The British Embassy to the Department of State

The situation in the International Settlement at Shanghai is causing concern. The Japanese have for years past been trying to increase their representation on the Municipal Council, but have been unable to out-vote the American, British and other opposing electors because of the property qualifications for franchise laid down in the Land Regulations. The Japanese community, although more numerous than other foreigners, consists mostly of the poorer residents without a vote. The Japanese also complain that the system of taxation is inequitable, and in general they demand a reorganisation of the administrative system. The Land Regulations are however in the nature of a treaty between the foreign Powers having Treaty rights in China and the Chinese Government, and the desired changes can only be legally effected by agreement between all the parties concerned. In present conditions that is not practicable.

2. It is generally agreed that there is some justice in the Japanese claim for larger representation, but hitherto the British electorate, supported by the Americans and others, have taken every possible measure, such as the registration of additional voters, to defeat the Japanese at the election, for fear that their success would result in the complete domination of the Council.

3. It now appears however that the Japanese, despairing of getting what they want by Constitutional means, may be ready to consider a coup by violence. There is reason to believe that if the next annual [Page 831] election in April is like the last there will be serious disturbances, inevitably involving the American as well as the British and other democratic communities. Even if the Japanese accepted defeat at the polls it would be impossible for the Council to govern in the face of organized resistance to their taxation and other arrangements.

4. In order to avoid this outcome the British members of the Council have suggested that as a temporary measure, and until the land regulations can be legally advocated [modified?] after the war, the elections should be suspended and the Council replaced by an International Commission appointed by the Consular body. We should be willing to make some sacrifice to secure agreement on this line, provided that the Japanese did not try to impose objectionable conditions like recognition of the Nanking Government.80 We would accept for example a Commission composed of three Americans, three British, three Chinese, three Japanese, one German and one Dutch. This would mean a reduction of British and Chinese representation by two seats each in favour of other nationalities including the Americans. The actual figures would however be a matter for further discussion.

5. The Commission would in general be governed by the land regulations except in regard to proposals for taxation which it is suggested should require a two-thirds majority of its members, since there would be no reference to the rate-payers.

6. The proposal has been put tentatively to the Japanese Consul General through the Japanese Councillors, and it is understood that his reactions are favourable. It has also been discussed with the United States Consul General who has so far received it with reserve but is reporting to his Government for instructions.

If the Japanese and the Americans agree in principle Sir A. Clark Kerr will try to secure at least the tacit acceptance of the Chinese Government.

7. If the concurrence of the principal powers was obtained the main difficulty will be jurisdictional. The municipal administration depends on the national courts to enforce its taxation and other measures on their respective compatriots. The Land Regulations have been made binding on British subjects by King’s Regulations, and the new arrangement could be covered by amending the King’s Regulations. It is hoped that the other powers will also exercise appropriate steps so far as their own nationals are concerned.

  1. Japanese-sponsored régime headed by Wang Ching-wei.