Chapter 3

Premising that the contract delivers to a British company a monopoly of the rich coal deposits of the province for a period of ninety years and--quite incidentally of course--the right to use all means of transportation, water or rail, wharves and ports now in existence, and also to "construct, manage, superintend and work other roads, railways waterways as may be deemed advisable"--which reads like a monopoly of all further transportation facilities of the province--first take up the time of the making of the contract. It was drawn in April, 1920 and confirmed a few months later. It was made, of course, with the authorities of the Kwantung province, subject to confirmation at Peking. During this period, Kwantung province was governed by military carpet-baggers from the neighboring province of Kwangsei, which was practically alone of the southern provinces allied with the northern government, then under the control of the Anfu party. It was matter of common knowledge that the people of Canton and of the province were bitterly hostile to this outside control and submitted to it only because of military coercion. Civil strife for the expulsion of the outsiders was already going on, continually gaining headway, and a few months later the Kwangsei troops were defeated and expelled from the province by the forces of General Chen, now the civil governor of Kwantung, who received a triumphal ovation upon his entrance into Canton. At this time the present native government was established, a change which made possible the return of Sun Yat Sen and his followers from their exile in Shanghai. It is evident, then, that the collieries contract giving away the natural resources of the people of the province, was knowingly made by a British company with a government which no more represented the people of the province than the military government of Germany represented the people of Belgium during the war.

As to the terms of the contract, the statement that it gave the British company a monopoly of all the coal mines in the province, was not literally accurate. Verbally, twenty-two districts are enumerated. But these are the districts along the lines of the only railways in the province and the only ones soon to be built, including the as yet uncompleted Hankow-Canton railway. Possibly this fact accounts for the anxiety of the British partners in the Consortium that the completion of this line be the first undertaking financed by the Consortium. The document also includes what is perhaps a novelty in legal documents having such a momentous economic importance, namely, the words "etc." after the districts enumerated by name.

For this concession, the British syndicate agreed to pay the provincial government the sum of $1,000,000 (silver of course). This million dollars is to bear six per cent interest to the company, and capital and interest are to be paid back to the company by the provincial government out of the dividends (if any) it is to receive. The nature of these "dividends" is set forth in an article which should receive the careful attention of promoters elsewhere as a model of the possibilities of exploiting contracts. The ten million capital is divided equally into "A" shares and "B" shares. The "A" shares go unreservedly to the directors of the company, and three millions of the "B" shares are to be allotted by the directors of the company at their discretion. The other two million are again divided into equal portions, one portion representing the sum advanced by the company to the province and to be paid back as just specified, while the other million--one-tenth of the capitalization--is to be a trust fund the dividends of which are to go for the "benefit of the poor people of the province" and for an educational fund for the province. But before any dividends are paid upon the "B" shares, eight per cent dividends are to be paid upon the "A" shares and a _dollar a ton royalty_ upon all coal mined. Those having any familiarity with the coal business with its usual royalty of about ten cents a ton can easily calculate the splendid prospects of the "poor people" and the schools, prospects which represent the total return to the provinces of a concession of untold worth. The contract also guarantees to the company the assistance of the provincial government in expropriating the owners of all coal mines which have been granted to other companies but not yet worked. These technical details make dry reading, but they throw light upon the spirit with which the British company undertook its predatory negotiations with a government renounced by the people it professed to govern. In comparison with the relatively crude methods of Japan in Shantung, they show the advantages of wide business experience.

As for the circumstances and context which give added menace to the contract, the following facts are significant. Hong Kong, a British crown colony, lies directly opposite the river upon which Canton is situated. It is the port of export and import for the vast districts served by the mines and railways of the province. It is unnecessary to point out the hold upon all economic development which is given through a monopolistic control of coal. It is hardly too much to say that the enforcement of the contract would enable British interests in Hong Kong to control the entire industrial development of the most flourishing of the provinces of China. It would be a comparatively easy and inexpensive matter to provide the main land with a first class modern harbor and port near Canton. But such a port would tend to reduce the assets of Hong Kong to the possession of the most beautiful scenery in the world. There is already fear that a new harbor will be built. Many persons think that the concession of building such railways etc., "as are deemed advisable for the purpose of the business of the company and to improve those now existing" is the object of the contract, even more than the coal monopoly. For the British already own a considerable part of the mainland, including part of the railway connecting the littoral with Canton. By building a cross-cut from the British owned portion of this railway to the Hankow-Canton line, the latter would become virtually the Hankow-Hong Kong line, and Canton would be a way-station. With the advantages thus secured, the project for building a new port could be indefinitely blocked.

During the period in which the contract was being secured, a congress of British Chambers of Commerce was held in Shanghai. Resolutions were passed in favor of abolishing henceforth the whole principle of special nationalistic concessions, and of cooperating with the Chinese for the upbuilding of China. At the close of the meeting the Chairman announced that a new era for China had finally dawned. All of the British newspapers in China lauded the wise action of the Chambers. At the same time, Mr. Lamont was in Peking, and was setting forth that the object of the Consortium was the abolition of further concessions, and the uniting of the financial resources of the banks in the Consortium for the economic development of China itself. By an ironical coincidence, the Hong Kong-Shanghai Bank, which is the financial power behind the contract and the new company, is the leading British partner in the Consortium. It is difficult to see how the British can henceforth accuse the Japanese of bad faith if any of the banking interests of that country should enter upon independent negotiations with any government in China.

By the time the scene of action was transferred to Peking in order to secure the confirmation of the central government, the Anfu regime was no more, and as yet no confirmation has been secured. The new government at Canton has declined to recognize the contract as having any validity. An official of the Hong Kong government has told an official of the Canton government that the Hong Kong government stands behind the enforcement of the contract, and that Kwantung province is a British Hinterland. Within the last few weeks the Governor of Hong Kong and a leading Chinese banker of Hong Kong who is a British subject have visited Peking. Rumors were rife in the south as to the object of the visit. British sources published the report that one object was to return Weihaiwei to China--in case Peking agreed to turn over more of the Kwantung mainland to Hong Kong as a quid pro quo. Chinese opinion in the south was that one main object was to secure the Peking confirmation of the Cassell contract, in which case $900,000 more would be forthcoming, $100,000 having been paid down when the contract was signed with the provincial government. Peking does not recognize the present Canton government but regards it as an outlaw. The crowd that signed the contract is still in control of the neighboring province of Kwangsei and they are relied upon by the north to effect the military subjugation of the seceded province. Fighting has already, indeed, begun, but the Kwangsei militarists are badly in need of money; if Peking ratifies the contract, a large part of the funds will be paid over to them--all that isn't lost by the wayside to the northern militarists.[1] Meantime British news agencies keep up a constant circulation of reports tending to discredit the Kwantung government, although all impartial observers on the spot regard it as altogether the most promising one in China.

[1] Since the text was written, the newspapers have stated that the Peking Government has officially refused to validate the agreement.

These considerations not only throw light on some of the difficulties of the functioning of the Consortium, but they give an indispensable background for judging the actual effect of the renewal of the Anglo-Japanese alliance. By force of circumstances each government, even against its own wish, will be compelled to wink at the predatory policies of the other; and the tendency will be to create a division of spheres of influence between the north and south in order to avoid more direct conflicts. The English liberals who stand for the renewal of the alliance on the ground that it will enable England to exercise a check on Japanese policies, are more naive than was Mr. Wilson with his belief in the separation of the economic and political control of Shantung.

It cannot be too often repeated that the real point of friction between the United States and Japan is not in California but in China. It is silly--unless it is calculated--for English authorities to keep repeating that under no circumstances does the alliance mean that Great Britain would support Japan in a war with the United States. The day the alliance is renewed, the hands of the militarists in Japan will be strengthened and the hands of the liberals--already weak enough--be still further weakened. In consequence, all the sources of friction in China between the United States and Japan will be intensified. I do not believe in the predicted war. But should it come, the first act of Japan--so everyone in China believes--will be to seize the ports of northern China and its railways in order to make sure of an uninterrupted supply of food and raw materials. The act would be justified as necessary to national existence. Great Britain in alliance with Japan would be in no position to protest in anything but the most perfunctory way. The guarantee of such abstinence would be for Japan the next best thing to open naval and financial support. Without the guarantee they would not dare the seizure of Chinese ports. In recent years diplomatists have shown themselves capable of unlimited stupidity. But it is not possible that the men in the British Foreign Office are not aware of these elementary facts. If they renew the alliance they knowingly take the responsibility for the consequences.

May 24, 1921.

IV

A Political Upheaval in China

Even in America we have heard of one Chinese revolution, that which thrust the Manchu dynasty from the throne. The visitor in China gets used to casual references to the second revolution, that which frustrated Yuan Shi Kai's aspirations to be emperor, and the third, the defeat in 1917 of the abortive attempt to put the Manchu boy emperor back into power. And within the last few weeks the (September 1920) fourth upheaval has taken place. It may not be dignified by the name of the fourth revolution, for the head of the state has not been changed by it. But as a manifestation of the forces that shape Chinese political events, for evil and for good, perhaps this last disturbance surpasses the last two "revolutions" in significance.

Chinese politics in detail are highly complicated, a mess of personalities and factions whose oscillations no one can follow who does not know a multitude of personal, family and provincial histories. But occasionally something happens which simplifies the tangle. Definite outlines frame themselves out of the swirling criss-cross of strife, intrigue and ambition. So, at present, the complete collapse of the Anfu clique which owned the central government for two years marks the end of that union of internal militarism and Japanese foreign influence which was, for China, the most marked fruit of the war. When China entered the war a "War Participation" army was formed. It never participated; probably it was never meant to. But its formation threw power wholly into the hands of the military clique, as against the civilian constitutionalists. And in return for concessions, secret agreements relating to Manchuria, Shantung, new railways, etc., Japan supplied money, munitions, instructors for the army and a benevolent supervision of foreign and domestic politics. The war came to an unexpected and untimely end, but by this time the offspring of the marriage of the militarism of Yuan Shi Kai and Japanese money and influence was a lusty youth. Bolshevism was induced to take the place of Germany as a menace requiring the keeping up of the army, and loans and teachers. Mongolia was persuaded to cut her strenuous ties with Russia, to renounce her independence and come again under Chinese sovereignty.

The army and its Japanese support and instruction was, accordingly, continued. In place of the "War Participation" army appeared the "Frontier Defense" army. Marshal Tuan, the head of the military party, remained the nominal political power behind the presidential chair, and General Hsu (commonly known as little Hsu, in distinction from old Hsu, the president) was the energetic manager of the Mongolian adventure which, by a happy coincidence, required a bank, land development companies and railway schemes, as well as an army. About this military centre as a nucleus gathered the vultures who fed on the carrion. This flock took the name of the Anfu Club. It did not control the entire cabinet, but to it belonged the Minister of Justice, who manipulated the police and the courts, persecuted the students, suppressed liberal journals and imprisoned inconvenient critics. And the Club owned the ministers of finance and communications, the two cabinet places that dispense revenues, give out jobs and make loans. It also regulated the distribution of intelligence by mail and telegraph. The reign of corruption and despotic inefficiency, tempered only by the student revolt, set in. In two years the Anfu Club got away with two hundred millions of public funds directly, to say nothing of what was wasted by incompetency and upon the army. The Allies had set out to get China into the war. They succeeded in getting Japan into control of Peking and getting China, politically speaking, into a seemingly hopeless state of corruption and confusion.

The militaristic or Pei-Yang party was, however, divided into two factions, each called after a province. The Anwhei party gathered about little Hsu and was almost identical with the Anfus. The Chili faction had been obliged, so far as Peking was concerned, to content itself with such leavings as the Anfu Club tossed to it. Apparently it was hopelessly weaker than its rival, although Tuan, who was personally honest and above financial scandal, was supported by both factions and was the head of both. About three months ago there were a few signs that, while the Anfu Club had been entrenching itself in Peking, the rival faction had been quietly establishing itself in the provinces. A league of Eight Tuchuns (military governors of the provinces) came to the assistance of the president against some unusually strong pressure from the Anfu Club. In spite of the fact that the military governor of the three Manchurian provinces, Chang Tso Lin, popularly known as the Emperor of Manchuria, lined up with this league, practically nobody expected anything except some manoeuvering to get a larger share of the spoils.

But late in June the president invited Chang Tso Lin to Peking. The latter saw Tuan, told him that he was surrounded by evil advisers, demanded that he cut loose from little Hsu and the Anfu Club, and declared open war upon little Hsu--the two had long and notoriously been bitter enemies. Even then people had great difficulty in believing that anything would happen except another Chinese compromise. The president was known to be sympathetic upon the whole with the Chili faction, but the president, if not a typical Chinese, is at least typical of a certain kind of Chinese mandarin, non-resistant, compromising, conciliating, procrastinating, covering up, evading issues, face-saving. But finally something happened. A mandate was issued dismissing little Hsu from office, military and civil, dissolving the frontier defense corps as such, and bringing it under the control of the Ministry of War (usually armies in China belong to some general or Tuchun, not to the country). For almost forty-eight hours it was thought that Tuan had consented to sacrifice little Hsu and that the latter would submit at least temporarily. Then with equally sensational abruptness Tuan brought pressure to bear on the president. The latter was appointed head of a national defense army, and rewards were issued for the heads of the chiefs of the Chili faction, nothing, however, being said about Chang Tso Lin, who had meanwhile returned to Mukden and who still professed allegiance to Tuan. Troops were mobilized; there was a rush of officials and of the wealthy to the concessions of Tientsin and to the hotels of the legation quarter.

This sketch is not meant as history, but simply as an indication of the forces at work. Hence it is enough to say that two weeks after Tuan and little Hsu had intimidated the president and proclaimed themselves the saviors of the Republic, they were in hiding, their enemies of the Chili party were in complete control of Peking, and rewards from fifty thousand dollars down were offered for the arrest of little Hsu, the ex-ministers of justice, finance and communications, and other leaders of the Anfu Club. The political turnover was as complete as it was sensational. The seemingly impregnable masters of China were impotent fugitives. The carefully built up Anfu Club, with its military, financial and foreign support, had crumbled and fallen. No country at any time has ever seen a political upheaval more sudden and more thoroughgoing. It was not so much a defeat as a dissolution like that of death, a total disappearance, an evaporation.

Corruption had worked inward, as it has a way of doing. Japanese-bought munitions would not explode; quartermasters vanished with the funds with which stores were to be bought; troops went without anything to eat for two or three days; large numbers, including the larger part of one division, went over to the enemy en masse; those who did not desert had no heart for fighting and ran away or surrendered on the slightest provocation, saying they were willing to fight for their country but saw no reason why they should fight for a faction, especially a faction that had been selling the country to a foreign nation. In the manner of the defeat of the Anfu clique at the height of its supremacy, rather than in the mere fact of its defeat, lies the credit side of the Chinese political balance sheet. It is a striking exhibition of the oldest and best faith of the Chinese--the power of moral considerations. Public opinion, even that of the coolie on the street, was wholly against the Anfu party. It went down not so much because of the strength of the other side as because of its own rottenness.

So far the results are to all appearances negative. The most marked is the disappearance of Japanese prestige. As one of the leading men in the War Office said: "For over a year now the people have been strongly opposed to the Japanese government on account of Shantung. But now even the generals do not care for Japan any more." It is hardly logical to take the easy collapse of the Japanese-supported Anfu party as a proof of the weakness of Japan, but prestige is always a matter of feeling rather than of logic. Many who were intimidated to the point of hypnotism by the idea of the irresistible power of Japan are now freely laughing at the inefficiency of Japanese leadership. It would not be safe to predict that Japan will not come back as a force to be reckoned with in the internal as well as external politics of China, but it is safe to say that never again will Japan figure as superman to China. And such a negation is after all a positive result.

And so in its way is the overthrow of the Anwhei faction of the militarist party. The Chinese liberals do not feel very optimistic about the immediate outcome. They have mostly given up the idea that the country can be reformed by political means. They are sceptical about the possibility of reforming even politics until a new generation comes on the scene. They are now putting their faith in education and in social changes which will take some years to consummate themselves visibly. The self-styled southern republican constitutional party has not shown itself in much better light than the northern militarist party. In fact, its old leader Sun Yat Sen now cuts one of the most ridiculous figures in China, as shortly before this upheaval he had definitely aligned himself with Tuan and little Hsu.[2]

[2] This was written of course several months before Sun Yat Sen was reinstated in control of Canton by the successful revolt of his local adherents against the southern militarists who had usurped power and driven out Sun Yat Sen and his followers. But up to the time when I left China, in July of this year, it was true that the liberals of northern and central China who were bitterly opposed to the Peking Government, did not look to the Southern Government with much hope. The common attitude was a "plague upon both of your houses" and a desire for a new start. The conflict between North and South looms much larger in the United States than it did in China.