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87. MacMurray, 1911/5.

88. U. S. For. Rel., 1909, pp. 178-180.

89. U. S. For. Rel., 1910, p. 280.

90. MacMurray, 1911/5.

91. MacMurray. 1909/12.

92. U. S. For. Rel., 1910, p. 234 et seq.

93. During this period four more states entered into treaty
relations with China — Congo Free State, 1898; Korea, 1899;
Mexico, 1899; Sweden, 1908.



IV

THE INTERNATIONAL COOPERATION AND
CONTROL (1911 )

The fourth and present period of the diplomatic his-
tory of China extends from the close of the Chinese
Revolution. It is a period in which a radical change of
policy on the part of the Powers took place. While in
the preceding period the international struggle for con-
cessions was the policy of the Powers, in this period the
policy of international cooperation and control is the
predominant note.

This radical change was due to several vital reasons.
The first was the unavoidable disadvantage of interna-
tional cut-throat competition. It is well known in eco-
nomic science that such competition leads inevitably to
either mutual destruction or combination and
tion. So likewise in the field of international politics,
the same law holds true. International cut-throat com-
petition must inevitably result cither in mutual destruc-
tion of one another's ends or in international combina-
tion and cooperation. For instance, as we have seen, in
the case of the Peking-Hankow railway, the British, the
American and the Belgian capitalists were all competi-
tors, among whom the British were especially anxious to
win the premier concession, passing as it does from the
capit.al of China to the heart of the Yangtze Valley; but
the Belgian capitalists, supported by Russia and France,
underbid the other and won the concession. Again, in
the case of the Hankow-Canton railway, the British
capitalists, although holding a prior option by virtue of
the pledge of Viceroy Chang Chi-tung, were defeated by
German capitalists who were willing to accept the con-

62



COOPERATION AND CONTROL 63

cession on the Tientsin-Pukow terms which the British
had rejected. It was because of the painful experience
of this sort that the Powers began to realize the inex-
pediency of international competition and favored the
policy of international combination and cooperation.

In addition, there was another cause for the radical
change of the policy of the Powers in China, and that
was the possible occurrence of the foreign control of
China's finance. In the preceding period there were a
few foreign loans made for the immediate payment of
the war indemnity to Japan, but there were practically
no loans made that were of an administrative character,
most of the loans being largely for railway construction
and other commercial purposes. But with the advent
of the Republic, and the falling off of provincial reve-
nues, which either were diverted to provincial uses or
failed to reach Peking on account of the relatively inde-
pendent position of the military governors in control of the
provinces, the Peking Government was forced to resort
to administrative loans for the purpose of meeting ordi-
nary non-productive needs of the government. With the
coming of administrative loans, there loomed the ghastly
apparition of possible and probable bankruptcy, and
hence there arose the possible eventuality of foreign con-
trol of China's finance. As no one power would allow
any other single power to have the exclusive control of
her finances, the Powers were compelled to reach the
conclusion that they must combine and cooperate, so
that, in case there should be any foreign control of China's
finance, it would be an international control rather than
the control by any single Power.

Toward the close of the preceding period, there were
a few instances of international combination and coopera-
tion, but on the whole they were not the results of de-
liberate choice, but rather the consequences of inevitable
circumstances. For instance, the Hukuang railway loan
was equally shared by the four Powers — Great Britain,



64 THE DIPLOMATIC HISTORY OF CHINA

the United States, France and Germany — not because
they were willing to pool their interests, but rather be-
cause the German capitalists had underbid the British and
obtained the Hukuang railway concession, and there was
no other solution of the tangled situation than the
common sharing of the concession, which was effected
by the Berlin Conference of Bankers ; and the United
States was not granted participation until President Taft
threw his whole personal weight of influence into the
diplomatic controversy by cabling a personal despatch
to the Prince Regent of China. Thus this notable in-
stance of international combination and cooperation was
an outcome to which the Powers were driven, relunct-
antly but inevitably, by the force of circumstances.

A real instance, however, of international combination
and cooperation, commencing at the close of the pre-
ceding period and extending nevertheless into this period,
was the currency reform and Manchuria industrial de-
velopment loan. The loan was initiated by the Chinese
Government and first offered to the American Banking
Group. The preliminary agreement for a loan of $50,
000,000 was signed by this Group on October 27,
1910. 1 But the United States Government deemed that
such a gigantic undertaking as the currency reform and
the Manchurian industrial development would need the
sympathetic cooperation of the Powers and should be
shared by all of them alike. So out of good will it ex-
tended an invitation to the other Powers to join in the
loan. As a consequence, France, Germany, Great Britain
and the United States, through their respective financial
agencies, signed the agreement on April 15, 1921 ■ for
a loan of £10,000,000. On account of the Revolution of
1911, however, the loan was not floated, although an
advance of sterling treasury bills amounting to the value
of Shanghai taels 3,100,000 was delivered for the urgent
needs of the Chinese Government on March 9, 1912. 1

Thus at the opening of the present period, through the



COOPERATION AND CONTROL 65

experiences derived from the Hukuang Railway loan and
the currency reform and Manchuria!! industrial develop-
ment loan, the powers had already learned the lesson of
the advantages of international combination and coopera-
tion and were therefore quite ready to try this new policy.
And the instrument through which the policy was to be
put into effect was the quadruple syndicate or the old
consortium, consisting of the banking groups of Great
Britain, France, the United States and Germany, which
was a direct product of the Hukuang and the currency
loans. To this quadruple consortium were later added
Russia and Japan. The working agreement of the
sextuple group was signed on June 18, 1912, 4 at the
Interbank Conference of Paris, setting forth the prin-
ciple of equal participation on the basis of complete
equality.

The first subject the consortium was to deal with was
the reorganization loan of £25,000,000. Shortly after his
assumption of office, Yuan Shih-Kai, then Provisional
President of China, commenced the negotiation for the
loan. On making a request for a preliminary advance of
10,000,000 taels for administrative purposes, he had
promised the original quadruple group that he would
give first option to the group for the reorganization loan,
provided their terms were as advantageous as those of
the other banking groups. But when the negotiations
started, it was soon found that the terms were too oner-
ous. Pressed by immediate needs, a small Belgian loan
of £1,000,000 was concluded on March 14, 19 12, 5 for
which service preference for future loans was pledged.
The conclusion of this loan called forth a stormy pro-
test from the quadruple group. A.S a consequence, the
loan was canceled. Thereupon the negotiation for the
reorganization loan was resumed, and meanwhile, as we
have seen, Japan and Russia were admitted to the con-
sortium.



66 THE DIPLOMATIC HISTORY OF CHINA

During the negotiation, it was soon discovered that
the Powers concerned aimed to secure the supervision of
China's finance. 8 To this China vigorously declined to
accede. Later, as a result of the conference of the hank-
ing groups at London, May 17-24, the Powers demanded
the right to manage the loan funds for five years, the
foreign supervision of salt gabelle, the right to appoint
a foreign representative to be president of the auditing
bureau and to appoint a financial adviser to the Chinese
Government. 7 To these proposals the Chinese Govern-
ment again refused to give its assent. A deadlock thus
ensued.

Pressed once more by urgent needs, China again turned
to other sources for temporary relief. This time she
o included, on August 30, 1912, with an independent
British Syndicate (C. Birch Crisp & Co.) 8 for a loan of
£10,000,000, for which preference was again given for
future loans, provided the terms were equally advan-
tageous as those otherwise obtainable. The conclusion
of this loan, commonly called the Crisp Loan, once more
called forth the protest of the Powers, in consequence of
which the privilege of preference was withdrawn and
the issue of the second half of the loan was canceled at
a compensation of £150,000. 9A

Thereafter negotiation were again resumed. By the
end of January, 1913, the agreement was ready for
signature. At this juncture, fiance and Russia made
objections to the appointment of foreign advisers sug-
gested by China. A shameless wrangle ensued. The
controversy was finally settled by the agreement to have
a Britisher as Inspector of the Salt Administration, a
German as director of the National Loan Department,
and two advisers, one French and the other Russian, for
Auditing Bureau.

During the time when the Powers were scrambling
over the appointments of advisers, President Wilson,
conscious of the precarious nature of the reorganization



COOPERATION AND CONTROL 67

loan, withdrew the support of the United States Gov-
ernment from the American banking group, and issued a
proclamation on March 18, 1913, announcing that as
the terms of the reorganization loan touched the adminis-
trative integrity of China, the United States could not
become a party thereto. 93 Consequently, the American
group withdrew from the Sextuple Consortium.

The final agreement was signed on April 26, 191 3. 10
The amount of the loan was to be £25,000,000 (Art. 1).
The security was to be the Chinese Salt Administration
(Art. 4). which was to be reorganized under foreign
supervision (Art. 5). The rate of interest was to be
five percent (Art. 8). The life of the loan was to be
forty-seven years (Art. 9). Redemption after a lapse
of seventeen years and up to the end of the thirty-second
year was to be at a premium of two and one-half per-
cent, but after the thirty-second year extra redemption
could be made without premium (Art. 9). In reim-
bursement of expenses connected with the payment of
interest, and with the repayment of the principal of the
loan, a commission of one- fourth of one percent was to
be paid to the banks. For the flotation of the loan a
commission of six percent of the nominal value was to
be granted. The issue price was to be not less than
ninety percent (Art. 13), securing to China a net price
of not less than eighty-four percent. ( 'hina was to estab-
lish an account and audit departmenl (Art. 14). 11

After the conclusion of the reorganization loan of
1913, the policy of international combination and coo
tion came to a standstill. This was due to two main
Causes. The first was the withdrawal of the United

State- which inaugurated this policy during the i
tiation of the currency loan and was it i real champion.
With the absence of the United States there was no
moral leader among the Powei could uphold the

doctrine of equal opportunity of trade and the i i it •

of China. As a result, the other Towers fell into their



68 THE DIPLOMATIC HISTORY OF CHINA

old practice of international struggle for concessions.
The other reason, which came later, was the Great War
in Europe. That drew away the contending Powers from
the concession scramhle in China to the battlefields of
Europe. The policy of international combination and
cooperation was therefore suspended until the close of
the Great War, when the Powers instituted the New
International Banking Consortum and came back to China
with the former policy of international combination and
cooperation.

As we have seen, the withdrawal of the United States
left the other Powers without a moral leader, and with-
out an earnest champion of the policy of international
combination and cooperation. As we have also seen, the
consequence of the withdrawal was the falling off of
the Powers into the old practice of international strug-
gle for concessions. In pursuance of this old policy of
competition, which brought on the Boxer Uprising of
1900 and the Chinese Revolution of 1911, the Powers
again contended for concessions. On September 24, 1912,
the Belgian Company, Compagnie Generale de Chemins
de Fer et de Tramways en Chine, secured the concession
of the Lung-Tsing-U-Hai Railway. 12 On December 12,
1912. the supplementary clause was signed, 13 and on May
1, 1920, another subsequent agreement for the loan was
entered at Brussels. 14 On July 22, 1913, Belgium and
France, through their respective financial agencies,
jointly obtained the concession of the Tatung-Chengtu
line. 15 France procured, besides the five percent indus-
trial gold loan of 1914, in the contract for the L'hing-Yu
Railway on January 21, 1914, 17 and the pledge of the
Chinese Foreign Office regarding preference to French
nationals in railway and mining enterprises in Kwangsi
Province. 18 Germany acquired, by an exchange of notes,
n December 31, 1913, ia the right of extending the Shan-
tung Railway from Kaomi to Hanehuang and from
Tsinan to Shunteh. 20



COOPERATION AND CONTROL 69

Following the general scramble, Great Britain obtained
on Xovember 14, 191 3, " the contract for the Pukow-Sin-
yang Railway; on December 18, 1913, the preliminary
agreement for the Shasi-Shingyi Railway,-'- and on July
25, 1914, the final agreement for the same. 23 On March
31, 1914, she also obtained the Nanking-Hunan Railway
agreement,- 4 and on August 24, 1914, the Nanchang-
Chaochow concession. 2 '' The United States financial
agents also obtained concessions. The American Inter-
national Corporation secured, on May 13, 1916, 2U the
agreement for the Huai River Conservancy Grand Canal
Improvement Loan agreement. 27 The Siems and Carey
Company obtained, on May 17, 1916, 28 the concession
to construct 1,500 miles of railways in China, which was
later reduced by the supplementary agreement of Sep-
tember 29, 1916, to an aggregate of 1,100 miles.

Likewise, Japan wrested many valuable concessions
from China. By an exchange of notes, on October 5,
191 3, 29 she secured the concession from Supingkai via
Chengchiatun to Taonanfu, from Kaiyuan to Hailung-
cheng, from Changchun to Taonanfu. By the treaty of
1915 relating to the Province of Shantung, she also pro-
cured the right to construct a railway from Chefoo or
Lungkow to a point on the Kiaochau-Tsinan Railway.
The Japan Advertiser of October 2, 1918, announced ad-
ditional railway loans in Manchuria and Mongolia, —
from Taonan to Jehol, from Kirin to Haiyuen via Ilai-
lung, from a point mi the Taonan-Jehol Railway to a
seaport, and the railway loans in Shantung, — the Tsinan-
Shunteh and the Kaonii-1 Isuchow ;u concluded on Sep-
tember 24, 1918. Under the Terauchi Cabinet there were
also concluded with China the Communication I lank
Loan,' 12 the Telegraph Loan," the Kirin-Hueining Kail-
way Loan. ' and the loan of yen, 30,000,000. with all the
forests and gold mines in both Kirin and I [eilungkiang
provinces for security. 88

Russia was the onl\ greal Power during this period



70 THE DIPLOMATIC HISTORY OF CHINA

that was not so much interested in the international strug-
gle for concessions. What railway concession her finan-
cial institutions gained in this period was the Pin-Hei
Railway acquired by the Russo-Asiatic Bank on March
27. 1916. :i ° The interest of Russia rather lay in Mon-
golia. Excepting the treaty of December 20. 1 Ml, 37 fix-
ing the boundary between Russia and China from Tar-
Dagh to Abahaitu, and along the Argun River to
its confluence with the Amur River and the protocol of
delimitation along the river Horgos, May 30-June 12,
1915, the successive treaties she made with China dur-
ing this period were concerning Mongolia. On Novem-
ber 3, 1912, 38 she concluded a convention with Mongolia
pledging to assist the latter in maintaining its regime of
autonomy and prohibiting the admission of Chinese troops
or the colonization of the land by the Chinese. A year
later, on November 5, 1913, she concluded a convention
with China,"" exacting the recognition of the autonomy of
Outer Mongolia, and the pledge not to interfere in the
internal administration of Outer Mongolia, nor to send
troops thereto, nor to colonize the territory. Subse-
quently, on September 30, 1914, Russia again entered
into an agreement 4 " with Outer Mongolia, binding the
latter to consult Russia in the grant of railway conces-
sions to other nations. To complete the settlement of
the relationship between Russia. Outer Mongolia and
China, the tripartite agreement was concluded on June
7, 1915. 41 Outer Mongolia recognized the Sino-Russian
( "(invention of November 5. 1913 (Art. 1). "Outer Mon-
golia recognizes China's suzerainty, China and Russia
recognize the autonomy of Outer Mongolia funning part
of Chinese territory" (Art. 2). "Autonomous Mongolia
has no right to conclude international treaties with for-
eign | ting political and territorial questions
(Art. 3). As regards questions of a political and terri-
torial nature in ( >uter Mongolia, the Chinese Govern-
ment was obligated to come to an agreement with the



COOPERATION AND CONTROL 71

Russian Government through negotiations, in which the
authorities of Outer Mongolia should have the right of
participation (Art. 3).

Thus the international struggle for concessions was re-
vived after the withdrawal of the United States. When,
however, the World War broke out, the struggle came
to an end. Retiring from the arena of Far Eastern poli-
tics, the Powers turned their full attention to the death
struggle in Europe, thereby relieving China temporarily
from the aggressions of Europe.

This short moment of alleviation, however, was not
to last long. Left alone and untrammeled in the Far
East, and with China lying unprotected and almost help-
less before her, Japan took advantage of the situation.
She realized that the opportunity of a thousand years had
come and that she must strike while the iron was hot.
Therefore, on the pretense of the Anglo-Japanese Al-
liance, she entered the war on the side of the Allies.
On August 15, 1914, she presented an ultimatum to Ger-
many, advising the latter to withdraw immediately all
armed vessels from Chinese and Japanese waters, and
to deliver to herself the leased territory of Kiaochow,
not later than September 15, "with a view to the eventual
restoration of the same to China." ,J and also asking for
an unconditional acceptance of the advice by noon of
August 23, 1914. hailing to receive a reply at the speci-
fied time, she declared war on Germany on August 23,
1914.

Thereupon s itched her forces to capture Kiao-

chow. On September 3, t the surprise and indignation
of the e, she landed her troops at Lungkow on the

northern shop- of the Shantung Peninsula, about 150
miles from Kiaochow, while the British foi perat-

ing in the campaign, landed on September 23 at Laoshan
within the German leasehold. Confronted by the evident

violation Of her neutrality and yet unwilling to conic to



72 THE DIPLOMATIC HISTORY OF CHINA

a conflict with Japan, China, on the day of Japan's land-
ing at Lunkow, proclaimed a war zone covering the east-
ern part of Shantung Peninsula as t'ar west as Weihsien,
and obligating the belligerents to observe the bounds thus

set and not to encroach westward.

But, unexpectedly, on October 6, the Japanese soldiers,
despite the protest of the Chinese Government, went to
Tsinan and seized the railway station there. Having oc-
cupied the entire length of the railway from Tsingtao to
Tsinan, the Japanese distributed soldiers along the rail-
road and thus gradually displaced all the Chinese em-
ployees of the railway. They also seized the mining
properties of the Germans along the railway and operated
them for their own benefit.

During this time the siege of Tsingtao continued, until
September 7, when the Germans surrendered the city.
As the capture was completed, and it seemed that there
was no more necessity for the Japanese troops to remain
in Shantung, the Chinese Government asked the Japanese
to withdraw from the Province and concentrate their
forces at Kiaochow. This the Japanese refused to do.
As a next step, and seeing that the exigency which called
forth the proclamation prescribing the war zone had
passed, the Chinese Government abrogated the declara-
tion and duly notified the British and Japanese on Janu-
ary 7, 1915, to that effect. To this note the Japanese
Minister replied that the revocation of the war zone was
an indication of want of international faith and of un-
friendliness, and that the Japanese troops in Shantung
would not be bound thereby.

When diplomatic relations were thus in such a difficult
pass, the Japanese Minister, to the dismay of the Chinese
Government, presented on January 18, 1915, the now fa-
mous Twenty-one Demands, divided into five groups.
The first group related to Shantung. Japan was to have a
railway concession from Chefoo or Lungkow to join the



COOPERATION AND CONTROL 73

Kiaochow-Tsinan Railway, the opening by China of cer-
tain commercial ports in the province, the pledge by
China of the non-alienation of the coast or territory of
Shantung, and, above all, the assent of China to any ar-
rangement Japan might make with Germany at the end
of the war relating to the German rights in Shantung. 4:i
The second group dealt with South Manchuria and East-
ern Inner Mongolia. Japan demanded the extension to
ninety-nine years of the lease of Port Arthur and Dalny,
and the South Manchuria Railway and the Antung-Muk-
den Railway ; the right to lease and own land and to
open mines and to engage in any business, manufacturing
and farming; the requirement of the consent of the Jap-
anese Government to the pledging of the local taxes as
securities for any railway concession to a third Power
and to the employment of foreign advisers ; and the
transfer to Japan of the management and control of the
Kirin-Changchun Railway for ninety-nine years. 44 The
third group referred to the Hanyehping Company. Japan
demanded joint partnership in the company and the
monopoly by the said company of the mines located in
the neighborhood of those owned by the company .*■ The
fourth group treated of the non-alienation of the coast
of China. 4,i The fifth group, which was the climax, de-
manded the employment of influential Japanese advis-
ers; the right to own land by the Japanese hospitals,
churches and schools in the interior of China; the joint
administration by Japanese and Chinese of the police al
important places in China ; the purchase of a fixed amount
of ammunition from Japan (say, fifty percent or mure),
or the joint establishment of an arsenal in China; rail-
way concc-vinns from Wuchang to Kiuchang and Nan-
chang, from Manchang to Eiangchow, and fnom Nan-
chang to Chaochou; the exclusive right of the economic
development of Fukien; and the right of Japanese mis-
sionary propaganda in China.
The negotiations that ensued are known to the world, —



74 THE DIPLOMATIC HISTORY OF CHINA

the Japanese first tried to conceal the demands and
• 1 the Chinese Government t an immediate accept-
ance in secrecy; how later, a^ the news of the demands
leaked out, the Japanese denied their existence and pre-
sented to the world only eleven articles, omitting the most
important, including Group V.' ; As negotiations lagged,
on April 26, 1915, Japan presented her revised demands in
Twenty-four Articles. In the first group, relating to
Shantung, there was practically no change except the
demand of its non-alienation, which was changed to an
exchange of notes.' 8 In the second group respecting
South Manchuria and Eastern Inner Mongolia, the two



Online LibraryMingchien Joshua BauThe foreign relations of China: a history and a survey → online text (page 6 of 39)