CHAPTER IX

"SLOW AMERICANS"

"The Americans are altogether too slow!"

This exclamation from a Chinese seemed amusing. It came on the evening of the red dust-storm that enveloped Peking, during one of the long after-dinner conversations with Liang Shih-yi and Chow Tsu-chi; and it was the latter who thus gave vent to his impatience.

Liang Shih-yi, the "Pierpont Morgan of China," Chief Secretary to the President, was credited as being, next to Yuan Shih-kai, the ablest and most influential man in Peking. Mr. Liang is highly educated according to Chinese literary standards, and while he has not studied Western science, he has a keen, incisive mind which enables him readily to understand Western conditions and methods. His outstanding quality is a faculty for organization. He built up the Chinese Communications Service on the administrative and financial side. He declined taking office as a minister, but usually controlled the action of the cabinet through his influence over important subordinates, and managed all financial affairs for Yuan Shih-kai. Cantonese, short of stature and thickset, with a massive Napoleonic head, he speaks little, but his side remarks indicate that he is always ahead of the discussion, which is also shown by his searching questions. When directly questioned himself, he will always give a lucid and consecutive account of any matter. He did not rise above the level of Chinese official practice in the matter of using money to obtain political ends. To some he was the father of deceit and corruption, to others the god of wealth, while still others revered in him his great genius for organization. While by no means a romantic figure, he thoroughly stimulated a romantic interest among others, who attributed to him almost superhuman cunning and ability.

When the noted Sheng Hsuan-huai became Minister of Communications in 1911, he used his influence and cunning to thwart Liang and throw him out of the mastery of the Board of Communications, known as the fattest organ of the Government. Mr. Liang stood his ground, and his influence greatly increased because of his ability to withstand so strong an attack. During the revolution Liang Shih-yi was also very influential in the Grand Council, attaching himself more and more strongly to Yuan Shih-kai. Always satisfied with the substance of power without its outward show, he steadfastly declined to become a responsible minister, and worked from the vantage ground of the Secretariat of the President. His life has frequently been endangered. He gained the hatred of the democratic party, with which he was once associated, because he aided Yuan in playing his complicated game of first confusing, then destroying, parliament. Nor were the Progressives (Chin Pu Tang) enamoured of him. Of great personal courage, he was indifferent to the blame and ridicule which for a while almost all newspapers heaped upon him. As he was still in a comparatively inferior position when these attacks began, they rather helped him by calling attention to his abilities and his personal importance. Thus his opponents advertised him. In possession of all the intricacies of the situation, when the parliamentarians first came to Peking, he sat back inconspicuously, and, supplied with influence and money, moulded the political situation as if it had been wax.

Of all the cabinet, Mr. Chow Tsu-chi, Minister of Communications, was personally most familiar with American affairs, having lived for several years in Washington and New York in an official capacity. He speaks English fluently and prefers American methods. He hates unnecessary ceremony. Whenever he called upon me I had almost to engage in personal combat with him to be permitted to accompany him to the outer door, as is due to a high dignitary in China. He believes in learning improved methods from reliable foreigners, and will go as far as any Chinese in giving foreigners whom he trusts a free hand, though he would not yield to any one a power of supreme control. On this occasion he talked about the reorganization of the Bank of China, and the possibility of floating domestic bonds among Chinese capitalists. Mr. Chow was chanting a jeremiad about how the Chinese had been led to give valuable concessions to Americans, which had not been developed, and how this had brought only embarrassment and trouble to China.

We spoke, also, of the original Hankow-Canton railway concession which the Americans tried to sell to King Leopold; of the Knox neutralization plan, and of the Chinchow-Aigun railway concession, the only effect of which had been to strengthen the grip of Russia and Japan on Manchuria. When the Americans, as a mark of special confidence and trust, had received the option on a currency loan with the chance to reorganize Chinese currency, they had straight-way invited Great Britain, Germany, and France into the game. "Thus they saddled China with the International Consortium," Chow Tsu-chi moaned. And so on went the recital, through many lesser and larger enterprises that had proved abortive.

One had to confess that in China we certainly had not taken Fortune by the forelock, nor even had we clung to her skirts. Mr. Chow Tsu-chi was especially grieved at the circuitous and dilatory methods of the Four-Power Group which held the contract to build the Hukuang railways. "The thirty millions of dollars originally provided has been almost entirely spent," he complained, "without producing more than two hundred miles of actual construction; and there is constant wrangling among the partners concerning engineering standards. Moreover, everything has to be referred from Peking to London, thence to New York, Paris, Berlin, and back and forth among them all, until it is necessary to look up reams of files to know what it is all about. And it may all have been about the purchase of a flat car."

I knew well enough that Americans, too, were much discouraged at the cumbersome progress of the Hukuang railway enterprise. The engineering rights on the section west from Ichang up into Szechuan Province had been assigned to America, and Mr. W. Randolph was at this time making a survey. He had great energy and unlimited belief in the future importance and profitableness of this line. But beyond the initial survey the available funds would not go, and no new financing could be obtained--this for a railway to gain access to an inland empire of forty millions of people!

In the American enterprises which had been launched recently, however, there was no little activity. The Standard Oil Company with commendable expedition, if perhaps with undue lavishness of men and supplies, sent to China geological experts of the first order, together with large staffs of engineers, drilling experts, and all needed machinery. The geologists were soon off toward the prospective oil regions in Chihli and Shensi provinces. In Mr. Hsiung Hsi-ling's bureau and in the Standard Oil offices the outfitting of expeditions, the purchase of supplies, and the selection of a large Chinese personnel proceeded apace. Everyone was hopeful.

With the Hwai River conservancy matter, also, negotiations had gone rapidly in the United States. The American National Red Cross and the engineering firm of J.G. White & Company had agreed to finance the preliminary survey. The American Congress in May passed an act lending the services of an army engineer for the preliminary survey. Colonel Sibert of the Panama Canal Commission was designated as chairman of the engineering board. The outlook was favourable, action had been taken promptly.

The excitement stirred up among the Japanese by the sojourn in China of the Bethlehem Steel Company's vice-president, Mr. Archibald Johnston, now had a further sequel. The text of an alleged contract between the Chinese Government and the Bethlehem Steel Company was circulated early in May--by interested persons--which included among other provisions arrangements for construction of a naval base in Fukien Province. The bogus quality of the report was at once manifest. Through some influence, however, it was assiduously pushed forward in the press; it became the basis of a legend, which even got into the books of otherwise well-informed writers as authentic. It was on the subject of this spurious paper that the Japanese ambassador at Washington called on Secretary Bryan for information. Thus the matter of the possible building of a naval base in Fukien for the Chinese Government by American contractors became a matter of State Department note. I was informed that the Japanese ambassador at Washington had left a summary of the conversation, of March 12th, between the Japanese minister at Peking and myself. Apparently the Japanese were attempting to get around my refusal to acknowledge that American enterprise in China could in any way be limited by the declarations or agreements of other powers than the United States.

The State Department inquired whether the newly reported contract for a loan of $30,000,000 was identical with the older contract of the Bethlehem Steel Company. I was informed that the Japanese Government did not object to the loan, but to the construction of any new naval base in Fukien, and that the Department had been told that the Chinese Government itself did not wish to construct there because of the Japanese objection. It was intimated to me that I might encourage the Chinese in the idea that such building, while legitimate, would be unwise.

I reported to the Department that the original Bethlehem contract had no connection with the spurious document recently circulated; that only a very small sum was to be devoted to harbour work in China, the location of which had not been fixed; and that the execution of the entire contract had been postponed because of financial conditions. While the Chinese Government was not contemplating any construction at this time, I stated that the attempt of any other government to establish a claim of special rights of supervision must be considered derogatory to Chinese sovereignty and to American rights of equal opportunity; I urged, therefore, that we avoid any action or statement which would admit such a claim, or which would in any way encourage the making of it. The Chinese Government has never admitted that its right to plan the defence of its coastline is subject to veto by any other government. Such admission on our part that Japan has the right to claim special interests in Fukien would shake the confidence of the Chinese in our seriousness and consistency, and in our determination to protect our legitimate interests in an undivided China, freely open to the commerce of all nations, where Americans can do business without asking permission of any other outsiders.

Dr. Chen Chin-tao was then acting as Financial Commissioner of the Chinese Government in Europe and America. The danger of a further growth of the idea of spheres of influence in China had been accentuated. Railway concessions had been allocated to different nations according to territorial areas where the respective countries claimed certain priorities; if concessions were made otherwise, the combined influence of the powers seeking special spheres was used to defeat them. To meet this danger a plan was developed for granting a large construction contract to an international syndicate made up of British, American, French, and German companies, who would divide the construction on some basis other than localized national spheres of influence. Doctor Chen, with an American assistant, was charged to take up this proposal with various companies. On the part of France and Germany, contractors and governments seemed favourable to the idea. In Great Britain the firm approached was Paulding & Company, who had already in the preceding year received a railway concession in China extending through the Province of Hunan and to the south thereof. This firm would readily coöperate, but the British Government objected. It would accept the principle of the international company only on condition that all lines traversing the Yangtse Valley should be constructed by the British participant in the syndicate.

This suggests the extent to which the sphere-of-influence doctrine dominated at this time the thought and action of the British Foreign Office.

The American Government, on its part, took exception to the size and duration of the concession, which it feared might gain a monopolistic character. Probably the difficulty would have been cleared up, since, after all, a specific and limited, though considerable grant, was intended. But the preliminary discussion had not resulted in agreement before the Great War supervened.

When Mr. Gest returned to the United States, he took up the matter of a loan to China with American financial interests, but they hesitated to act until the American Government expressed its approval and willingness to give support. Mr. Gest thereupon laid siege to the Department of State. He succeeded on the 3rd of June in securing from the Secretary a letter to the effect that the Department would be gratified to have China receive any substantial assistance from Americans in the nature of a loan upon terms similar to the present agreement. "This Government," the letter stated, "will, in accordance with its usual policy, give all proper diplomatic support to any legitimate enterprise of that character."

There had been much talk about the supposed determination of the Department of State to let American interests abroad shift for themselves, quite without encouragement or special protection. The letter, though moderate in language, nevertheless attracted great attention and was taken to indicate a change of heart in the Administration. I may say at this point that the Department of State never at any time failed to back me in efforts to develop and protect American interests in China. But it was not always able, especially later on, when overburdened with the work of the war, to follow up matters which it had approved, when the opposition or indifference of other departments put other claims in the forefront.

I had for a season observed and worked with American commercial interests in China. I had definite conclusions as to what was needed in the way of organization to encourage American trade. The great defect lay in the absence of financial institutions for handling foreign loans, and for assisting in foreign industrial development, helpful to American commerce. The only American bank in China, the International Banking Corporation, then confined itself strictly to exchange business and to dealing in commercial paper; it had developed no policy of responding to local industrial needs and helping in the inner development of China. All the foreign banks had wholly the treaty-port point of view. They thought not at all of developing the interior regions upon which the commerce of the treaty ports after all depends. They were satisfied with scooping off the cream of international commercial transactions and exchange operations.

I strongly favoured creating banking institutions which would broadly represent American capital from various regions of our country, and would respond to the urgent need of China for a modern organization of local credit.

There were but few American commission houses. In most cases American-manufactured goods were handled by houses of other nationality, who often gave scant attention to promoting American trade and used American products only when those of their own nation could not be obtained. It seemed worth while to establish additional trading companies, especially coöperative organizations among exporters, after the fashion of the "Representation for British Manufacturers, Ltd." Further, I strongly urged the American Government to station a commercial attaché in China. I was gratified by the appointment during the year of a commercial attaché in the person of Consul-General Julean Arnold, an official of great intelligence, wide knowledge, and untiring energy.

The Chinese cabinet, which had been under a provisional premier for several months, was finally reorganized in June, 1914. The chief change in the cabinet was the appointment of Mr. Liang Tun-yen as Minister of Communications, and the shifting of Mr. Chow Tsu-chi from that position to the Ministry of Finance. With these new ministers American contractors and financiers had much to do. Premier Hsiung Hsi-ling had withdrawn in February, and with him the two other members of the Chin Pu Tang or progressive party. These political leaders had served Yuan's purpose by aiding him to dissolve parliament; they could now be spared. But a new premier was not immediately found. Yuan at length prevailed on Mr. Hsu Shi-chang to take the premiership in June. The title of premier was changed to secretary of state.

I met Mr. Liang Tun-yen for the first time on June 2nd, at a luncheon given by Mr. B. Lenox Simpson, whose landlord he was. Mr. Liang is tall, aristocratic-looking, with a fine, intellectual face. He speaks English perfectly, as he received his earlier education in the United States. Then, as on frequent occasions in subsequent years, he expressed himself in a deeply pessimistic strain. He complained of recent inroads attempted by the French in Yunnan, and of the methods they employed to strengthen their hold. But this was only one cause for pessimism. In the future of his country he saw "no prospect of strong national action," or of "any sort of effective help from the outside." He considered the upper classes "incapable of sacrifices and vigorous action." He had recommended in 1901, he told me, that, instead of paying an indemnity, the Chinese should be allowed to spend an equal amount of public funds in sending abroad young men to be educated. All young Chinese, he said, should be sent abroad quite early, "before they have become corrupted."

When Mr. Liang Tun-yen assumed office, it was announced that he would subject the Ministry of Communications to a thorough cleansing. This implied that the ministry had been corrupt and systematically so, under the control of Mr. Liang Shih-yi. Outsiders watched for indications of how that astute manager would handle the new opposition.

Mr. Yeh Kung-cho, able and expert, had been chief of the Railway Bureau; he became a vice minister, but as he was a lieutenant of Liang Shih-yi's, it was understood that this position would probably be an empty dignity. A friend of Mr. Liang Tun-yen's, a highly respected engineer of American education, was appointed as the other vice minister. With no formal or open breach between the different factions, maneuvring and counter-manoeuvring there undoubtedly was. The influence of Mr. Liang Shih-yi, however, seemed not seriously shaken. He had organized the Chinese railway experts and engineers in a railway association, keeping in touch with them through Mr. Yeh Kung-cho. Thus he held in his hands the main lines of influence. Also, he continued to head the Bank of Communications, which is the fiscal agency for the Railway Board. So again it seemed that the opposition could not get at the source of this unusual man's power.

Mr. Chow Tsu-chi, as Minister of Finance, warmly urged the idea that the Americans, to whom the Government had shown itself so friendly, reciprocate by making a loan to the Chinese Government. He planned a loan of $40,000,000 for the purpose of refunding the entire floating indebtedness of his government. Hopes had been entertained that the Standard Oil Company would use its influence in bringing about such a loan, but that company was not willing to go outside of the special business of its contract with China. The option which had been given to Mr. Gest had not yet resulted in any completed transaction in the United States. So accustomed were the Chinese to the readiness of any nationality which held important concessions, in turn to support the Chinese Government financially, that they could not understand how America, with professions of great friendship and just now substantially favoured by the Chinese, should not be ready to reciprocate. The soundness of the desire of the Americans to have every transaction stand on its own bottom and not to use financial support as a bait to obtain concessions, could, of course, be appreciated by the Chinese. But at times their urgent needs made them impatient.

The news of the assassination at Sarajevo reached us on July 1st. As this happened to be, though we did not then suspect it, the eve of a terrible convulsion in which all accepted conditions of life, national and international, were shattered and unsettled, I shall here insert parts of the memorandum which I drew up for my guidance at this time:

It is evident that China finds herself in a critical situation, in the sense that the fundamental character of her political life and the direction of her political development are now being decided. While a vast community living under a complicated social system, which embodies the experience of thousands of years, cannot change its methods of a sudden and will undoubtedly for a long time continue to differ radically from Western political societies, yet it admits of no doubt that a new era of development has begun and that certain essential alternatives are being faced. Such alternatives are the continued unity of the nation or its division; its continued independence or the direct dominance of one or more foreign suzerains; its commercial unity or its division into spheres of influence; the tendency of its institutions of government, whether in the direction of the absolutism of Russia and Japan, or the republicanism of the United States; and the character of its educational and legal system, either dominated by the ideas of America and England or of continental Europe or Japan. From these, there also follow important alternatives in industrial and commercial policy.

Under these circumstances, it is of great moment whether the Chinese Government will remain free, with the assistance of influences friendly to the development of China's nationality, to preserve the unity of the Chinese State and to develop its institutions; or whether its financial distress, combined with the plottings of a revolutionary opposition, will deliver it into the hands of those who are not favourable to the growth of China's national life.

The United States of America enjoys a position of great advantage for assisting the Chinese Government and influencing its development in the direction of free national life. The lack of a desire for political interference, the real sympathy felt in America with the strivings of the Chinese people, and cultural, educational, and charitable work unselfishly performed, have given the United States the undivided confidence of China. It is certainly true that the Chinese people are anxious to follow in the footsteps of the United States if they may only be permitted to do so.

Any development of enterprise which increases American commercial interest in China is incidentally favourable to Chinese independence; because, through the enlistment of neutral interests, the desire of outsiders for political control can be counterbalanced. The organizing of an American investment bank and similar agencies for the development of American commerce in China, participation of American capital in railway building, and the development of mines and oil fields through American companies and under American business methods would all be welcomed by China as the strengthening of a favourable influence. Different Chinese ministers have repeatedly said to me that at this time China is in need of the active assistance of those who are amicably disposed and that China is willing to do her part in coöperating, and in extending advantages, if only such active support is forthcoming. If American capital, industry, and commerce are not ready at this time to give that comparatively slight assistance to China which the situation calls for, it is likely that American action in China in the future will be on a far more modest basis than present possibilities promise.

The war, of course, brought many changes in China. Much of the good work which had been started was either destroyed or long delayed. It marked the end of one phase of China's development.