The Chargé in China (Tenney) to the Secretary of State

No. 3096

Sir: I have the honor to submit the following report on the general political situation in China during the quarter ended September 30, 1919:

I. Political Information

a. domestic

(1) General observations and developments.

In the Legation’s last quarterly report mention was made of the break-up on May 15th of the Internal Peace Conference at Shanghai consequent upon the presentation by the Southern Delegation of a series of eight unacceptable demands. This was followed by the resignation of the Northern Delegation, headed by Chu Ch’i-ch’ien, a personal friend of [and?] the nominee of President Hsu Shih-chang. There followed a period of active although quite informal negotiations between the northern and southern leaders, while at the same time a political struggle took place in Peking in regard to the appointment of a successor to Mr. Chu Ch’i-ch’ien as Chief Northern Delegate. The names of a number of important personages were mentioned for the post but all declined to serve, which is the Chinese equivalent of saying that their names were not acceptable in the dominant political circles. Finally the President was induced to appoint Mr. Wang I-t’ang, Speaker of the House and the parliamentary leader of the Anfu Club, to the vacant post. Mr. Wang’s appointment was gazetted on August 16th. There will be found a reference to his activities in the Anfu Club in the last quarterly report. His appointment was a political success for the Anfu Club, but apart from this it deserves consideration for other reasons. There have been two explanations commonly advanced for the appointment of an Anfu man as head of the Northern Delegation: that the Anfu Club, which has always stood for the forcible suppression [Page 376]of the Southern Federation, while unwilling to suffer the loss of prestige which would result from the conclusion of a negotiated peace by its political rivals, is not averse itself to concluding such a peace and to obtaining the popular credit therefor; and that a strong Anfu man was appointed with the expectation that the South would refuse to negotiate with him and would therefore have to assume the burden of declining to discuss terms of peace. It is possible that both of these contingencies entered into the calculations of the Anfu Club as either would strengthen its hand. A third hypothesis has been advanced: the northern militarists may have some understanding with their confreres in the south, and may only be waiting for the southern parliamentary party to refuse to come to terms to join with certain of the southern military chiefs in completely wiping out the Canton Military Government.

Mr. Wang’s appointment was not favorably received except amongst his own immediate political supporters. His political affiliations are such as to make his choice extremely unpopular in the South. As has been noted in previous reports, the northern military party of which the Anfu Club is an important part is entirely dependent on Japanese support which has been extended both in the form of loans and of military supplies under the Sino-Japanese Military Agreement. Mr. T’ang Shao-i, Chief Southern Delegate, has not failed to make tactical use of this fact, and thus far has avoided any direct refusal to negotiate with Mr. Wang by insisting that the Central Government shall make public all agreements entered into with Japan as well as a complete statement of loans negotiated, before he consents to continue negotiations. For the moment the next move lies with the North. It should be noted in passing that Mr. Wang consulted with the Military Governors of Fengtien, Shantung, and Kiangsu before proceeding to Shanghai. It is understood from consular reports that General Chang Tso-lin of Fengtien recommended forceful action in the event of further southern “obstinacy”, that the Shantung authorities appear to favor a “peace by negotiation “, while General Li Shun of Nanking, who is in close touch with the South, is not believed to approve of Mr. Wang’s appointment. Mr. Huston54 reports that General Li Shun advised Mr. Wang to delay proceeding to Shanghai until some preliminary arrangement had been reached; Mr. Wang disregarded this advice and went at once to Shanghai, to be met by Mr. Tang’s refusal to negotiate as mentioned above.

There is no doubt that at the close of the quarter conditions were extremely critical with a number of possibilities of trouble. As [Page 377]Chinese politics are largely personal, a brief survey of the affiliations of the leading military men may not be out of place. The northern military party, or Peiyang party, had its origin some twenty odd years ago in the modern army raised by Yuan Shih-kai when Viceroy of Chihli. It assumed no important political significance until after the revolution when the control of the State passed from the classic civilian mandarinate to the military. During Yuan Shih-kai’s presidency the Peiyang party was divided into two groups, the Anhui Clique and the Chihli Clique. Amongst the then leading members of the former group were Tuan Chi-jui, Ni Ssu-ch’ung, and Chang Huai-chih, while of the latter Feng Kuo-chang, Li Shun, Wang Chan-yuan and Li Yuan-hung may be mentioned. The Anfu Club so far as its military membership is concerned, is formed principally from amongst members of the Anhui Clique. The following military governors are closely associated with the Anfu Club and generally may be expected to act in concert; Chang Tso-lin of Mukden, Ni Ssu-chung of Anhui, Chen Shu-fan of Shensi, Chang Kuang-chien of Kansu, Chang Ching-yao of Hunan, Chao Ti of Honan, and Lu Yung-hsiang formerly Defence Commissioner at Shanghai and now Military Governor of Chekiang. In opposition to the Anfu Club, the heirs of the old Chihli faction still control the central Yangtze Valley—Li Shun at Nanking, Chen Kuang-yuan in Kiangsi and Wang Chan-yuan in Hankow. Tsao Kun, Military Governor of Chihli, is “astride the Wall” in the Chinese expression. As has been noted General Hsu Shu-cheng is the Peking representative of those military men who are associated with the Anfu Club. For some months past this group, with its strong provincial support and with Japanese backing, has been in complete control in Peking. There are indications however that Marshal Tuan Ch’i-jui, who still exercises a great influence, has been gradually drifting away from the Anfu party and is coming into closer touch with the President than formerly; with him goes Chin Yun-p’eng, Minister of War and Acting Premier. The President can certainly count upon the support of the three Yangtze Valley governors as against the Anfu Club and if he is able to attach to himself Tuan and Chin, he may be in a position to defeat the Anfu Clique and regain sufficient authority to put into effect his domestic policies. A further opposition to the Anfu Club exists in Hunan, where are two military commanders neither of whom really recognizes the authority of Military Governor Chang Ching-yao. The better known of these General Wu P’ei-fu, was originally a subordinate commander under Ts’ao K’un, Military Governor of Chihli, but, since his command in Hunan, has gradually [Page 378]assumed a semi-independent attitude and is commonly regarded as having southern sympathies. He is a bitter enemy of Chang Ching-yao and appears to be as popular locally as the latter is unpopular. The other is General Feng Yii-hsiang, sometimes known as the “Christian General”; he is by origin a member of the Chihli Clique. He is known to be on friendly terms with Wu P’ei-fu and at any moment may make common cause with him against Chang Ching-yao. Like General Wu he enjoys a high reputation locally. It is generally admitted that these two commanders are in a position to expel the Military Governor by force if they so desire, and there are now rumors current that they are about to take this step. In such an event it is probable that Hunan would come into line with the other Yangtze Provinces as a neutral province.

To add to the confusion there is no doubt that ex-President Feng Kuo-chang is actively intriguing against President Hsu and is open to make terms with any of the northern military who would support him in a claim to be the legitimate president, or to be exact in the claim that President Hsu’s election was illegal and therefore is void, and that as the legally elected Vice-President Feng is entitled to function as President. General Feng has been particularly active during the past few weeks. His affiliations are all with the old Chihli Clique, but he is so discredited politically that it is doubtful whether he would be able to command any support from the Yangtze tuchuns in a movement to eliminate President Hsu. General Feng’s movements are being watched with much interest.

To sum up briefly the immediate possibilities of the domestic situation: (1) Not only has there been little progress made toward an early conclusion of peace between the north and south, but on the contrary there are a number of indications that hostilities may be resumed unless the control of the Anfu Club in Peking is overthrown; (2) there is a strong possibility of a working arrangement between the President, Marshal Tuan Ch’i-jui, the Minister of War and the Yangtze tuchuns to overthrow or at least to neutralize the power of the Anfu Club in Peking; (3) there is considerable possibility of a localized conflict in Hunan between the Military Governoi and Generals Wu and Feng; (4) ex-President Feng is actively intriguing for the overthrow of President Hsu—he is discredited and probably will be unable to bring matters to an issue, but, while it is improbable, it is conceivable that under certain circumstances he might secure Anfu support for his schemes, which, in such a case, would become dangerous. Geographically the Southwest is independent of Peking, the Yangtze Valley is under the control of northern military men in opposition to the Anfu Club and the northern plain is under the control of the Anfu Clique.

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On September 24, Mr. Kung Hsin-Chan, Minister of Finance, who had held the additional post of Acting Premier since the resignation of Mr. Ch’ien Neng-hsun in May last, resigned both posts. No successor was appointed to the portfolio of Finance, the Ministry being left in charge of Mr. Li Ssu-hao, Vice-Minister. General Chin Yun-p’eng, Minister of War, of whom mention has been made above, was appointed Acting Premier. Mr. Kung’s resignation, which had been impending for some time, occasioned no surprise. The financial difficulties of the Government, and the fact that Mr. Kung was not on the best of terms with his cabinet colleagues of the War and Navy Ministries, are a sufficient explanation of his retirement. Mr. Kung was never favorable to the proposed consortium method of financing China, and is understood to have held the view that with a proper reorganization and economy China should be able to do without any foreign loans. It is not clear how the period of reorganization could have been financed without foreign assistance, and as a matter of fact he himself applied to every possible service for foreign financial assistance. General Chin, who succeeds him as Acting Premier is reported to be more favorably disposed toward the consortium.

Mr. Kung’s resignation leaves the Cabinet with only four full ministers, those of War, the Navy, Law, and Agriculture and Commerce. The Ministries of Foreign Affairs, Interior, Finance and Communications are all in charge of Vice Ministers. The Minister of the Navy has been seeking to resign for some time, as he cannot obtain funds for the payment of the Navy. The President thus far has been unable to carry out the much needed reorganization of the Cabinet owing to the attitude of the Anfu Club which demands the principal cabinet posts for Anfu members, a condition the President is not willing to meet. There seems to be reason to suppose that there is some idea of bringing Tuan forward again as Premier. It is doubtful if the Anfu Club would challenge his appointment, and, provided that Tuan breaks his connections with General Hsu Shu-cheng, the appointment would not be an unpopular one. Tuan is generally credited with being a sincere patriot, and has earned most of the criticism to which he has been subjected by reason of the unfailing support which he has given to all action taken by his subordinates, particularly General Hsu, to whom he delegates far too much authority. He is in addition extremely stubborn and very difficult to move once he has made up his mind. He enjoys the personal respect of many people to whom he is obnoxious politically.

Early in July General Meng En-yuan, Military Governor of Kirin, was ordered to turn over his seals to the Civil Governor, to vacate his post and to report to Peking for a new appointment. He was to be succeeded as Governor of Kirin, by General Pao, then Military [Page 380]Governor of Heilungchiang. General Meng has for the past few years been the only rival in Manchuria to General Chang Tso-lin, Military Governor of Fengtien. After the appointment of the latter to be Inspector-General of the Three Eastern Provinces, which made him the immediate superior of General Meng, the relations between the two became even more strained. It is believed that General Meng consistently refused to recognize General Chang’s authority in Kirin. When it became known that General Meng had been transferred, one of his most intimate lieutenants, General Kao Shih-ping, “refused to permit him to leave”. General Chang Tso-lin promptly championed the Central Government and both parties made troop dispositions. Fortunately no fighting actually occurred. After some preliminary discussions between General Pao and General Meng, the latter finally consented to carry out his instructions and the incident, which at one time gave cause for serious alarm, passed off quietly.

A reference was made in the last quarterly report to the organization of the Northwest Frontier Defence Bureau and the placing thereunder of a considerable body of troops, as well as of the intention to despatch a force of these to Urga. Troop movements began in late July and early August and by August 26th, according to a report received by the Military Attaché 700 had reached Urga, 500 were at Kiakhta, 120 were at Uliasutai and 100 at Kobdo. Between that date and September 30th it is believed that about 600 more reached Urga. The Military Attaché doubts the accuracy, of many reports as to the strength of the Expedition, and places the total number of Chinese troops in Outer Mongolia at not over 1500 men. In the force is one battery of mountain artillery, and a number of machine gun companies, the rest being infantry. This force is probably all drawn from the former National Defence Bureau First Mixed Brigade, which was moved out of Honan during August and September. It was planned to despatch the 23rd Mixed Brigade of the same force to some point in Mongolia, probably to Ude (halfway between Kalgan and Urga) but this brigade had not moved up till the end of the quarter. The 2nd Mixed Brigade was scheduled to go to Suiyuan; it is not known definitely whether or not this unit has moved, although it is known that all told several thousand troops have left Peking by rail for Kalgan. In addition to those mentioned in detail above, there are now not more than 3000 men of this force quartered in Kalgan and at the head of the Hannabar Pass just outside of Kalgan. From this analysis of troop dispositions it will be seen that out of a total of between 7000 and 10,000 men, General Hsu has actually despatched to remote frontier districts only some 1,500; of the balance [Page 381]some 4,000 or possibly more (those at Kalgan and Suiyuan) are within twelve hours of Peking by rail. The disposition of the remainder is doubtful. In view of the general unsettled state of affairs, this fact is worthy of note. Turning more particularly to General Hsu’s Mongolian adventure, according to his own statements he has not only been well received by the local princes, but his emissaries have received marked and unique distinctions at the hands of the Living Buddha of Urga, the chief potentate, temporal as well as spiritual, of Mongolia. Less biased reports however are not so favorable. It is stated that the Expedition is viewed with suspicion and alarm by the Mongolians, who are placing all possible obstacles in its way. There were commodious barracks in existence in Urga which had been evacuated by the Mongolian troops and were standing empty. So soon as news of the expedition was received, these were completely destroyed by the Mongols, and the Chinese are now engaged in their reconstruction. Nevertheless the fact that General Hsu has despatched this relatively small force into the heart of Mongolia, where it could easily be attacked and cut up by the Mongols would seem to indicate some understanding.

Reports from southern Fukien and from Kwangtung Province indicate that conditions in the Southern Confederacy are equally as chaotic as in Peking. In that portion of Fukien under southern control, there was open fighting, although not on any large scale, between the locally recruited Fukienese troops and the Kwangtung troops under the command of General Chen Chiung-ming. The countryside generally was groaning under excessive and irregularly conducted taxation. Brigandage remained prevalent.

In Kwangtung much dissension arose over the appointment of a successor to the Civil Governorship made vacant by the resignation during June of the Acting Civil Governor. The Cantonese themselves were strongly in favor of the appointment of Dr. Wu T’ing-fang to the post. His nomination was opposed however by the Military clique, who desired to see the Military Governor made acting Civil Governor. A number of strikes which took place to support Dr. Wu’s candidacy were suppressed by the military. A temporary solution was found by the appointment of the local Taoyin (Intendant of Circuit) to act as Civil Governor.

The direct authority of the Military Government does not appear to run beyond a part of Kwangtung Province, and that part of Fukien occupied by Cantonese troops. In Kwangsi, General Lu Yung-t’ing is semi-independent, while the Military Governor of Yunnan, General T’ang Chi-yao controls that province absolutely and exercises a very great influence in Szechuan as well. In the latter province a certain amount of friction is still apparent between the [Page 382]Szechuan and Yunnan interests although there have been no open clashes.

Generally speaking the only interest in common which unites the southwest is its opposition to the present central government.

Apart from the conflicting ambitions and jealousies of the individual southern military leaders, there is a broadly defined split in the Southern Military Government between the civilian element headed by Wu T’ing-fang, T’ang Shao-i and others and embracing most of the politicians of the old parliamentary group, and the military element composed of the several military governors, together with the principal generals in the field. The southern military seem disposed to take an independent line in the matter of peace with the north and it would not be surprising to find a peace declared by the northern and southern military groups which would be acceptable to the North and which would have to be accepted by the Southern civilian group as the latter would have no military support left it. Such a peace would in reality be a victory for the northern military, as it would leave them more firmly in control than they were before the last revolution was proclaimed. There is no essential difference between the northern tuchun and his southern prototype, and a mutual agreement for the perpetuation of the military control of China would be in the interest of both groups.

The Peking Parliament adjourned on September 30th, upon the expiry of the constitutional limitation of the regular session. While not within the scope of this report, it may be mentioned that Parliament reconvened in extraordinary session almost immediately. There is an entire lack of public interest in the deliberations of Parliament, which is recognized as representing public opinion in no particular. It is devoid of influence and for the most part is a dummy in the hands of the leaders of the Anfu Club. Its sole claim to importance lies in the fact that the President received his election at its hands, wherefor it is an essential point of policy for the present Government to insist on the legitimacy of the present body as the constitutional parliament of the country.

(2) Attitude towards the war.

The discussion by the United States Senate Committee on Foreign Relations of the Shantung clauses of the Peace Treaty aroused great interest in China, and undoubtedly had a beneficial effect in so far as it tended to show that the United States was an unwilling party to the arrangements set forth in the Treaty for the disposal of the German interests in Shantung. There is no doubt that the whole country is definitely opposed to the Shantung settlement. The Government, however, in the first place contains a number of important [Page 383]officials who are under Japanese domination, and, in the second place, in view of its international responsibility, it hesitates to take any radical steps, and has done no more than offer a passive resistance to that settlement by refusing to become a party thereto. No such considerations restrain the southern leaders, however, who are insistent in their demands not only that the Shantung settlement shall not be recognized, but that the several Sino-Japanese Conventions dealing with Shantung, which have been widely quoted in support of the Japanese contention, shall be declared invalid as being without that parliamentary sanction necessary under the constitution to give effect to any treaty. Naturally this stand is taken largely as means of obtaining popular support for the southern cause generally, but it must be admitted that it represents a view which is held in many circles which have no connection with the Southern Confederacy. Finding itself unwilling to accept those clauses of the Peace Treaty which related to its own immediate interests, China set about to discover some other way of concluding peace with Germany, and finally decided to do so by Presidential Mandate. A Mandate, a copy of which was forwarded to the Department of State under cover of the Legation’s despatch No. 3022, of September 17th,55 was accordingly issued on September 15th, declaring the state of war between Germany and China to be at an end. The Mandate states specifically that apart from the three clauses dealing with Shantung the Paris Treaty is as acceptable to China as to the other powers. This declaration of peace by Presidential Mandate, without previous consultation with the power with whom China is at war, is curiously reminiscent of the earliest days of foreign intercourse with China, when China quite genuinely assumed to regulate the affairs of the universe by Imperial Edict. Despite the fact that [Page 384]peace has thus been declared, no change has been made in the regulations governing German subjects in China and the disposition of their property. The Enemy Custodian Bureau continues to function in name, although actually nothing has been done with respect to the greater part of the property sequestered.

Simultaneously with the declaration of peace, the Grand Order of Merit was bestowed on Marshal Tuan Ch’i-jui in recognition of his services in connection with the War.

China’s signature of the Austrian peace treaty aroused considerable interest, first because of the eleventh hour amendments which were proposed, but not adopted, for incorporation into the treaty, which if adopted would have made the treaty unacceptable to China, and second, because by her signature thereto China became a member of the League of Nations.

The War having been officially ended so far as China is concerned, it is worth while noting that Germans and Austrians have never been personally unpopular in China, nor has there ever been any strong anti-German sentiment, apart from individuals. China entered the War for reasons of Far Eastern politics, hoping thereby to secure international support and protection against Japanese aggression. That she failed in a large measure to gain her point, is, in the ultimate analysis, largely the fault of her own officials. In the first place she refused to move at all until she was quite certain that she was secure against any molestation at the hands of Germany, by which time she had lost the opportunity of herself recovering directly the German holdings in Shantung. In the second place, she hopelessly compromised her position vis-a-vis Japan by the series of secret agreements entered into between certain Chinese officials and that country. While it may be true that these agreements are not legally binding on China, nevertheless they gave Japan all that she required to support her case at the peace conference, more particularly as China herself has never yet definitely declared the agreements in question to be void. China undoubtedly expected the western powers in the protection of their own obvious interests to force Japan to disgorge Shantung.

b. foreign

(1) Relations with foreign countries.

China’s relations with Germany and Austria have been discussed above, as have also her relations with Japan so far as the questions immediately relating to Shantung are concerned. As these and financial questions to be discussed under the appropriate heading below were the most important features of China’s foreign relations during the quarter, there does not remain much to add.

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Another unfortunate incident took place between Chinese and Japanese troops in Manchuria. On July 19th at Changchun there occurred an armed clash between Chinese and Japanese troops in which some 18 Japanese and some 12 Chinese were killed and a number wounded on each side. The essential facts are not seriously disputed. It appears that a Japanese coolie was roughly handled by certain Chinese soldiers; the Japanese sent a small number of railway guards to the scene, who were reinforced by about 30 infantry; this armed Japanese force then marched to the Chinese barracks, where the commanding officer of the Japanese troops sought out the principal Chinese officer in the barracks and demanded an immediate investigation. While the parley was in progress, fighting started between the Chinese troops in the barracks and the Japanese force without. It is claimed, and may probably be true, that the Chinese started the firing. The firing continued for some time despite the efforts of both the Japanese and Chinese officers to stop it. Those who have any experience of Chinese troops and of the difficulty of obtaining satisfactory redress for grievances suffered at their hands will be the first to admit that the Japanese in the first instance had good cause for complaint. But there can be no justification for the unwarranted and provocative act of the Japanese in marching with an armed force to the Chinese barracks and there and then demanding that certain steps be taken.

It was first stated by the Japanese authorities that no political significance would be attached to this affray, and in fact the Japanese demands as at first reported were of no particular political significance. They provided for the withdrawal of all Chinese troops to a distance of 10 miles from the scene of the trouble, for apologies and the punishment of the responsible officers. The Chinese no doubt with the hope of minimizing the trouble, instructed the local officials to make a settlement. The Chinese Government itself promptly dismissed General Kao Shih-pin, the Commanding Officer, actuated thereto by his championing of the cause of the recalcitrant Governor Meng of Kirin. The case had not yet been completely settled by the close of the quarter, and from reports received during the progress of the negotiations it appears that the Japanese added to their original demands, a claim to have more Japanese instructors engaged for the Manchurian Gendarmerie forces.

While not strictly pertinent to the present section of this report, it may be mentioned that during the quarter an American citizen travelling in Manchuria, was the victim of an outrage at the hands of Japanese troops. Having fallen into an altercation with a Japanese private who attempted to thrust him from the road, they came [Page 386]to blows; the American was arrested by Japanese troops and taken to Japanese police headquarters where he was detained for some time; he was finally released but again re-arrested the same day. Again he was released and left hurriedly the next morning on learning that he was again about to be arrested. The case was satisfactorily settled by apologies from the responsible Japanese officers and the punishment of the soldier concerned.

The anti-Japanese boycott, whose inception was noted in the last quarterly report, continued to be rigorously enforced in the South. Reports from Canton, Swatow, Amoy, and Foochow agree in describing it to be effective and nearly complete. In several of these districts, Japanese goods discovered on sale were publicly destroyed; merchants dealing therein were fined, and societies were organized for seeing that the boycott was strictly observed. In Shanghai the boycott is said not to be very effective. In Shantung it seems to be generally enforced, together with a Chinese nationalist campaign directed against the Japanese. There were a few cases of arrests of Chinese alleged to be boycott agitators by Japanese police in the Japanese Railway zone in Shantung. In North China the boycott movement though strong is not universal. The Japanese continue to attribute all Chinese anti-Japanese feeling to the intrigues of the “white” residents in China, particularly Americans, and of Americans particularly American missionaries. These latter were placed in a most awkward position in relation to the students in their schools. They could not well require of these boys an entire abstention from any participation in a nationalist movement, more especially as there is no desire on the part of American missionaries to make of their converts anything but good Chinese citizens. On the other hand, there was considerable difficulty in restraining the students from using the schools as headquarters and centres of direction for a campaign directly [directed] partly against the Japanese and in some cases partly against their own officials.

The Japanese continued to exercise a very great influence over the officials of the Central Government in Peking. While the so-called new Communications clique, headed by Tsao Ju-lin, formerly the principal medium for Japanese intrigue, was not much in evidence during the quarter, close relations continued to be maintained between the Japanese and that wing of the military clique allied with the Anfu Club. General Chin Yiin-p’eng, the new Premier, by common repute is considered to be less under Japanese influence than General Hsu Shu-cheng, but the Legation is confidentially informed that his nomination to the Premiership was actually referred to and approved by Tokyo before his appointment was made [Page 387]effective, which would indicate that the popular view of his attitude is hardly correct.

Owing to the disturbed state of affairs in Siberia, a number of Sino-Russian questions have arisen during the past few months. Of these the most important were the illegal seizure of several million roubles by General Semeonoff from Chinese merchants passing through Chita, and the question of the despatch of Chinese war vessels up the Russian portions of the Sungari and Amur Rivers. In regard to the former, after a threat by the Chinese Government to stop further payments on account of the Russian share of the Boxer Indemnity, the Omsk Government undertook satisfactory measures for the indemnification of the Chinese merchants concerned. The latter case has to do with the provisions of the Treaty of Aigun of 1848 [1858] and of the Treaty of St. Petersburg of 1880 [1881], concerning the navigation of the Amur and Sungari Rivers, which are bilateral in character and grant to the vessels of each nation the right to navigate within these two rivers the territorial waters of the other. This right has long been exercised by Russian vessels in respect to the Chinese portions of the rivers in question, but has never been operative in respect to Chinese war vessels desiring to navigate the Russian portions thereof. The Russian Legation explains this failure to give effect to a treaty provision by a deficiency in domestic legislation. The question has become acute owing to the attempt of Chinese Government to despatch war vessels up the rivers in question. The Commandant of the Russian fortifications at the entrance denied them access, and for a time they were practically interned. No solution of the difficulty had been found up till the end of the quarter.

The post of Minister to Japan, vacant since the resignation of Chang Tsung-hsiang after the assault made upon him in Peking by students during last May, was filled by the appointment of Mr. Liu Ching-jen, lately Chinese High Commissioner in Siberia. Mr. Liu had an extended diplomatic career in Europe before his appointment to Siberia. He was succeeded as High Commissioner by Mr. Li Chia-ao, lately Commissioner for Foreign Affairs at Harbin, where he was on most excellent terms with both Russian and other foreign officials and residents. Mr. Li has spent many years in Russia, speaks the language fluently, and is well disposed towards the Russians.

(2) Attitude toward the United States and Americans.

The departure of Mr. Reinsch, the retiring American Minister, was made the occasion for a striking display of China’s friendship toward the United States. During his tenure of office in Peking, [Page 388]Mr. Reinsch had made himself extremely popular in Chinese circles by reason of his sincere friendship for China and of his attempt to cultivate informal social relations with Chinese of all classes in Peking. However, while the demonstrations on his departure were no doubt largely as tribute to his personal popularity, they were equally inspired by a desire to express China’s gratitude for the friendly attitude adopted by the United States toward China at the Peace Conference. This was noticeable in practically every public speech made. The series of entertainments to which Mr. Reinsch was invited were unprecedented in connection with the departure of any former foreign minister in Peking, and included, besides the usual strictly official fetes, dinners and receptions given by Chinese merchants, bankers, both Houses of Parliament, student organizations and a large number of prominent individuals. His departure was also made the occasion for a eulogy, both personal and of the United States, in almost every important Chinese paper in the capital.

It is difficult for any American to form an accurate estimate of the real Chinese opinion in regard to the United States, as oriental politeness plays a large part in the expressions of opinion which he constantly hears. At the same time, the tone of the Chinese press, and the fact that petitions invoking American assistance for China are constantly being received from all parts of the country, are perhaps a sufficient indication of the fact that of all foreign countries, the United States stands first in Chinese esteem. Unfortunately, however, while the United States is probably genuinely liked, there exists a marked disposition on the part of responsible Chinese officials to question her intentions of playing an active role in Chinese affairs. Thus it by no means follows that, because America is a popular nation, China’s officials, even if well disposed personally toward America, will readily fall in with American plans in China, as they beg leave to doubt whether in the final analysis the United States will exert the pressure necessary to bring such plans to fruition in the face of opposition from other powers.

During September the Chinese Government despatched Mr. Hsu En-yuan to the United States with a confidential commission to conclude with the Continental and Commercial Bank of Chicago the negotiations initiated by Mr. Abbott56 in 1917 looking to the execution of a contract for a loan of $25,000,000, supplemental to the $5,000,000 loan made by that Bank in 1916 secured on the Wine and Tobacco Tax.57 The further history of these negotiations will be dealt with in the following quarterly report.

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c. propaganda

(1) Activities of Japanese propaganda.

The bitter anti-American tone of the Japanese owned and controlled press in China, already noted in a number of previous reports, continued to be manifest during the quarter. The Legation again had occasion to complain to the Japanese Legation of a further personal attack on the American Consul at Tsinan appearing in the local Japanese paper there.

The Japanese press attacks on American policy in China centered mainly on the new Consortium.58 A strong effort was made to discredit the motives of the powers supporting the Consortium project by constant discussion of the railway unification provisions adopted by the Paris Bankers’ Conference in May last, which were represented as a threat to China’s independence and liberty of action. The belief already noted, held in many Chinese quarters, that the United States cannot be relied on to carry to fruition her projects in China is also in no small measure due to sedulous Japanese intrigue. While the Consortium negotiations are being perpetually delayed by the presentation by the Japanese of conditions which they know are unacceptable, the Japanese in China point to the delay in the consummation of the Consortium as another example of American indecision, and foster the growing opinion in China that it is futile for the Chinese Government to await financial assistance from this source. It is becoming an open question as to whether it would not be a desirable matter of policy for the United States to conclude a Chinese loan independently to make clear and unmistakable the fact that the United States does intend to take a part in Chinese finance, through an international Consortium if possible, but if not independently, and that she does not propose to be indefinitely blocked by insincere Japanese negotiations.

(2) American publicity.

It will be recalled that during May last, an American syndicate purchased the Tientsin edition of a well-known Chinese paper called the Yi Shih Pao. At that time the negotiations for the purchase of the Peking edition of the same paper had to be abandoned owing to the suppression of the paper by the Chinese authorities. The paper was permitted to resume publication during June or July and in August was purchased by the same syndicate which purchased the Tientsin edition. The Yi Shih Pao has one of the largest circulations of the Chinese dailies in North China.

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The Legation learned of negotiations in progress for the purchase by American interests of one of the leading Chinese dailies in Shantung, and the establishment in the same province of another American owned Chinese daily by other American interests. From Foo-chow also there were reports of negotiations for the establishment of an American controlled Chinese paper.

While, as a legal proposition, the right of foreign interests to conduct vernacular newspapers in open ports under extra-territorial privileges appears to be well established, this sudden development of American interest in vernacular papers suggests some interesting points of moral responsibility, which may in time necessitate additional legislation. That foreigners enjoy extra-territorial privileges in China and exemption from the operation of Chinese law is in itself proof of the fact that China has not yet developed within measurable distance of the civilization and conditions of the west. In such a backward country, subject as it is to constant domestic political disturbances, what might, in more advanced countries, be considered as no more than rather strong political comment may easily become revolutionary propaganda of a pronounced type. This tendency is accentuated by two facts: first, that there are few Americans capable of personally conducting the editorial policy of a vernacular paper on account of the language difficulty, and that the Chinese journalists whom the American proprietors are forced to use, have not been trained up to the sense of responsibility and the ethics of journalism exemplified in the better class of American journals; and, second, that when existing Chinese papers are purchased, it almost invariably happens that the more able and trenchant of the journals in opposition to established authority are those which come upon the market, as they seek to protect themselves by cover of foreign ownership and consequent extra-territorial immunity. The Chinese sellers of such papers generally retain a part ownership, and there exists a strong suspicion in some cases that when such papers are sold, the Chinese vendors in effect are purchasing foreign protection by the very advantageous terms of sale which they accept. As a matter of policy, it may be found desirable to permit such papers to go their way unchecked, as their policies, to do them justice, are generally directed against official corruption and oppression and in favor of the development of democratic ideals. Should it be considered advisable to impose some measure of control, two methods suggest themselves: that it be made a legal prerequisite to the recognition of a newspaper corporation as an American citizen, that the responsible editorial control of such a paper be vested in an American, and that the United States officials be [Page 391]directed to bring suit for criminal libel against the responsible American whenever circumstances warrant it; and that additional legislation be enacted to control the publication by American papers in China of inflammatory news matter or editorial comment. Both methods are open to obvious objections, particularly if the American interest in Chinese newspapers assumes large proportions.

II. Economic Information

There were no new economic developments of importance during the quarter.

Reports of opium cultivation from various parts of the country continue to be received. It would appear that the authority of the Central Government in the provinces is not sufficient to prevent the re-introduction of the opium curse by unscrupulous provincial officials who require the revenue to be derived from opium production and sale. Further it appears that the soldiers as a class are becoming much addicted to the use of the drug, which makes the prohibition of smoking that much the more difficult.

The rice shortage in Canton which caused acute distress amongst the poorer classes, was partially relieved by large importations from the Yangtze and with excellent prospects for the new crop the danger of famine has disappeared.

The chief disturbing factors economically continue as before to be brigandage, which is still prevalent over large parts of the country, the circulation in many provinces of practically worthless paper money, and the lack of adequate transportation facilities. These factors have already been discussed at length in previous reports and therefore need not be elaborated here.

Complaint was made by foreign merchants of the collection in the Upper Yangtze of unauthorized and illegal duties on river borne freight. It appears that these duties are simply a forced levy without any legal basis collected by military commanders holding important points on the river. In addition to such frankly illegal taxation, the Legation continues constantly to receive complaints of various taxes on goods in the interior authorized by the Central Government, the ground of protest being that the goods in question having paid a transit tax in commutation of further inland charges, are nevertheless subjected to such charges immediately on arrival at the point of destination. There is hardly room for doubt that these taxes are contrary to treaty, but so far it has proved impossible to induce the Chinese Government to grant any relief.

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III. Commercial Information

a. the boycott of japanese goods

Commerce was diverted into new channels and industry stimulated by the steadily increasing scope and effectiveness of the boycott of Japanese merchandise in South and Central China. This movement, begun in May, has been distinguished from previous manifestations of its kind by two new elements—patriotism and organization. Through active efforts of the student class, supported by native merchants and chambers of commerce, it is reported, sales of Japanese cotton yarns and hosiery, machinery, toilet articles, medicines, beer, milk, biscuits, straw hats, soap, lumber, hides, watches, crockery and rubber goods have declined very materially; and imports of coal, paper, piece goods, toys, matches and stationery from Japan have decreased considerably. It is asserted that well over half the Japanese export business to China has been eliminated. This can not be proved by statistics now available because orders placed by Chinese firms before the beginning of the boycott are still being filled. The appended figures show the quantity of some of the principal imports from Japan into Shanghai during June, July and August:

. . . . . . .

The Japanese consul-general at Amoy, where Japanese interests are extensive, cabled to his government on August 18 that owing to the boycott agitation the import trade of that port had decreased 70 per cent. In Hankow, another center of Japanese commercial activity, the native chamber of commerce collected samples of homemade goods and located disguised shipments from Japan. At the end of the quarter it was reported that the boycott in Shantung was complete, the Chinese not only refusing to purchase articles from the Japanese but refusing to sell them anything. The Japanese egg products factory at Tsinanfu has been prevented from executing contracts with American firms.

The boycott is probably more effective in Canton than in any other large city of China. Both male and female students have labored unceasingly there and late in September succeeded in bringing the large department stores into line. These stores were not placing new orders in Japan; merely attempting to dispose of their vast stocks of Japanese goods. The manager of one of these establishments is quoted as saying that such stocks at the end of August were valued at Mex. $30,000,000.

As a result of the boycott the Texas Company, an American enterprise, discontinued its arrangements with Mitsui and Company, a Japanese house, for the distribution of its petroleum and petroleum products in China; henceforth their sale will be controlled by a [Page 393]branch office in Shanghai. The Texas Company’s chief brands of oil, “Sing “and “Yingfoo”, have been marketed in China direct from Port Arthur, Texas. Since May these lines have been boycotted and very little business has been done, Chinese dealers turning back the stocks in their possession because Mitsui and Company, it is alleged, claimed that the goods came from Port Arthur, Manchuria. The fact that the Texas Company has been forced to cancel its contract with Mitsui and Company is expected to have a considerable influence in discouraging other proposals for Japanese-American business co-operation in China.

b. the import trade

High exchange continued to favor imports into China during the quarter, and inward cargoes were notable chiefly for the large quantities of goods from the United States, both from Pacific ports and New York via Panama or Suez. The market for piece goods was weak. Staples quieted down in July and prices declined. In August business was almost at a standstill. There was an improvement in September, when numerous inquiries were recorded, but prices did not advance materially. Shipments of American gray sheetings, plain cotton prints, and drills were received.

The impetus given to Chinese industries by the boycott of Japanese goods led to the placing of many orders for machinery and other factory equipment, a generous share going to American manufacturers. It is stated that Andersen, Meyer, and Company alone obtained twenty orders for cotton mills, and at least one American plant (the Saco-Lowell Shops) will be occupied with China trade exclusively for the next eighteen months. The large profits made by Shanghai mills, the desire of the Chinese to make their own cotton goods, and the anti-Japanese movement were the factors combining to bring about the unparallelled expansion of the local cotton industry. There are now approximately 1,500,000 spindles in China, but replacing the imports of finished products of various kinds, from yarns to piece goods, would require 5,000,000 spindles. Formerly the predominating interest in China’s cotton mills was foreign; the development in the past six months has been almost entirely native, and when the new factories are in operation Chinese capital will be well in the lead.

During the quarter new machinery for the Wuchow Electric Light Company arrived from the United States, and an American firm in Shanghai was awarded the contract for washing and dry cleaning machinery and equipment for the Shanghai Sanitary Laundry Company. In July and August imports of American machinery into the port of Shanghai were valued at 334,296 Haikwan taels, giving the [Page 394]United States considerably more than half the total trade in this line. Canada supplied machinery valued at 96,507 Haikwan taels in August. Aniline dyes of American manufacture enjoyed a substantial lead in Shanghai’s import trade, and although shipments of American hosiery were insignificant, in July they exceeded receipts from Great Britain.

In connection with the efforts being made by American manufacturers to increase their sales in China it is worth while to note the success attained by the large department stores in Canton and Shanghai. These establishments have introduced the fixed-price system of merchandising with excellent results, and their large trade in foreign goods has induced most of the other native stores to carry imported lines. A chain of American department stores in the principal cities of China would be of incalculable benefit to American trade generally. They could display an unlimited number of different lines, exclusively American, and the advantage of goods new to the Chinese market could be explained.

. . . . . . .

I have [etc.]

Charles D. Tenney
  1. Jay C. Huston, vice consul and interpreter at Nanking.
  2. Despatch not printed (File No. 763.72119/7778); the following is the text of the mandate enclosed:

    With the object of upholding International Law as well as the principles of humanity and actuated by the desire to mitigate the horrors of war and to hasten the conclusion of peace, the Republic of China declared war on Germany on August 14, in the Sixth Year. Since this country became one of the belligerents, we have been following the same policy as the other Associated Powers. Now hostilities in Europe have ceased and the Peace Treaty with Germany was signed by the delegates of the difference [different] Associated Powers on June 28 this year at Paris. By virtue of this, the state of war which had hitherto existed between Germany and the Associated Powers was brought to an end on that day. Dissatisfied with the conditions embodied in three clauses relating to Shantung, this country refused to sign the Treaty. But it must be remembered that the other terms in the document are as acceptable to us as to other Associated Powers. As the state of war between Germany and other Associated Powers is at an end, it naturally follows that we are now standing in the same relationship with Germany as the other Associated Powers. A resolution to this effect has been passed at a Parliament meeting and we hereby declare that the state of war between Germany and the Republic of China is at an end. Let all take note of this.

  3. John Jay Abbott, vice president of the bank.
  4. See Foreign Relations, 1916, pp. 138143; also ibid., 1917, pp. 130133.
  5. See section on negotiations for the organization of a new international financial consortium, pp. 420 ff.