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They have also invested in many foreign companies,
especially those whose interests are in the East, such as
the Hong Kong and Shanghai Banking Corporation and
many Insurance Companies having branches in China.

The same treaty provides that ' the British Government
agree that British subjects investing in Chinese companies
shall be under the same obligations as the Chinese share-
holders in such companies '. This is effective, indeed, in
Chinese companies established in other countries under
the law, the notable instance being the investment by
British capitalists in sugar or rubber plantations, in the
Straits Settlements and the Malay States, ow^ned and con-
trolled by Chinese. But within the dominion of China
there are very few instances in which foreign capital is
invested in a Chinese enterprise. China has her own
business methods and customs, which are beyond the
capacity of foreigners to master. Her industries have
hitherto been mostly organized on the system of partner-
ship or single proprietorship, and very few of them on a
joint stock basis. She is only beginning her industrial life
in the modem sense of the term, and it will probably be
some time before she can witness a full development of
her modern enterprises. Moreover, a Chinese company
registered in China will necessarily be under Chinese juris-
diction, and foreign shareholders may have to appear in
Chinese courts in cases of litigation. Extra-territorial
rights prevent them, however, from appearing in Chinese

Foreign Investments 233

courts as defendants, though they are allowed to lodge
protests against Chinese. Under such conditions, it may
be unwise for foreigners to invest in Chinese companies,
even though the latter are so highly organized and developed
as to attract their savings.

In the mining regulations issued by the Chinese Govern-
ment in 1914, it is provided that ' citizens of treaty States
may join with Chinese citizens in acquiring mining rights,
but they must conform with these regulations and all other
laws connected with them ' and that they ' shall not hold
more than 50 per cent, of the total number of shares '.
Apart from the question whether these regulations are
acceptable to foreigners, the restriction on the number of
shares they may hold does not encourage their spirit of
enterprise. Foreigners, once they invest their money in
China, desire security, and so far they have not seen their
way to trust the Chinese with the care of their money.
The Chinese in China have not yet proved themselves
capable of organizing modern enterprises to the satisfaction
of foreign capitalists. So long as foreign capital is restricted
to 50 per cent, the preponderant power of control will
rest with the Chinese. The inability of the law courts
to afford them proper protection is, in fact, the root of
all troubles confronting industrial enterprises. It is hoped,
however, that with the political settlement between the
North and the South, and with the successful execution of
judicial reforms, the Chinese will be enabled to develop
their natural capacity for organizing industries, and that
foreigners will be willing to lend them their capital and
expert service as they do in the Straits Settlements.
Free exchange of scientific knowledge and merchandise
between China and the West will not only help her to

234 Economic Concessions

develop herself, but to supply America and Europe with
many sorts of raw material and manufactured goods of
which they are sorely in need.

The restriction by the Chinese Government on the
introduction of foreign capital, as shown in the mining
regulations, is explained by their dread of admitting foreign
political influence and domination, which in the past have
always accompanied commercial exploiters. The Chinese
seem to have made up their mind that they would rather
have their treasures buried underground than let foreigners
open them and bring in diplomatic controversies. Their
patriotism is not less strong than that of any other race,
and the nationalistic feeling has been strengthened rather
than weakened with the progress of modern education ;
and the time may come when the possession of heavy guns_
and cruisers will no longer enable foreigners to disregard
the sentiments of the Chinese. It is therefore worthy of
the consideration of the foreign Governments that, while
they secure reasonable protection for the investors of their
respective countries, they should allow them a free hand to
compete in China, as they do in all other countries, without
giving them any supervision or direction influenced by
political or territorial consideration:^.


New Problems since the War

§ I. Kiaochow Question

On August 15, 1914, Japan dispatched to Germany an
ultimatum in the following terms :

' We consider it highly important and necessary in the
present situation to take measures to remove the causes of
all disturbance of the Peace in the Far East and to safe-
guard general interests as contemplated in the agreement
of alliance between Japan and Great Britain. In order to
secure firm and enduring peace in Eastern Asia the estab-
lishment of which is the aim of the said agreement, the
Imperial Japanese Government sincerely believe it to be
its duty to give advice to the Imperial German Government
to carry out the following two propositions :

' (i) To withdraw immediately from Japanese and
Chinese waters the German men-of-war and armed vessels
of all kinds, and to disarm at once those which cannot be
withdrawn ;

' (2) To deliver on a date not later than September 15th,
to the Imperial Japanese authorities, without condition or
compensation, the entire leased territory of Kiaochow with
a view to the eventual restoration of the same to China.

' The Imperial Japanese Government announces at the
same time that, in the event of its not receiving by noon of
August 23r'd an answer from the Imperial German Govern-
ment signifying unconditional acceptance of the above
advice offered by the Imperial Japanese Government,
Japan will be compelled to take such action as it may deem
necessary to meet the situation.'

236 New Problems since the War

On the expiry of the time limit, no reply had been received
from the German Government. War was declared on the
23rd, and Kiaochow was blockaded on the 27th. The army
of Japan landed in Shantung on September 2, and with the
assistance of a few British regiments from India and Wei-
hai-wei, captured Kiaochow on November 6, 1914.

With these few dates in mind, let us proceed to discuss
the question of the liability of leased territory to attack
in the event of the lessee being at war with a third Power
(the lessor being neutral).

It should be first emphasized that, in spite of what inter-
national lawyers say, lease is different from cession ; and
territory held on lease is not under the dominion of the
lessee State. It may be true that the latter intends to
acquire a place in the sun by cession, but that, with due
regard for outward appearances, he is compelled to disguise
his intention under the mild form of lease. Many legal acts
have behind them intentions which are not exposed in the
documents relating to them ; but law courts can only be
guided in their judgements by what is clearly written down.
It is not the business of judges to inquire into the intention,
which is often beyond the range of human investigation.
So it is true that in diplomatic transactions, treaties are the
only instruments binding on the parties concerned. To go
beyond them and consider the motives of the signatories is
not only novel to the traditions of diplomacy but impossible
in the nature of things.

Whatever the intentions of Germany may have been when
she obtained from China the lease of Kiaochow and the
right of free passage for her troops in a zone of 50 kilometers
surrounding it, she did not receive from China a piece of
territory as an integral part of the German Empire. It is

Kiaochoin' Question


expressly stated in the treaty that both in the zone and in
the leased territory, China reserves her rights of sovereignty.
What she conceded is the permission to exercise these rights
during the term of the lease. The territory remains Chinese,
but its administration is delegated to Germany for ninety-
nine years.

The delegation has its extent as well as its limit. The
extent is defined in the treaty by an article to the effect
that China ' abstains ' from taking any measures, or issuing
any ordinances, ' without the previous consent of the German
Government ' and ' especially from placing any obstacle in
the way of any regulation of the water-courses '.

These restraints on her part are necessary, in order to
enable the lessee to fulfil his duty without ' any possibility
of conflict V but apart from them, China has her position
as the territorial Sovereign unimpaired. She is fully
entitled to negotiate with the German Government on any
course that she is prepared to take ; and subject to its
approval, she is authorized to issue orders and enforce laws
on the leased territory and in its surrounding zone — an
authorization that would be contrary to the usages of inter-
national law, had the status of Kiaochow been legally the
same as that of Hanover or Dresden. Rules of the law
require that one State should on no account interfere with
the internal affairs of another independent State ; and China
would have broken the rules, had she considered Kiaochow
as outside her dominion and yet exercised her rights of
sovereignty affecting its internal administration, as she has
done in establishing Customs Houses, in regulating steam
navigation, and in maintaining the same tariff in Kiaochow
as in other parts of the country. Moreover, while Germany
1 Art. 3, Treaty of 1898.

238 New Problems since the War

is granted the right to construct fortifications on the leased
territory for the protection of buildings and the harbour,
China reserves to herself the right to station troops and
take military measures in the zone in agreement with the
German Government. In fact, the fortifications are not
erected by the lessee Power with the object of protecting
himself against the lessor or any other State. They are
erected as an integral part of the military measures of the
lessor, and in the event of the latter being at war with
another State, they could be taken over and operated by
him to defend his dominion. It is stated in the treaty that
it is ' to increase the military readiness of the Chinese
Empire ' that Germany is granted the right of free passage
for her troops. In other words, like a Power allied to
Germany, China introduces German troops into her territory
in order to make them co-operate with her own soldiery.
Whether the introduction is effected of her own will or
forced on her, is a matter that does not affect our argument.

Judging from the legal status of Kiaochow so far explained,
the conclusion can be easily drawn, that for purposes of war
and neutrality it should be considered as a part of the
Chinese and not of the German territory. Early in this
war, China was neutral, and by the rules of international
law ' the territory of neutral powers is inviolable '. If
Kiaochow was attacked, it was a violation of the neutrality
of China.

The attack was, however, excused on two grounds. The
first ground is that as Port Arthur and Dalny, which had been
leased to Russia, were attacked during the Russo-Japanese
War, the attacks on Kiaochow only followed a precedent.
The fallacy of this is manifest, when it is remembered that,
during that war, the whole of Manchuria (east of the Liao-

Kiaochow Question 239

Ho River), of which the leased territory was only a small
part, was delimited by the Chinese Government as a belli-
gerent zone within which she did not enforce neutrality.
As the whole province was liable to attack, there was no
question of sparing a corner whether it was leased to Russia
or not. Manchuria, though Chinese territory, was in Russian
occupation, and for reasons of military exigency it had to
be considered as a possession of the occupant.

Moreover, there is no law to govern all cases of lease.
Each is governed by its own treaty. The treaty which
leased Port Arthur and Dalny to Russia is different, both
in nature and scope, from that by which Kiaochow is leased
to Germany. According to the former, China was not
allowed to station troops of any kind within the boundary
of the leased territory. Batteries and barracks were erected
for the convenience of the army and navy of the Tsar,
without any pretence of making them serviceable to the
territorial sovereign. As to its administration, she was denied
the right to establish customs houses or to do anything in
the nature of government. She was even denied the right
to make suggestions for the welfare of Chinese inhabitants.
To all intents and purposes, Port Arthur and Dalny were
Russian territory and were therefore liable to attack. The
position of Kiaochow is altogether different ; and no parallel
arguments can be deduced from the attack on the former
Russian leased territory to justify the attack on Kiaochow

The second ground is that it is permitted by the law of
lease and usufruct that in the event of the tenant mis-
behaving himself and endangering the safety of his neigh-
bours, the latter have the right to oust him from the land
in his occupation. On the outbreak of war in Europe,

240 New Problems since the War

Germany was making military preparations behind the ram-
parts of the Tsingtau forts and fitting war vessels in the
Kiaochow harbour with a view to raiding the naval stations
and merchant ships of the Allies. Under these circumstances
the Allies, of w^hom Japan was the leading Power in the Far
East, were fully justified by the principle of self-defence in
launching an attack on the German forts in order to destroy
the enemy plan before it was matured. Consideration for
self-preservation may compel a Power to attack neutral
territory, when it is necessary for the sake of securing her
own safety; but according to the rules of international law
laid down in the Caroline case, the extraordinary action is
only justified when the necessity for it is ' instant, over-
whelming, leaving no choice of means and no time for
deliberation '. With the limited number of ships and troops
under the command of the German Governor of Tsingtau,
when the ultimatum was issued, it was not likely that the
danger to the Allies was so instant, so overwhelming, and so
urgent as to require an immediate attack.

As to the choice of means, the lessor was responsible to
the Allies for the good conduct of the lessee. Should the
latter misuse or overstep his power, the Allies have the right
to demand from China that she should intervene to prevent
him from giving them cause for anxiety. In dealing with
a Power like Germany, which had already been characterized
by unscrupulousness, it was imperative for the Allies to offer,
and the Chinese to accept, advice which would ensure their
mutual safety against the enemy. But one searches in vain
for any hint to China from Japan or any other Allied State
before the issue of the ultimatum.

It is argued that the Allies were fully convinced of the
futility of a negotiation between China and Germany,

Kiaochow Question 241

because it was beyond the capacity of the Chinese Govern-
ment to enforce their demands by arms, and the Germans
would yield to no other pressure. This is true, but it affords
no excuse for the Allies to overrun Chinese territory. With
their willingness and readiness to assist less advanced States,
they should have given China moral support to make her
demands effective. A reasonable time-limit should have
been accorded to her to give the negotiation a chance of
success, before the Allies issued an ultimatum. In case
Germany was obstinate and ignored China's treaty rights,
they should have helped her to maintain her neutrality by
lending her an armed force, but should not have proceeded
to the attack of Kiaochow without her previous knowledge
or consent.

After the operations had begun, it was useless to discuss
the legality of the attack. The die had been cast and *
further developments were watched with burning interest.
The attack itself, let it be repeated, was a breach of China's
neutrality, but during the progress of the campaign further
breaches were committed. Assaulting the Tsingtau forts
from their rear, the infantry, the cavalry, and the artillery
of the Japanese army landed at Lungkow, at the northern
boundary of the Shantung promontory, at the south side
of which Tsingtau is situated. The distances from the
landing-place to the forts and to the outer outskirts of the
zone within which German troops had a right to free passage
were respectively eighty and fifty miles. If the territory
within the zone was open to the passage of Japanese troops,
because its neutrality had been compromised by the partial
use made of it by the Germans, there was nothing to justify
their landing and marching on the neutral territory outside
the zone. To the protest of the Chinese Government, Japan

1832.13 j^

242 New Problems since the War

pleaded militar)^ necessity. ' Necessity knows no law ' ; and
it is not within my power to prove that the necessity existed.
Suffice it to say that the British contingents which co-
operated with the Japanese did not land outside the zone,
but lawfully and carefully observed the difference of the
absolute and the ' compromised ' neutrality by landing at
Laoshan Bay within the zone.

' Rules of neutrality ', says Sir Francis Pi ggott,' have been
framed to meet ordinary circumstances, of which fighting
is one ; they are hardly applicable to abnormal circum-
stances without modification.' ^ If this interpretation is
accepted, China, who was impotent and unwilling to fight
for the maintenance of her neutrality, could not do other-
wise than acquiesce in its violation. Moreover, it is generally
agreed by authorities on international law that neutrals are
only expected to fulfil their duties ' with due diligence '
and ' with the best means at their disposal ' ; and they are
not legally bound to undertake anything beyond their power.
When the landing of Japanese troops on neutral territory
had already become an accomplished fact, China, following
the precedent during the Russo-Japanese War, in which
fighting took place on her soil but was restricted to the
west of the Liao-ho River, proceeded to double the extent of
the original 50-kilometre zone within which German troops
were free to pass — that is to say, to delimit an area having
Tsingtau as the centre with a radius of 100 kilometres.
Within the circumference of this circle the belligerents were
free to take military action, and China was not responsible
for any damage to their life and property.

Against this extension of war zone Germany immediately
protested to the Chinese Government. In reply, the latter
^ The Nineteenth Century ^ March 191 5.

Kiaochow Question 243

pointed out that the extension was only ordered after and
not before the landing of Japanese troops. ' Were China
to use force against the Allies and oppose the landing, she
should, in order to be impartial, also use force to oust the
Germans from Tsingtau, because that place is still Chinese
territory, Germany having no right to make military pre-
parations.' As she could do neither, she had to accept
a situation created by force majeure ; and in the words of
the official dispatch to Germany, the extension was ' dictated
by a correct appreciation of her peculiar position and a proper
estimate of her duty to herself '. In short, though the zone
was extended, she still hoped to confine belligerent operations
within a limited area. The anomaly of her position was
manifest, but a nation that was not too proud, but too
feeble, to fight had to pay a price for its neglect of military

Contrary to her hopes and expectations, the violation of
China's neutrality did not end with the extension of the
zone. The invading army was on the march and was deter-
mined to observe no proclamation of neutrality. It was not
deterred by the boundary lines marked by chalk on the sand
any more than by the issue of a paper proclamation in Peking.
The invaders had made their plans, irrespective of the pro-
tests of the Chinese Government ; and it did not make the
faintest difference to them when the Chinese Foreign Office
had handed to the Japanese Minister in Peking a very reliable
and accurate map showing the boundaries of the extended
zone — a map that would be posted to Tokyo for record but
not issued to the Commander in the field.

From Lungkow, the Japanese troops marched to Tsinanfn,
200 miles from the nearest point on the circumference of
the extended zone and 60 miles again from the leased

R 2

244 ^^^ Problems since the War

territory at Tsingtau. In the district through which they
passed, requisition without compensation was made on the
peaceful Chinese inhabitants, who were pursuing their
occupations without the slightest notion of what was going
on. It was immaterial whether their vocabulary was suffi-
ciently large to enable them to read a proclamation issued
by the Japanese Commander to the effect ' that they must
afford aid to the Japanese troops in all matters to the utmost
of their ability ; that any one daring to disobey military
orders or to injure any member of the Japanese Forces
would be at once arrested and severely punished without
mercy ; that this is not an empty threat ; and that all must
strictly obey ' ; but they had to supply carts, boats, cattle,
horses, fuel, grain, and anything that the invaders thought
useful or necessary. According to the rules of land warfare,
it is permissible for belligerents to make requisition with
compensation on hostile citizens, but there is no precedent
in this enlightened age for making it without compensation
on the subjects of a neutral State in their own territory.

Tsinanfu, towards which the invading army was marching,
was the terminus of a railway line to Tsingtau. Acting on
the pretext of ' military necessity ', Japan seized the railway,
and the seizure was hardly justifiable, as it was private
property. According to the rules of international law,
private property on enemy territory may be requisitioned
(but not confiscated) for military emergency, but no pre-
cedent could be found to justify a seizure of enemy property
in neutral territory. Moreover, though its capital was sub-
scribed by Germans and its management entrusted to
Germans, the railway was partially a Chinese concern, as
she retained the right to appoint directors and purchase it
from the Germans after a certain number of years from its

Kiaochow Question 245

opening to traffic. Rules or protests were, of course, of no
avail, when the invader subordinated everything to military
necessity. Strategy may have made it necessary for the
Japanese to occupy the line, but strategical plans are not
always formulated in accordance with the rules of civilized

So far, I have dealt with the legality of the attack on the
German leased territory and the incidents that have arisen
in the course of the campaign. Let us now examine the
status of Tsingtau after its capture from the Germans.

With the triumphal entry of the Anglo-Japanese con-
tingents into the city on November 24, 1914, Tsingtau came
under the occupation of Japan ; Great Britain, having done
her duty in assisting the Japanese to oust the Germans,
withdrew her troops and abstained from interfering with
its administration. The German Governor of Tsingtau,
together with his troops, was conveyed to Japan as a prisoner
of war. All German Government property was confiscated
and private property seized. Japan has not only replaced
the German administrative system and personnel by the
Japanese, but has also changed the names of the Bismarck
and the Moltke Hills near Tsingtau to those of some Japanese
heroes. Trade is flourishing, and the harbours and docks
are working at full speed for the benefit of Japanese ships.
All the Germans formerly employed by the Chinese Govern-
ment on the Customs Service have now been replaced by
Japanese, and the railway line is still occupied and worked
by Japan. In addition to the temporary acquisition (pending
the settlement of the Peace Conference) of all these rights
and privileges formerly enjoyed by Germany, she has
stationed troops in many parts of Shantung outside the
50-kilometre zone and has established civil administration

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Online LibrarySih-Gung ChengModern China, a political study → online text (page 18 of 28)