forced to seek financial assistance for the project elsewhere. It is known that the Japanese are most anxious to make the necessary loan, but the provincial government does not look with favor on mortgaging this one remaining port of Manchuria to the Japanese, and it is believed therefore that the intimation mentioned referred to certain British interests. Eventually the provincial government consented to await the formation of the new consortium to whom it is presumed the option in question will be surrendered by the present holders. Should the new consortium not wish to proceed in this matter, the Provincial Government has consented to hold it open temporarily for any other American group to which the original syndicate may assign its option.

In this connection it should be noted that by the railway concessions granted in 1918 to Japan a line is projected from a point on the Taonan-Jehol line to the sea, and that this projected line cannot well terminate elsewhere than at Hulutao. The desire of the Japanese to obtain control of the port is therefore easily understandable.

From a Chinese point of view the Japanese control of Hulutao would be nothing short of a catastrophe. At present there are only two ice-free ports north of Chefoo, one being Dalny (Dairen) and the other Chinwangtao. Chinwangtao is not a good winter port as it is frequently blocked by drift ice and furthermore it has neither the depth of water nor is it sufficiently close to the Manchurian producing centers to serve as a rival to Dalny. Newchwang and Antung, the two remaining Manchurian ports, are both closed for about three months in the winter and even under favorable circumstances are available only for lighter draft coasting steamers. The projected Japanese railway system in Manchuria and Inner Mongolia if built will increase the already enormous exports passing through Manchurian ports for shipment. If Hulutao is not available this trade of necessity will pass through Dalny. Hulutao has an advantage in position over Dalny, being some 100 odd miles nearer Mukden. Furthermore it is connected with Mukden by a purely Chinese railway (the Peking-Mukden line). The importance of having a neutral artery of commerce to serve these regions in which Japan by her control and abuse of shipping facilities has placed her trade in a predominant position is self-evident. For this reason the construction [Page 375] of Hulutao by Chinese, American or neutral capital appears to be a matter of prime importance to the future of American trade in Manchuria.

. . . . . . .

I have [etc.]

Paul S. Reinsch