FOOTNOTES: (continued 3)

China's internal political situation had not improved greatly as a result of the overthrow of the monarchical movement. On his return to Peking as restorer of the republican government, General Tuan had the chance to rally all elements in Chinese politics to a policy of constructive action. With whom would he ally himself? As his distrust of the Kuo Min Tang was great, he constituted his new government without regard to that party, and sought instead to govern through a combination of the Chin Pu Tang and the so-called Communications Party. Of the latter the real leaders, Liang Shih-yi and his immediate associates, were still living in exile under the mandate issued by President Li. Mr. Tsao Ju-lin controlled the new wing of the Communications Party, and he had a disproportionate prominence through Japanese support. Both he and Liang Chi-chao, the leader of the Chin Pu Tang, were under the Japanese thumb. This influence could thus act strongly and extensively on Chinese affairs. It was a Japanese loan that had facilitated the overthrow of Chang Hsun and made the leadership of General Tuan possible.

These two factions, while they supported General Tuan, were mutually antagonistic. Mr. Liang Chi-chao is a literary man and a theorist. Long befriended by the Japanese, he doubtless believed himself to be a patriotic Chinese who was ready to use Japanese aid, but would not surrender any essential national rights. Not being a man of affairs, he may not always have seen the bearing upon the ultimate independence of China of the measures which he proposed. Some Chinese as well as foreigners thought him merely the venal instrument of Japan; others regarded him as essentially honest, but subject to being misled because of his theories. As Minister of Finance, his administration tended to bring about a great increase of Japanese influence in China.

Mr. Tsao Ju-lin, cynical, practical-minded, and keen, is a different type of man. He was closely associated with Mr. Lu Tsung-yu, himself the most pliable instrument of Japanese policy in China. Mr. Tsao was educated in Japan; one or more of his wives were Japanese, and in business and pleasure he was constantly in Japanese company. He was out-spokenly skeptical about his own country and about republican institutions.

The Government felt dependent upon assistance from abroad, for it had financial difficulties due to inherited burdens and present military expenses. It was made to believe that assistance could come only from the Japanese. The Americans had left the Consortium four years ago; they had every opportunity to interest themselves in China, but they had done nothing substantial beyond the loan of the Chicago bank. In China, the margin between tolerable existence and financial stress is so narrow that a few million dollars may wield an enormous influence for good or bad.

These needs were accentuated because the southern republicans were holding aloof. They felt themselves excluded from the Government; they doubted General Tuan's honesty of purpose, and they planned to remain independent of the central authorities. From Shanghai Mr. C.T. Wang, the most prominent of the younger republicans, wrote that Tuan Chi-jui and his cabinet represented the reactionary element; that they were strongly backed by undesirable foreign influence, and that the latter would virtually control the Government. He ascribed to General Tuan the ambition of paving the way to make himself emperor. The opposition to Tuan, he said, would continue the fight until the Chinese Republic was indeed a republic. As to American action in China, he noted that America plays the game as a gentleman, therefore it is likely to be outmanœuvred by another country less squeamish about its methods. Another letter from Mr. C.C. Wu, dated July 19, 1917, I will give textually, in part:

... When General Tuan arrived at the head of his troops in Peking, he had a good opportunity to gain the goodwill and coöperation of the whole country if he had proclaimed his adherence to the constitution at present in force, and to reassemble the dissolved parliament in order that the Permanent Constitution may be completed and the organization of the future parliament provided for; in other words, that the basis for a legal and constitutional government may be found. Unfortunately, other counsels seem to have prevailed. Another assembly, without any semblance of legality, is to be convened and the future regulation of the Republic is to be left in its hands. This will only mean fresh internal dissension and strife. It is to be admitted that there is much fault to be found with the old parliament, but as I once told General Tuan, it is the name, the signboard, of parliament that we must respect.

Meanwhile, the papers are full of the inquiry which the Entente Powers are alleged to have made in regard to the declaration of war against Germany, and the reply made by the Waichiao Pu that the step will be taken almost immediately. Now, it is unnecessary to tell you of my opinion in regard to this question ever since the interview we had on that fateful Sunday in February, of my firm conviction of the many advantages, both material and moral, that such a step would confer on China, nor of the efforts I have exerted in the cause. And my week's stay in Shanghai has not altered my opinion. At the same time I agree entirely with the view expressed in the note you recently presented to the Waichiao Pu on behalf of your government to the effect that the paramount need of the moment is the consolidation of the country and the establishment of an effective and responsible government, and that, compared with this, the demarche against Germany, desirable though it is, is of secondary importance. Indeed, it is nothing short of ridiculous to declare war against a foreign power when every man and every resource has to be kept in hand to meet possible civil strife and when the authority of the Central Government is effective in only a doubtful half of the country. It is difficult to see what benefit the Entente Powers expect to derive by urging such a government to take such a step, a step which is detrimental to the best interests of China and contrary to the good advice tendered by the U.S., with whom Great Britain, at least, associated herself. It is enough to make one almost suspect that it is for these very two reasons that the war measure is being urged on the Government.

Quite plainly, the southern leaders believed that the party of General Tuan was in its war policy animated with the purpose of building up its power at the expense of the rest of the country—particularly of subduing the southern republicans. Even less unselfish purposes were attributed to those who based their policy on foreign financial support. In a speech in Parliament, Senator Kuang Yen-pao makes the officials who contract ill-advised public loans say: "We are planning for the conservation of the property of our sons and grandsons; why should we have compunctions about driving the whole people to the land of death? What matters the woe of the whole nation by the side of the joy and happiness of our own families?" But the southern leaders did not disavow the act of the Central Government in declaring war. Their political opposition continued; but they accepted the international action of Peking as binding on the whole country.

In such matters China has not the hard-and-fast ideas of sovereign authority and legality which reign in the West. It was therefore possible for a local government to be independent in most matters, and yet to allow itself to be guided by the central authority in some. A declaration of independence by no means implies that there are no relationships whatever between the recalcitrant ones and the central authorities. For this reason, too, the visit of a foreign representative to any one of the governors who had declared his independence would not, as in other countries, be regarded as an affront to the Central Government. Circumstances might occur under which the Central Government itself might favour such a visit, as incidentally relieving the strain. I felt quite free to send attachés of the Legation to the governors of disaffected provinces, and should quite freely have gone myself.

In all my interviews with high officials the prime subject was finance. Not that China, as an associate in the war, was to get such aid—which was taken as a matter of course—but how it was forthcoming supplied the only question. Mr. Liang Chi-chao, Minister of Finance, who called on me on the 4th of August, talked in favour of a big loan by the Consortium. With this he hoped that the United States would again associate itself. When he spoke of independent American loans, I called his attention to the difficulty of concluding them or of calling up the option under the Chicago loan, unless there were a parliament whose authority was recognized by the country. Shortly after this I saw the Acting President, General Feng. "China," he said—undoubtedly to tell me something pleasant, but also because all Chinese do prefer association with America—"China has followed the United States in the policy of declaring war upon Germany. Now will not the United States independently finance China? Or, if that is out of the question, then, surely America will join the Consortium since that is the only way the Chinese Government can be safely and effectively supported."

"The republican form of government," he vowed, "is now eternally secure in China." I could not but remember his previous monarchist leanings. The Acting President spoke of General Tuan. "I have a very cordial understanding with the Premier," he assured me.

I went to the Premier on the 21st of August. In this discussion the Chinese iron industry came up. The Premier asked: "Why not go ahead with the development of mining and iron manufacture? Create a national Chinese iron industry, and it will form the basis of a general loan for industrial purposes." He thought, at first, that the Chinese Ministry of Agriculture and Commerce should summon experts and start the enterprise. I told him about the enormous technical difficulties of such a project. Then he seemed to recognize that a contract with an experienced and powerful organization, which could be held responsible, would be more effective in establishing a national iron industry for China. "I am not sure about the ore deposits near Nanking," he added; "they may not be included in such coöperative enterprises."

I suspected that he was trying to get financial support from another source, and was leaving his hands free to make them a grant there. I put in a caveat against any grant of iron ores to foreign nationals. Americans had in the past been invariably informed that iron deposits could not be leased or granted to individuals because they had been reserved for national uses.

I visited General Tuan on August 22nd and found him more talkative, more anxious to discuss the general aspects of policies than ever before. "We must first of all establish the authority of the Central Government," he said; "this can be done only through a defeat of the opposition. My purpose is that military organization in China be made national and unified, in order that the peace of the country shall not at all times be upset by local military commanders. The military power thus unified I intend to take entirely out of politics and confine it to its specific military purposes. At present the military is used in factional and political disputes. When this is no longer possible, then we shall leave the public mind in civil life entirely free to settle all questions of the Constitution and of the public policy."

I believe the Premier was sincere in these views, and in his efforts to vindicate the authority of the National Government, but he thought only in terms of military authority. He did not realize what the organization of public opinion and of a civilian administration require. His opponents feared that a consolidated military power would be used by him, after all, to accomplish the reëstablishment of a military dictatorship, such as that of Yuan Shih-kai.

The personal wisdom and integrity of General Tuan commanded respect, but he was not fortunate in selecting his assistants. Both in Peking and in the provinces his immediate advisers gave him trouble. When he appointed General Fu Liang-tso governor of Hunan Province, he expected the ready settlement of all difficulties there; General Fu would know how to handle the situation. But the people of Hunan did not welcome General Fu. Soon his authority and that of the Central Government were questioned throughout that province. But the Premier never disavowed or deserted his representatives. He was loyal to them, which accounts for the strong personal influence which Tuan enjoyed.

The country could not be unified, of course, until railways were built, and representatives of the Chinese Government often approached me to ascertain Whether some action could not be taken in regard to the Hankow-Canton Railway, long delayed in construction. This trunk line would have joined the north and south. A trip from Peking to Canton by existing routes took from ten days to two weeks: by direct railway it should be possible to make it in two days. Not only the movement of passengers, but of mail and freight, would stimulate an intercourse that would be sure to overcome separatist tendencies. But China had entrusted the building of this railway to foreigners, who had played with the concession, had lost it, and, after reacquiring part of it, were now delaying its execution. Europe was preoccupied with the war. And now that China was herself entering the war, it seemed a prime need of national preparedness to have this comparatively short remaining gap in the communications of China filled out. Good friends of America among the officials—among them Mr. Pan Fu, Mr. T.C. Sun, the managing director of the Siems-Carey railway offices, and Mr. J.C. Ho—argued with me, as did their superiors, to have America lead in completing this essential highway of commerce.

CHAPTER XXV

THE CHINESE GO A-BORROWING

The time was come for China to put money in her purse. She was sure she could do it, and sure that the United States, her great, rich sponsor and friend, would help her to the means commensurate with her needs of development for war. A suggestion to this effect had been made to the Chinese minister at Washington by the Department of State. It was undreamt of that no assistance whatever could be given to China.

During the fall of 1917 all my powers were devoted to securing for our Far Eastern associate in the war the best form of American assistance. I wished to avoid, if possible, a loss of the chance for giving Chinese financial affairs a sound basis. Above all, it was essential to aid in steering China beyond earshot of the financial sirens that were luring her upon the Japanese rocks. China invited American leadership, relied upon it. No other nation in the circumstances could justly take exception to it. It involved no vast enterprise of immediately raising a huge army in China, but of preparing the way for such mobilization, if need should arise. This could be done by facilitating works which would endure and which would contribute to the welfare of China and the world, war or no war. It meant building means of communication and improving the food supply. It meant reconstruction after the war. It meant an expenditure of money that would be infinitesimal compared with the sums spent in Europe. America had lent billions to the Entente Allies; the hundred millions that would have served to make China fit were a mere trifle. Nor was it necessary to insist upon independent American action in this matter. America's leadership in behalf of the common interest and in coöperation with her associates could produce the results desired of putting the situation in the Far East on a sound basis. I had always desired American independent enterprise in individual cases, free from all entanglements and semi-political arrangements with other nations, whose favour, fortunately, we did not require. But in the great task of the World War joint action with others was natural, and action in China, given only positive American leadership, could have produced fine results. The war powers did get together for some action. They suspended the Boxer indemnity payments for China, and she got the benefit of the twentieth of ad valorem duty which the treaties provided; on the basis of reckonings two decades back, the 5 per cent. had really shrunk to 3. To restore the rate fixed by the treaties was hardly a beginning of justice.

Here was China, ready, willing to take her part in the war. What should she do? In America the slogan: "Food Will Win the War" was in vogue, and China could furnish food. She could supply coolies, millions if necessary, as workmen and as soldiers. The war had proved that the training of men as soldiers could be a matter, not of years, but of months. Plans were drawn up, at first for hundreds of thousands of Chinese soldiers, then for half a million.

I urged my proposals on the State Department. The Canton-Hankow Railway needed finishing. The Chinese arsenals and shipyards could be refitted. I asked the consular officers and attachés for a rapid survey of China's food resources; their returns showed that a large surplus could be produced, if steps were taken at once to assure a market. The Chinese have a genius for growing food; among them they have the world's most skilful gardeners. But they needed added credit if they were to put in more seed and harvest bigger crops. In these estimates Professor Tuck of Cornell, who was up in Manchuria, and Professor Bailey, in Nanking, gave their expert aid.

England and her European allies, it was determined, had "gone broke"; if there was to be a Consortium of lenders to China, would America lead the way? Liang Chi-chao, Minister of Finance, proposed it. There was China's public credit, with such vast human and material resources as to stagger belief, waiting to be organized. There was the supreme opportunity to send scattering all of the promoters of the unseemly scramble to get special advantages through Chinese financial deals. I spared no pains—for four years, indeed, I had laboured for this very thing—to impress upon America the new vision of a developed China. Two things halted action. Outside influences working in America itself were aimed to stop the free play of financial enterprise in China; next, there was the provincialism of the New York financiers. They would only follow where other nations led.

Then there was the alternative—coöperation between the war powers. By hoops and barrages of steel we were bound to our brothers of Britain, France, and Italy; Japan was an allied and associated power; at every point our gold and war bonds were mingled with theirs. We were powerful enough to hold our associates to a policy of developing China for the benefit of all participants; an end might be put there to "special interests." I suggested a new consortium on this basis.

I went to the Chinese President. "I know," he declared, "that America will spare no means whereby China may carry out her purpose to stand by the side of the Allies on the battlefields of Europe."

From the President I went to the Premier. By this time he was not so friendly. Time had elapsed; the glitter of Japanese money had been made to catch his eye. I inquired concerning the Japanese loan of 20,000,000 yen, and incidental arrangements connected therewith. "Does not China need to keep a credit balance in a foreign country," he asked; "and would not the same arrangements be made with the United States if a loan were made there?" Curiously, he added, "There is no need, yet, of convoking parliament; no time has been set for it." A militarist leader, he was being comforted by hopes of Japanese backing. But he was quite willing to send a big army to Europe.

The Japanese were alive to this situation. Professor Hori was sent to lecture on finance before an association which Liang Chi-chao had helped form. The theme of his opening lecture was the bankruptcy of the Western powers. China must rely on Japan for money. Following Hori came a commission of ten officials from Tokyo to study Chinese financial administration. Then came Doctor Kobayashi to act as Japan's expert in China. Prominent posts, it was freely said, were to be created for "currency reform," posts which would be held by Japanese. Later on Baron Sakatani came, to study Chinese finance.

From Japan came loans and offers of loans. They lent 10,000,000 yen through the Yokohama Specie Bank. This was merely an advance on a future reorganization loan. Then a loan, labelled "Industrial," of 20,000,000 yen, was made through the Bank of Communications. Two Japanese financial cliques sprang up and flourished. Liang sat at the receipt of customs at the Ministry of Finance, dealing with the Yokohama Specie Bank; the other clique, headed by Tsao Ju-lin and Lu Tsung-yu, played in with the tri-fold group of the Industrial Bank of Japan, the Bank of Chosen, and the Bank of Taiwan (Formosa). With the loan dubbed "Industrial"—this to evade the provisions of the reorganization loan—came Japanese advisorships in the Chinese Bank of Communications. Not by the remotest chance would the loan be used by the bank to strengthen its depreciated notes. It went for politics and the military.

The Japanese financiers coolly calculated that the British and French banks would fail to take up their option on the currency reform loan, which they had held since 1911. That would leave the field clear for Japan. The French and British legations got busy about this, and so did we. As a consequence the American Government resumed its interest in currency reform in China, and the sigh of relief was almost audible. I called on Minister Liang. Did he not remember the Treaty of 1903 and America's long-continued interest in Chinese currency betterment? There was the Jenks-Conant Monetary Commission; there were the long negotiations conducted by Willard Straight, and the resultant Currency Loan Agreement of 1911. "I remember all these things," Liang responded; "America should lead in this matter. Our banknote issues are being shot to pieces by local issuance of worthless paper. The Tuchuns have bent the national banks to their purposes. The books of the banks must be kept and made public. I suggest appointing three principal foreign experts on a reform of the entire currency. Let them be an American, a European, and a Japanese."

The currency loan option was extended until the following April.

But Japan had other shots in her locker. Suddenly the Japanese press bristled with news of a projected "arms alliance" with China. It sounded almost menacing. The Tai Hei Company, originally organized by the Japanese Government to supply arms to Russia, was going to furnish China with her armament. General Tuan said that he had long been urged to buy a "limited amount" of war material from Japan. The Japanese minister chimed in with the statement that, inasmuch as the United States refused to sell steel to Japan—under the war trade restriction—the time was come for Japan to control China's ore deposits. "Japan is to sell China arms. Why may she not have the raw materials for them?" he asked.

The disproportion involved in this demand served to amuse the Chinese. The deposits on which Japan's eyes were fixed amounted to from forty to fifty million tons of ore—enough to make several guns.

Along with these negotiations came proposals to establish Japanese military and arsenal advisorships.

I asked the Premier about these reports. I told him we could not object to the purchase of arms by China from any source whatever. But in negotiations for loans and concessions the United States had held unswervingly to the principle of the "open door" and no special privileges. As it sought no control of this kind, it was equally interested that none should be given to any other power.

"Have you not," the Premier asked me, "found me always candid and true?" Most sincerely I assured him I had.

"Then," he replied, "we have bought of Japan 40,000 rifles, 160 machine guns, and 80 field guns. There will be no incidental commitments. I can rely implicitly on my military associates [General Hsu Shu-cheng, the Vice-Minister of War; Ching Yun-peng, Acting Chief of Staff; and Fu Liang-tso, Tuchun of Hunan]. They would not sanction such a thing."

But the next day I got positive evidence that they had. The negotiations were in full blast for Japanese military advisorships, control of the Nanking Arsenal, and rights to specific iron deposits. I saw General Hsu, telling him everything before giving him a chance to answer. I was not then solely concerned about the encroachment on Chinese independence. American and European interests had been told: "Hands off the national iron ore reserve; all remaining iron deposits are to be held for the nation." Respecting this decision, we had told our people that concessions for iron ores could not be obtained. We could not in justice to them now consent to a change of policy, without protecting our interests. Japan had already one half of China's iron ore deposits. Was she to get the rest? Also, were Chinese armaments to be standardized without consulting the experts of the Allied Governments, so that the arms might be used in the present war?

"We have been hard pressed," General Hsu explained. "The Japanese wished us to do something for them and we need the arms. They will be of the larger calibre, such as China's armament now has. The Japanese did demand the assignment of new ore deposits; they needed security for the contract. They compromised by reducing the amount of ore we are to furnish. But we must supply it under a contract of 1916, between the Japanese and a company formed by Chow Tsu-chi, whereby a million dollars was paid in advance on iron ores from deposits near Nanking. This is the best we can do. They demanded at first the grant of new ore deposits."

"I should like to visit you more often," General Hsu remarked later; "but my movements are closely watched." I stated I hoped he entertained no fear that would keep him from seeing the minister of a friendly power at any time he wished.

The real trouble lay in the rivalries between the north and south. The Premier and General Hsu were willing to barter the nation's birthright in the form of concessions in order to impose an internal unity of their own making. For China was torn. The situation in October, 1917—how different from that of April and May, 1915, when the twenty-one demands came to their climax! Then the Chinese people and Government were united as one man. The sentiment of the nation was now the same; nearly all the members of the Government were unchanged, yet a small pro-Japanese minority were in the saddle. The men who had Japanese funds under their control had the advantage over the mass of officials. They succeeded in muzzling the Chinese press. By Japanese insistence, aided in this case by the French minister—some of the Chinese papers had criticized his attitude—news of diplomatic negotiations had been absolutely suppressed. Without information, the public was disturbed and confused. The editor of the Japanese Kokumin, Mr. Tokutomi, in an interview in Peking, advocated still more stringent press control. Japan was using the war to displace the influence of her associates in China and to make her own power predominant.

Bad as the situation was it might have been saved by an adequate loan from America. Liang's first proposal was for a reorganization loan of $200,000,000, which was vetoed by Europe; this shrivelled to the mess of pottage of 10,000,000 yen offered by the Yokohama Specie Bank. General Hsu had unfolded to me in September a comprehensive scheme of equipping 500,000 soldiers, and providing for the immediate transport of at least 500,000 to Europe, further detachments were to go as fast as ships could be had. Later came more specific plans for 1,000,000 men, out of which the best contingents were to be sent to France. It was planned ultimately to send the whole million, if needed. Then came a modified proposal for outfitting 500,000 men and the completion of the industrial plants needed for war materials and ships. The European ministers were all anxious to secure China's active participation; the French Legation, through its military attaché, was coöperating with special energy in planning for the eventual use of Chinese forces. From my conversations with the President, the Premier, and his most active assistant, there was no doubt that the Chinese were in earnest. Now it was all simmering down to a few millions of Japanese money, supplied for politics and internal dissension, with Japan seeking special advantages.

Work was to be done. The United States could still bring relief and a strong call for united action into this troubled situation without giving just cause for complaint or for taking offence. The French were especially desirous of bringing the Chinese actually into the war. The Belgians wished the mobilization of Chinese material resources, particularly foodstuffs. The British were in general accord, though they doubted whether Chinese troops could be soon transported to the theatre of war. Dr. George Morrison who had just gone over the whole situation with the President and cabinet, came to me saying: "The Chinese will apply to you for advice. You have a freer hand than the British minister."

But an event of profound significance was impending, and it interrupted my efforts along these constructive lines. It was at this time that the results of Japan's efforts to reach an agreement with the State Department in Washington became known to China.

PART IV

LAST YEAR OF WAR AND AFTERMATH

CHAPTER XXVI

THE LANSING-ISHII NOTES

It was in rather an indirect way that I learned of the secret negotiations which had been going on between the head of the State Department in Washington and the Japanese Government. Since these negotiations concerned some of the most vital problems in the whole Chinese situation, it was surprising that everyone had been kept in ignorance of them. I learned of them, I confess with mingled emotions, from none other than Baron Hayashi himself. I called on him on the evening of November 4th; and, after going over the matter of routine which I had wished to take up with him, I remained chatting pleasantly with him. In the course of our talk the Baron remarked: "I have just received some information that is quite important, and I want you to know about it. Let me get the cablegram."

He brought a paper and handed it over to me without comment. It was a cablegram from Tokyo that informed him of the signing of the Lansing-Ishii notes, and gave a summary of their text. The first paragraph contained the vital clause: "The Government of the United States recognizes that Japan has special interests in China, particularly in the part to which her possessions are contiguous." This naturally struck me in the face with stunning force, before I had time to weigh its meaning in relation to the remainder of the declaration. I read the dispatch twice and made an effort to impress its salient points on my memory, and then turned to my Japanese colleague attempting to retain my composure.

"Yes," I managed to say, "this is quite interesting. It is somewhat in line with conversations we have had, yet differs in some respects."

I forced myself to remain a little longer and tried to continue the matter-of-fact conversation which this astounding piece of news had interrupted. When I finally took my leave, I was uncertain whether Baron Hayashi did or did not know that I had been unaware of this exchange of notes. Hurrying to the Legation, I dispatched a cablegram to the Department asking that I be informed.

It had been agreed, so the cable from Tokyo had stated, that an announcement of the parley should not be given out until November 7th. But the Japanese minister had already informed the Chinese Foreign Office on Sunday night; and early on Monday its representative called to get my version of the matter.

No word had been sent me. It was inexcusable to fail to give the local representative the earliest possible information, and I intimated as much in my cablegram to the Secretary of State. As the Foreign Office had been fully informed, I could only state to my visitor that I was not authorized to deliver the text until later, and that I was myself still considering the full import of the document, which in certain respects followed lines of policy that had been discussed in the past.

As I could plainly see, the notes had been paraded in the Chinese Foreign Office as yielding important concessions from the United States and as a diplomatic triumph for Japan. I knew nothing of the motives which had animated the President and Secretary of State when they agreed to the paper. I could not explain its purposes; but when my visitor asked: "Does this paper recognize the paramount position of Japan in China?" I could and did answer with an emphatic "No." Beyond that I said nothing.

All that day and the next reports streamed in from many quarters that the Japanese were "crowing over their victory" in their talks with the Chinese. More Chinese officials and many Americans applied at the Legation for authentic word. But no help came from the Department of State. Indeed no word reached me until the morning of the 7th.

It cannot be said that the American secrecy pledge was not punctiliously observed—even to the extent of keeping in ignorance the American minister, who would have to bear the brunt of the consequences of this diplomatic manœuvre. The Japanese, meanwhile, had given the note not only to the Chinese Government several days in advance, but—was it out of abhorrence for secret diplomacy?—even before the notes had been signed their text was communicated to the representatives of Great Britain, Russia, France, and Italy. This was done at Tokyo.

It is not surprising that this procedure produced upon the Chinese the impression that the Japanese had got what they wanted. They thought the declarations made by the United States contained admission of a special position held by Japan in China, not desired by the latter, but forced through by the military and political power of Japan.

The reception given the note by Far Eastern experts and by the public indicated that it would be interpreted in widely varying fashion. The first impression only gradually gave way to a calmer judgment when the specific terms of the notes were carefully read and the ambiguous character of the instrument was realized. In the first place, the Japanese Legation, in translating for the benefit of the Chinese Ministry, had used for "special interest" a Chinese term which implied the idea of "special position." Doctor Tenney's more direct translation of the term was without this extra shade. The Department authorized me to deliver an explanatory note to the effect that the interests referred to were of an economic, not a political, nature. It referred to "Japan's commercial and industrial enterprises in China"; these, it added, "manifestly have, on account of the geographical relation of the two countries, a certain advantage over similar enterprises on the part of citizens or subjects of any other country."

I could not avoid the feeling that the form which the exchange of notes at Washington had taken was unfortunate. It was indeed desirable that the friendly attitude of the United States toward all Japan's economic activities in China should be stated strongly. This had been the tenor of the conversations between successive Japanese ministers and myself, which had been communicated to the State Department. It was necessary, if the Japanese really entertained it, to disabuse them of the conception that the political influence of the United States was being used to discourage close business relationships between China and Japan, and to frown upon Japanese enterprises in China. On the basis of such an understanding, it was hoped that Japan would join with the United States in agreeing that special privileges in any part of China, or any sort of economic advantage, would not be sought by political means; that the Manchurian régime, to be more specific, would not extend to other parts of China.

But the notes definitely stated that Japan would not use her special interests in a way to "discriminate against the trade of other nations, or to disregard the commercial rights heretofore granted by China in the treaties with other powers." This might give rise to the idea that "special interests" did not refer merely to specific economic interests and enterprises. It might include also a certain political influence or preference.

The Japanese minister, though disclaiming a reading which would imply a paramount interest, evidently saw in the notes an endorsement of the principle of spheres of influence. "The notes speak for themselves," he said in an interview on the 8th of November; "they simply again place on record the acknowledged attitude of the United States and Japan toward China. They are simply a restatement of an old position. Even the term 'special interests' is doubtless used in the same sense here as in the past. Several other countries have territory that borders on China; this fact gives them a special interest in these parts of China which they touch. In exactly the same way, Japan has special rights in China."

The non-official Japanese statements claimed much more than this. They did "crow over" the Chinese. Was not here a vindication of distinct priority enjoyed by Japan in China? In Japan the veteran Okuma, who is never backward in airing his opinions in the press, also seemed to have a rather broad idea of the notes. "Hitherto," he said, "America's activities in China were often imprudent and thoughtless. For instance, Secretary Knox's proposal to neutralize the Manchurian Railway was, indeed, a reckless move. The United States also relegated Japan to the background when she sent the note of June 7th to China, advising that country concerning domestic peace. Thus America disregarded Japan's special position in China. We may understand that she will not repeat such follies, in the light of the new convention."

Of course, there is nothing in the notes to interfere with the fullest and freest interchange of communications between the American Government and the Chinese, on any topic whatever.

In reporting his conversation on the notes with the Japanese Minister for Foreign Affairs before they were signed, the Russian ambassador at Tokyo hit it off in this way: "Nevertheless, I gain the impression from the words of the minister that he is conscious of the possibility of misunderstandings, also, in the future; but is of the opinion that in such a case Japan would have at her disposal better means than the United States for carrying into effect her interpretation."

To show how different people were affected, I shall cite from some letters. Dr. George Morrison wrote to a friend from southern China: "Relays of Chinese have thronged to see the American consul, all sounding one note—that they have been betrayed by America. After all her valiant protestations, what earthly good did America gain by making such a concession to Japan, giving recognition to that which every American and Englishman in China had been endeavouring to prevent? Carried to its logical conclusion this agreement gives recognition not only to Japan's 'special interests' in Manchuria, but also to those in Fukien Province which lies in 'geographical proximity' to Formosa. Surely the British will now claim recognition of similar rights in Kwangsi Province. It is all very deplorable."

Another Britisher, Mr. W.H. Donald, took a different view. "When I saw the notes," he wrote, "I was delighted, because I read into them the fact that America had, to use an Americanism, 'put one over' Japan. Ishii went to America to get acquiescence in Japan's predominance in China; to get America to admit Japan's hegemony of the Pacific. He got neither. Instead, he had to reaffirm adherence to the previous undertakings—undertakings which were discarded when Japan put in her twenty-one demands."

The Chinese papers generally pronounced the notes inconsistent. The Chung Hua Hsin Pao saw no need for having the "special interests" of Japan particularly recognized any more than those of other nations, like Great Britain, France, Russia, and the United States, all of which have territory adjacent to China. The paper thought that the assurance that Japan seeks no special rights or privileges, should be taken at its face value when the point of the whole agreement was the recognition of "special interests" enjoyed by Japan. The tenor of the note, therefore, appeared to favour "special interests," consequently the division of China into spheres of influence—contrary to the traditional policy of the United States.

Personally, from my knowledge of the situation in the Far East, I could not see any urgent reason for making this declaration. I learned later that the notes had been drawn up in consultation between the President and the Secretary of State, without other reference to the Department of State and without the knowledge of its staff. Also, the Secretary had acted upon the belief and understanding that the first statement concerning special interests was simply a self-evident axiom, but that its restatement would clarify the situation. Certainly, on the other hand, the positive affirmative pledge against "the acquisition by any government of any special rights or privileges" was clearer and went further than any previous declaration.

To safeguard its rights under any construction that might be given to the document, the Chinese Government declared that it could not recognize any agreement relating to China entered into between other powers.

I have said that I could not see the need of these notes. Failing to receive instructions which I sought from the Department of State, I continued to take the position that the policy of the American Government remained unchanged with respect to the existence of a special position or special privileges on the part of any other power in China. But the immediate effect of the notes on the Chinese Government was to make its high officials feel that nothing very positive could be expected from the United States by way of assistance out of the nation's difficulties.

The general and continuing effect of the notes was seen in the behaviour of the Japanese in China. The Japanese papers boldly declared that Japan would interpret the term "special interests" in a way to suit herself, and that it implied the supremacy of Japanese political influence in China. The thrusting forward of this View did not strengthen the government of General Tuan. Several more provinces followed those which had declared their independence with acts that made their allegiance at least doubtful. General Tuan's appointee as military governor of Hunan suffered defeat at the hands of the southern troops. The governors of the Yangtse Valley, under the leadership of General Li Shun, addressed to the Government pointed inquiries about financial dealings with the Japanese and the purchase of arms, which was reported to involve an arms alliance.

As the attacks were directed at him personally, General Tuan felt that he must resign. Notwithstanding an outward show of amity, General Feng Kuo-chang and the Premier had actually not agreed. The Premier wished to make war on the south and conquer it. The Acting President, on the other hand, was in constant correspondence with southern leaders in an attempt to bring about reconciliation. Tuan sent in his resignation. The Japanese worked for his retention. The President did ask him to reconsider, but his resignation finally took effect on the 20th of November. General Wang Shih-chen, who was close to the President as chief of staff, became acting premier. But Tsao Ju-lin, who headed the Japanese clique, was retained.

Peace and unity did not result. The northern Tuchuns gathered at Tientsin on December 4th, and decided to push the war against the south with 200,000 men. This was to be made a pretext for getting more funds.

I kept in touch with General Tuan, in whose personal character and honesty of purpose in wishing China to take part in the war I placed reliance. Also his friend, Mr. Chu Ying-kuang, who had made a fine record as civilian governor of Chekiang, had kept his eye mainly on this goal. Through them I kept in touch with all of the Chinese who fostered such action. If the Chinese of their own initiative should create services for supplying urgent needs of the Allies, and should train a model division for use on the battlefields of Europe, I felt that the United States and her associates would find a way to transport them to Europe. General Tuan was now free of politics. In the conversations I had with the Premier and his associates, the idea of a special organization for preparedness was talked over. The upshot of this was the creation of a War Participation Office, with General Tuan as its president. The Office was to make constructive plans for developing resources useful in the war, and for training troops for Europe.

Meanwhile, the Japanese were "cutting loose" in Shantung. Quite openly they were trying to set up an administration in what they called the railway zone. The agreements between China and Germany contained no provision for such a zone. The Germans merely had the railway itself, and certain specific mining enterprises, together with the port of Tsingtao. A general priority in the mining districts within a zone of ten miles along each side of the railway had been abandoned some time previous to the war. Now the Japanese asserted in this "zone" general administrative power, including policing, taxation, forestry, and education. With this encroachment, the Chinese noted evidences of Japanese toleration of revolutionary and bandit activities wherever they served the purposes of the invaders.

People came frequently from Shantung to see me in order to lay before me their complaints and petitions. They were distressed, but I could not help them, save where American rights were involved. The Shantung men reported that the Japanese were making the Lansing-Ishii notes the basis of their propaganda, stating that Japan's special position had now been recognized. This penetration into the interior of one of the provinces of China proper by a foreign political administration was undoubtedly the most serious attack ever made on Chinese sovereignty.

A member of the Chinese Foreign Office called on me on the 21st of December, and spoke earnestly about the Japanese inroads in Shantung. He said nothing could stop the Japanese. Their minister had stated that it would be difficult to change an ordinance signed by the Premier and sanctioned by the Emperor.

Among both Chinese officials and the general public all was discouragement and depression. The first effect of the Lansing-Ishii notes, the strong influence exercised by the pro-Japanese clique in the government because of the financial backing they got, the knowledge that such backing had to be bought with valuable national concessions, the increasing disunion between north and south, the general despair of any constructive and unifying policy being possible, made the Chinese individually and collectively paralysed with doubt, fear, and a feeling of impotence. It was plain that Japanese influences, making a politico-commercial campaign in China, were everywhere actively taking advantage of this demoralized state of the public mind and intensifying it through their manipulations.

CHAPTER XXVII

AMIDST TROUBLES PEKING REJOICES

The Armistice meant the end of the Great War. Would it also mean the end of sinister intrigue in China?

In the joy of the world victory everybody felt so. But when I returned to Peking early in October, 1918, I found that things had gone from bad to worse. Money had been squandered on war expeditions which had torn the country, not united it. The unofficial Japanese financial agent, Mr. Nishihara, a borer in the rotten trunk of Chinese finance, had been at work all summer. The fact of his loan negotiations was denied to the very last by the Japanese Legation. Suddenly, on October 1st, Japan's Minister of Finance announced that his government had arranged a number of loans to the Chinese. They involved commitments in the sum of 320,000,000 yen, ostensibly to build railways and iron works; of this amount 40,000,000 yen would be immediately advanced.

The earlier loans had all gone to the inept militarists. The advances on these so-called industrial loans were in the same way dissipated in partisanship, division, distraction. The new parliament had been elected. It was to elect a new president. Money was poured into the contest between Feng, the Acting President, and Hsu Shih-chang. General Tuan had his army of small political adherents, who battened on the funds supplied by the chief manipulators. They formed the Anfu Club—from Anhui, the province of the army clique, and Fukien, the province whence the navy drew most of its admirals.

The inner military ring was operating from the War Participation Bureau, which had preëmpted the control of finance, natural resources, and police. The ministries were powerless. The Government was debauched with the easy money from Japan. With a sardonic grin, the Japanese offered to lend China 200,000,000 paper yen, not redeemable, on which the Chinese Government should base a gold-note issue. On this paper of the Bank of Korea China should repay Japan, with interest annually.

Using the militarists, they tried hard to put it through. But the foreign press, and such Chinese papers as dared, succeeded in laughing it down. Redeemable in Korean or Japanese banknotes, which the Chinese never use in daily trade, the proposed government gold notes could not have been forced into circulation. They would only have worse confounded the already existing monetary confusion.

The police terrorized and bullied the papers that opposed Japan's loan negotiations and printed the facts about them. Nearly a dozen were suppressed. The Anfu gang had cowed the Government and people in north China. Without moral and legal authority, it made the Government impotent in its prime functions, such as levying taxes and protecting lives.

The diplomatic corps had to consider whether the customs and salt revenues should be released to such a government. The best interests not only of China, but of all the friendly nations, including Japan herself, were being blighted. The prostitution of the War Participation Bureau by the gold-lust of the militarists, with Japan as pander, fostered the brawls of faction and disunion. Public opinion was throttled and the corrupt elements found no organized popular opposition.

Tsao Ju-lin, Minister of Finance, advocated the spurious gold-note project, which had been dubbed the "gold-brick scheme." Tsao had represented that the diplomatic corps had approved this scheme. Four ministers jointly informed the Chinese Government that Mr. Tsao's methods tended to destroy confidence between the Government and the legations, and one minister said his legation would thenceforward accept no statement coming from the Minister of Finance until the Foreign Office had vouched for its truth.

The Finance Minister unblushingly tried to suspend the renewal of the currency loan option until the foreign banks should consent to the gold-note scheme. Here I protested, saying that under the Currency Loan Agreement the American Government had a right to be consulted before any such proposals could be considered.

His Excellency Hsu Shih-chang was elected President—a veteran statesman of the old régime. In my first interview with him he complained: "I am trying to deal with the south; but they have nobody to bind them together and represent them. We are demobilizing most of our superfluous troops, but I am worried because the Government lacks financial support."

I talked with him again often. General Li Shun, of Nanking, had been asked to mediate. The southern leaders needed to be "grubstaked" to pay off their troops, then an agreement with them could be reached. The President's solution smacked of buying them off. But this would not end the militarist intriguing. President Hsu issued on October 25th a peace mandate, taking President Wilson's statement about reconstituting international unity as his point of departure. The President had cabled this to Hsu when he was inaugurated. The press was reporting that the British and American ministers were working for internal peace; our mediation would have been popular. It would have pulled the leaders of north and south out of their impasse. President Hsu cabled back to Mr. Wilson: "Though we are separated by a great distance, yet I feel your influence as if we were face to face."

President Hsu had gotten a report from Dr. George E. Morrison, who had returned from investigations in south China. Doctor Morrison made the point that internal strife must be ended if China was to do anything in the Great War and to hold up her rights strongly at the Peace Conference. I will quote this report somewhat at length:

China under the advice of several of her more powerful ministers looks to Japan for guidance, Japan having in an incredibly short space of time, by the energy and patriotism of her united people and the wisdom of her rulers, raised herself to an important position among the nations. But Japan is no longer one of the great world powers. Japan lacks experience of modern war. Her army and navy are much out of date. Her troops have no experience of the marvellous methods of modern war. She has no submarine service, she has no air service. Her government, created after the model of Germany, her kaiserism, her Prussian militarism, are fast becoming obsolete. Compared with the great powers of Great Britain, America, France, and Italy, the strength of Japan is meagre. Japan at the end of the European war is a third-rate power. Her government is the only military autocracy existing in the world to-day, and for that reason Japan will occupy a unique position at any peace conference. Japan is the only one of the Allied nations who has failed to take any adequate part in the great world struggle.

For China, a republic, to seek the guidance of the only existing autocratic military government in the world to-day has at least the appearance of inconsistency. Such action is viewed with suspicion by all those in China who are aspiring to a democratic government—a government by the people for the people.

If intervention is to be prevented, there must be early restoration of democratic government, early reconciliation. As the simplest and quickest way in which this can be effected, I suggest that your Excellency invite the President of the United States to act as mediator, to bring together representatives of the two great parties of state in China that they may hear and weigh each other's view and agree to a compromise. There is no loss of face in doing this.

During my recent visit to the south I gave expression to Chinese views to all the leading men with whom I had the opportunity of discussing the question of peace and reconciliation in China. All without exception expressed their belief and confidence that an invitation to the President of the United States to act as mediator would be a wise act and one that promised the easiest solution of the grave conflict which at present divides into hostile camps this fair land of China.

Japan persisted in her work, the United States remained indifferent.

The people of China got tired of all this. As a matter of fact, China was divided only on the surface. Deep down into the life of the people political controversies had not penetrated. They went on, placid and industrious, regardless of the bickerings of politicians. Chinese revolutions and declarations of independence might be bruited to the world, which might think China had plunged into anarchy. As a people the Chinese are freer from governmental interference than any nation living. If the entire Central Government should suddenly disappear from the face of the earth, it would make little difference in China. Yet the long continuance of political conflicts lets foreign intrigue into the national quarrels, and so reacts dangerously.

The people as a whole wished the nation to be a unit. But the professional militarists had to be paid off. After the President had issued his peace mandate, he asked that I see him. "If decisive action for peace is taken," he asked, "may we depend on the United States to back us in getting funds to pay off these large bodies of troops? If not, will she not lead in a reorganization loan joined by several powers?"

I asked the American Government for the funds desired. If they came conditionally upon the reunion of China, the responsible military governors and civilian leaders north and south would have the means to be rid of the predatory and parasitic bands. Japan then roused herself. She approached the governments of the United States, France, Great Britain, and Italy on October 23rd, asking that they work toward a peace settlement with the leaders both north and south. The American Government approved, adding that China needed money, but that no funds would be afforded her until a reunited government was seated.

Meanwhile, the temper of the Chinese people was sounded in a gratifying way. John Mott asked the Y.M.C.A. in China to raise $100,000 for the War Works Drive. I sat at dinner one evening with Liang Shih-yi and Chow Tsu-chi, and said: "A drive is going on in the United States to aid all the war works undertaken for the benefit of the soldiers at the front. Do you suppose that some of our friends in China would wish to contribute?" They both replied: "Yes, we are sure they would."

Two days elapsed. Chow Tsu-chi called, told me they had formed a National War Works Committee, and that local committees were being formed in every provincial capital. They raised, not $100,000, but more than $1,000,000!

It was the more remarkable because this way of contributing to a public purpose had never been tried in China. Only the Shun Tien Shih Pao of Peking, Japanese-controlled, threw cold water on the movement, saying that to be sending money to Europe while so many provinces in China themselves needed aid was peculiar.

The representatives of the Associated Powers met on October 18th. They felt that participation in the war had not united China; a clique had perverted it to factional uses. Each representative, it was agreed, should present instances in which the Central Government or local officials had obstructed action or been remiss. At the next meeting, on the 28th, I had prepared a memorandum of instances; this was made the basis of a statement. A conference was to be held with the President of China, to be quite friendly, but to make manifest the grave shortcomings due to political vices. Thus, it was thought, the responsible and conscientious elements in the Government would be fortified against the clique that had invaded it. The Foreign Minister, however, asked that the conference be deferred, in order that the Government might strive to bring its action more completely into accord with its real desire. There was no threat in our suggestion. But publicists often overlooked its true object, and treated it as if it had been a condemnation of China rather than of the controlling clique in the Government.

Joy and cheerfulness greeted the news of the Armistice. The American Legation Band was the first to celebrate, with a detachment of marines it paraded the legation compounds; only the Japanese Legation sentinel failed to salute it; he had failed to gather its purport. At Sir John Jordan's personal invitation I joined the British Legation's impromptu festivities that night, with some members of my staff. Responding to Sir John's remarks of welcome, I spoke of the trinity of democratic peoples, the British, French, and Americans, as destined to lead the world to a fuller understanding of free institutions and popular rights.

In the continuous round of festivities and celebrations the foreign and Chinese communities joined whole-heartedly, with dinners, receptions, special meetings of societies, and finally a great national celebration on the 28th of November. We gave a reception on the 20th to the ministers of the Associated Powers. As each minister arrived, the national air of his country was played by the Marine Band. When the Russian minister came in, the band, without special instructions, played the old Russian Imperial hymn. Prince Koudacheff was moved, for this anthem was now outlawed in his country; he came to me in tears. Next day he showed me a song with music which he had suggested for adoption by the Siberian Government as the Russian national hymn. But at the solemn service held on the Sunday following, when the national airs of the different countries were played, when the turn came for the Russian hymn a pause was noted. Those conducting the service had ruled out the old Imperial hymn. As there was apparently no music available as a substitute, poor Russia had to go unsaluted.

From early in the morning of the national celebration, Chinese troops marched toward the Imperial City, where they lined the spacious interior courts. The legation guards followed. Multitudes of Europeans and Chinese flocked to the palace, where the diplomats were gathered, all but myself resplendent in gorgeous uniforms. The neutral ministers, too, were in attendance. The European adviser had found a precedent among peace celebrations in Europe, such as that after the Danish War and the Franco-Prussian War, in accordance with which the neutral ministers might attend, though peace was not fully concluded. Also, it was argued that the Chinese were celebrating the cessation of hostilities, and the participation of friendly representatives might be invited.

Whispered controversy was heard among the ministers. The representative of France, seeing senior neutral representatives ahead of him, said this occasion was different, and demanded that the rank of precedence be changed. Time was too short for so thorny a problem. We agreed to say nothing at all, but to walk in a group forming itself spontaneously.

We gathered in the pavilion of the Ta Ho-men, the gate which leads into the court immediately before the main Coronation Hall of the Imperial City. Here, in the very inner sanctuary of the thousand-year-old imperialism of China, the victory of freedom was celebrated. The square was massed with troops, Chinese and foreign. On the ascending terraces stood thousands of guests, the military and officials in uniform; over the balustrades waved forests of flags of the Associated Nations, as well as long floating banners with Chinese inscriptions in gold.

After the President had ascended the steps to the music of bands of the nations, bowed to all the flags, and made his address, aeroplanes appeared, dropping innumerable Chinese flags and messages of felicitation printed in gold on red; then they continued to circle above the Imperial City. While the military were marching to the gate, rockets were sent skyward; exploding, they released paper figures of animals, as well as soldiers and weapons of war, which floated a long time in the air. When the President left the Tung Hua Palace, where he had received thousands of guests, the aeroplanes preceded him on his ride to his own residence.

We celebrated Thanksgiving that afternoon in American fashion with a religious service, the American colony and many British and other Allied residents attending, as well as the ministers of the Associated Powers with their staffs. Premier Chien Neng-hsun dined the diplomatic corps and welcomed President Wilson's proposal for a league of nations. President Hsu invited us on November 30th, and then the French minister, who still was troubled with the question of the non-belligerents, objected to the neutral ministers being there at all. If they went, he said, he would not go. The British minister and I devised, as we thought, a way out. Would the neutral ministers view the Allied ministers as guests of honour on this occasion? The secretary to the Foreign Minister was chosen to ask them. Unfortunately, the neutrals took it as a demand rather than an inquiry. Then the fat was in the fire—the neutral ministers would not attend the dinner. This was the one discordant note in our celebrations.

In order to enable the Central Government to get along at all, the diplomatic corps agreed to the release of surplus salt revenues to the extent of $5,300,000. President Hsu on the 16th of November ordered immediate cessation of hostilities in the Chinese interior. The northern leaders were still war-like, but accepted his decision. The British, French, American, Japanese, and Italian representatives and myself met on the 22nd to uphold President Hsu's attitude. We took up the Japanese proposals, deciding that identical representations be made at Peking and Canton. My colleagues asked me to draft an aide mémoire which was to accompany the oral representations. Japan objected to including in it the American suggestion that no financial advances would be made now but that a reunited China would get support from the powers. The Japanese banks had bound themselves to make further payments to China, it was said. The aide mémoire deplored disunion, disavowed wishing to intervene, and hoped that, "while refraining from taking any steps which might obstruct peace, both parties would seek without delay, by frank confidence, the means of obtaining reconciliation." In the clause about obstructing peace I had in mind such acts as the election of a northern militarist as Vice-President. This, though in itself a peaceful act, would have raised an insurmountable obstacle to peace.

Five powers were represented in an audience before the President on December 2nd, the British minister speaking. The northern military leaders had held a conference at Tientsin. If, as reported, they wished to demand that Tuan be reinstalled as Premier, and that Tsao Kun, Military Governor of Chihli, be elected Vice-President, it would have embittered the south. The public therefore welcomed the representations of the powers. The American reference to loans was omitted; nevertheless, the situation produced made it no longer possible for any one country to lend money to either faction without putting itself in an equivocal position.

The Japanese felt moved on the 3rd of December to publish a statement about Chinese finance. Japan could not discourage financial and economic enterprises of its nationals in China, the statement read, "so long as these enterprises are the natural and legitimate outgrowth of special relations between the two neighbouring and friendly nations. At the same time they fully realize that under the existing conditions of domestic strife in China loans are liable to create misunderstandings and to interfere with peace in China. Accordingly, the Japanese Government has decided to withhold such financial assistance to China as is likely in their opinion to add to the complications of her internal situation."

This declaration left great latitude in the making of loans, yet it did, in fact, acknowledge the appropriateness of the American position. I asked Baron Hayashi about it. What exceptions would be made? The Baron was not very definite but said bona fide industrial loans were meant. "Most decidedly," he added in reply to my continued questioning, "I favour the strictest scrutiny of each loan, and mutual information among the governments about such transactions." He gave me plainly to understand that he did not approve, and had opposed, certain deals attempted by his countrymen in the semi-official group. I gathered his thorough disapproval of direct interference by the military in international affairs; but the military were in power in Japan, and its diplomats were helpless.

In accordance with its main suggestion, the American Government followed with a memorandum about financing China, sent to Great Britain, France, and Japan. It had already proposed a new consortium, including virtually all parties interested in each national group. The Currency Reform Loan should come first, with the shares of the British and French groups carried by the Americans and Japanese so long as the former could not furnish funds. Industrial as well as administrative loans should be included, and thus removed from the sphere of destructive competition.

The danger that industrial loans might be converted to political ends was patent. Yet in my recommendations I felt it difficult to avoid evils of monopoly, unless independent enterprises involving loans should be admitted.

The British and French banking representatives plainly wished to have America lead in the international financial reorganization of China. Japan, as its minister often said, desired the United States to reënter the Consortium—but he meant the old Consortium, in which Japan had the leadership. Japan did not readily take to the idea of the new Consortium. It declared that it favoured the proposal "on principle," but found it necessary to weigh every detail with considerable minuteness. This caused great delay.

CHAPTER XXVIII

A NEW WORLD WAR COMING?

The old World War ended with the Armistice. Was a new one looming?

If one came it would break in China—of that we were convinced. Unless it settled China's problems the Peace Conference would fall disastrously short of safeguarding the world against a renewal of its titanic conflict. In China the powers were rivals, each with its jealously guarded sphere of influence. In the extravagant language of fancy, Ku Hung-ming thus pictured to me the situation: "China's political ship, built in the eclipse and rigged with curses black, has been boarded by the pirates of the world. In their dark rivalries they may scuttle it and all sink together, but not until they have first plundered and burned civilization as we know it."

Should any action be taken which might be interpreted as a recognition of a special position for Japan in China, whether in the form of a so-called Monroe Doctrine or a "regional understanding" or in any other way, forces would be set in motion that in a generation would be beyond controlling. In comparison with this tremendous issue, even the complex re-alignments of Central Europe fell into relative unimportance. The same fatal result was sure to follow any further accentuation of spheres of influence.

We in China realized this, and in deadly earnest we worked out a plan of joint preventive action by the powers, which would unite them instead of leaving them in fatal rivalry. The root of all evil is in the love of money. It was local financing by single exploiting powers in spheres protected by political influence that was the evil. If, instead, the finance of the world could be made to back a united China, there would be a great constructive development, from which all would benefit far in excess of selfish profits garnered in a corner. We planned a system of joint international finance. That, despite its drawbacks, would destroy the localization of foreign political influence. The plan in its relations to the Chinese Government was worked out with everyone that we could reach competent to give advice. There were the official and business representatives of Great Britain and France; the Chinese cabinet ministers and other officials, and all of the American representatives, including the commercial attachés Julean Arnold and P.P. Whitham, and the American advisers, Dr. W.W. Willoughby, Dr. W.C. Dennis, and Mr. J.E. Baker of the Department of Railways. Day and night the conferences went on informally; by day and night these matters were threshed out. Japanese experts, too, were consulted.

The time seemed propitious. The Armistice brought the hope that the powers would coöperate. The separatist political aims in China might be overcome, together with the sinister intrigue for dismembering or dominating that mighty nation of freemen. Could foreign financial action and influence in China be gathered up into a unit? Could it be made to build for the whole of China, not tear it down in its several parts? At all events, we hammered out a plan to make this possible.

Foreigners had gone deeply into railway loans, making their chief investments there. Hence we made the plan of unified financial support apply, first of all, to the railway service. The operating of the different Chinese lines according to the respective national loans was a curse; it was evil politics, and it broke down the railway service. Foreign experts, acting as servants of the Chinese Government, might unify the Chinese railroads, though of this Liang Shih-yi, Chow Tsu-chi, and Yeh Kung-cho—who knew most about Chinese railway affairs—had their doubts. It would pile up the overhead expenses, they thought. The railways could be managed thriftily only by the Chinese. The foreign banking interests, too, might try to be depositories for the railway funds, as they were already for the customs and salt revenues. Thus Chinese capital would pay tribute to foreign capital. If still other revenues were thus absorbed, as might be feared, national economy would be fettered too much.

Therefore they proposed a Chinese banking group. It would help in the financing and could be made the depository of funds.

These men sympathized, however, with the main purpose of the suggested arrangement for unification. Foreign expertship on the railways, also, was highly valued by Chinese railwaymen trained in the West. True, Mr. Sidney Mayers somewhat frightened them by his proposals. This British industrial representative of long experience in China proposed internationalizing each separate line by putting on it an international group of experts. The Chinese objected; it would mean giving all the important positions to a large staff of foreign officials. Of this they had had enough in the Customs.

It was necessary to dissociate banking from building; such a union would mean monopoly and fierce attacks upon it by all outside interests. With the financing separate, the contracting might be left free to all competitors, bidding low and resting their bids upon their repute and responsibility.

So long as it remained possible for different countries to acquire special privileges in distinct spheres, promises of "integrity and sovereignty" would be nothing but empty words. No matter how much they might promise that they would not discriminate against the trade of other nations, the fact remains that established position in itself constitutes preference.

The favoured nations might more honestly say: "Give us our special position and we will give you all the equal opportunity you ask."

Foreign influence could safely be wielded only as a trusteeship for China and the world, without any vested political interests or economic advantages secured through political pressure. But Chinese administration was lax. I urged the Chinese officials to set their house in order, to put their public accounting on an efficient plane; even if necessary to employ foreign experts to do this. They said: "Yes, if the United States will lead," for a long record of square dealing had endeared our business men to the Chinese.

But Americans had been slow in China. Two years had fled, and the Grand Canal was not yet restored as promised. The half million dollars advanced had been spent on preliminary surveys. Silver had risen; American gold bought only one half what it had before. Overhead expense was high, and for the preliminary work more than the half-million was needed. The Chinese were disappointed, grief-stricken; they began to be suspicious.

The Japanese-controlled papers redoubled their attacks on Americans. Pretty soon a Japanese journal at Tsinanfu assaulted the name and character of President Wilson. I had an understanding with my Japanese colleague that all press misstatement should be corrected. I saw him about this attack on the head of a friendly nation. He promised to look into it. After ten days I wrote inquiring again. Under the press laws of Japan, he responded, a paper could indeed be punished for libellous attack upon the head of a foreign state, provided that such head happened to be in Japan at the time. As this paper was notoriously under the domination of the Japanese authorities, amenable to their very breath and whisper, I failed to see how the minister should find it hard to bring it to book. I merely called for a retraction where the Japanese, if a Chinese-owned paper so scurrilously had attacked the Japanese Emperor, would have asked for total suppression. The Japanese minister said he would "further consider the matter" and would see what he could do. A mild apology and retraction were eventually published.

The action of the Japanese in China, official and unofficial, during the war, had aroused the deepest resentment among the Chinese, who were on the verge of despair. The Chinese people were being whirled in the vortex of old and new. The old organization was beginning to crumble; the new had not yet taken shape. It was easy to find spots of weakness and corruption, aggravation of which would bring about an actual demoralization of social and political life and the obstruction of every improvement; bandits could be furnished with arms; weak persons craving a stimulant could be drugged with morphia; the credit of native institutions could be ruined; and the most corrupt elements in the government encouraged. For the original weaknesses and evils the outside influence was not responsible, but it was culpable for making them its instruments for the achievement of its aims of political dominion.

A vast system whose object was the drugging of China with morphia, which utilized the petty Japanese hucksters and traders throughout the country, was exposed in the "opium blacklist" published by the British papers in China. Specific proof was adduced in each case. Often the blacklist extended over two pages of a paper. Obviously these Japanese druggists, photographers, and the whole outfit of small-fry traders could not traffic in morphia without the connivance of the Japanese Government and the support of semi-official Japanese interests. The Japanese post offices were used for its distribution in China. Chinese police interference with the thousands of Japanese purveyors was ruled out under the exterritoriality agreements. In Korea, the Japanese opium grown officially for "medicinal uses" was produced far in excess of medicinal needs, and through the ports of Dairen and Tsingtao large quantities of morphia came into China.

The Japanese-controlled press at first answered the blacklist with charges of tu quoque; but when they defamed the American missionary hospitals, alleging that they were centres for distributing narcotic drugs, nobody among the Chinese paid further attention to them. The blacklists mapped graphically the thickly sown morphia "joints" around the police station of the Japanese settlement at Tientsin and the responsibility was brought home to Japan. An official Japanese announcement was evoked that no effort would be spared to stop the "regrettable, secret, illicit traffic."

In Shantung Japanese civil administration had been set up along the railway without a scintilla of right. It was later withdrawn for new concessions and privileges wrung from the Peking Government. The Japanese were old masters of this trick. Seize something which you do not really want, and restore it to its owner if he will give you something you do want. Then what you want you get, but it is not "stolen," and can be kept with smug immunity. The arrangements in Shantung were made secretly, riding roughshod over Chinese rights, and intended to sterilize in advance the enactments of the Peace Conference. If a foreign power should wish to own the Pennsylvania Railway system, and should actually come into the United States and occupy it, the parallel would be exact with what Japan did in Shantung. After taking the Shantung Railway and holding it, the Japanese stoutly claimed an "economic right" to it. The whole course of Japan in China during the Great War alarmed both Chinese and foreigners. I may not name the responsible and fair-minded writer of a letter from which I quote:

It would be in the highest degree unfortunate if the present fortuitous and temporary possession of the Leased Territory and Shantung Railway by Japan should be confirmed by the final Treaty of Peace, for not only would China's sovereignty in Shantung be in danger of impairment, but the trading rights of Chinese, Americans, and Europeans would undoubtedly be prejudiced.

Another consideration that has the greatest weight with the writer is that the principles for which the United States entered the European War and on behalf of which the United States, in common with the whole world, has paid an unthinkable price in gold and blood, make unbearable a continuance, not to say accentuation, of the old system of foreign intrigue in China. It is unbearable that one result of the victory bought in part with American lives should be the extension of Japanese power in China, when such extension means the further strengthening of the domination of a monarchical and imperialistic foreign nation over China, a result constituting in its own sphere a complete negation of the objects for which the United States devoted its entire resources in the war against Germany.

Dr. Sun Yat Sen wrote me at Shanghai on the 19th of November, referring both to internal and external troubles, and the union of militarists, foreign and Chinese:

Through you alone will the President and the people of the United States see the true state of affairs in China. Your responsibility is indeed great. Whether Democracy or Militarism triumphs in China largely depends upon Your Excellency's moral support of our helpless people at this stage.

These words show the Chinese belief in the sheer force of public opinion, and their wish that the Chinese situation be known and understood abroad. This achieved, the evils under which China groans and travails would shrivel.

We built up our solution of unity for China. In carefully weighed dispatches I sent it to the American Government, and cabled the President a statement of China's vital relation to future peace. I was constrained to condemn Japan's policy, quite deliberately, summing up the evidence accumulated in the course of five years. I had come to the Far East admiring the Japanese, friendly to them—my published writings show this abundantly. I did not lose my earnest goodwill toward the Japanese people but I could not shut my eyes to Japanese imperialist politics with its unconscionably ruthless and underhanded actions and its fundamental lack of every idea of fair play. The continuance of such methods could only bring disaster; their abandonment is a condition of peace and real welfare. The aims and methods of Japan's military policy in the Continent of Asia can bring good to no one, least of all to the Japanese people, notwithstanding any temporary gains. Such ambitions cannot permanently succeed.

A cure can come only when such evils are clearly recognized. Lip-service to political liberalism might mislead the casually regardful outside world. To those face to face with what Japanese militarism was doing to continental Asia there was left no doubt of its sinister quality. Japan herself needs to be delivered from it, for it has used the Japanese people, their art and their civilization, for its own evil ends. More than that, it threatens the peace of the world. If talk of "a better understanding" presupposes the continuance of such aims and motives as have actuated Japanese political plot during the past few years, it is futile. What is needed is a change of heart.

Here is the substance of the memorandum upon which my cablegram to the President was based:

In 1915, coercion was applied and China was forced by threats to solidify and extend the privileged position of Japan in Manchuria and Mongolia and to agree prospectively to a like régime in Shantung together with the beginnings of a special position in Fukien Province. After this there was a change of methods although the policy tended to the same end—domination over China.

Instead of coercion, Japan applied secret and corrupt influence through alliance with purchasable officials kept in office by Japanese support. The latter insidious policy is more dangerous because it gave the appearance that rights are duly acquired through grant of the Chinese Government; no demands or ultimatums are necessary because corrupt officials strongly supported by Japanese finance, acting absolutely in secret channels, suppressing all public discussion with the strong arm of the police, are able to deliver contractual rights regular in form, though of corrupt secret origin and evil tendency.

Japan has used every possible means to demoralize China by creating and sustaining trouble; by supporting and financing the most objectionable elements, particularly a group of corrupt and vicious military governors akin to bandits in their methods; by employing instigators of trouble; by protection given to bandits; by the introduction of morphia and opium; by the corruption of officials through loans, bribes, and threats; by the wrecking of native banks and the debauching of local currency; by illegal export of the copper currency of the people; by local attempts to break down the salt administration; by persistent efforts to prevent China from going into the war and then seeing to it that China was never in a position to render to the common cause such aid as would be in her power and as she would willingly render if left to herself: finally, by utilizing the war and the preoccupation of the Allies for enmeshing China in the terms of a secret military alliance.

As a result of these methods and manipulations, Japan has gained the following advantages: a consolidation of her special position in Manchuria and eastern Mongolia, and the foundation of the same in Shantung and Fukien; control in the matter of Chinese finance through the control of the Bank of Communications and the Bureau of Public Printing and the appointment of a high financial adviser together with the adoption of the unsound gold-note scheme happily not yet put in force. She has secured extensive railway concessions in Manchuria, Shantung, Chihli, and Kiangsu; mining rights in various provinces; and special monopolistic rights through the Kirin forestry loan, the telephone loan, and others. Through the secret military convention Japan attempts not only to control the military policy of China but incidentally national resources such as iron deposits. All these arrangements are so secretly made that in most cases not even the Foreign Office is in possession of the documents relating thereto. Together with this goes the persistent assertion of special interests which are interpreted as giving a position of predominance.

This is a strong indictment and I feel the fullest responsibility in making these statements. Fundamentally friendly to the Japanese as my published expressions show, I have been forced through the experience of five years to the conclusion that the methods applied by the Japanese military masters can lead only to evil and destruction and also that they will not be stopped by any consideration of fairness and justice but only by the definite knowledge that such action will not be tolerated.

As a steady stream of information from every American official in China and from every other source as well as my own experience have made this conclusion inevitable, I owe the duty to state it to the American Government in no uncertain terms. Nor is this said in any spirit of bitterness against the Japanese people but from the conviction that the policy pursued by their military masters can in the end bring only misery and woe to them and the world. During all this period it has not been possible for the European powers or the United States to do anything for China. The United States, though assisting all other Allies financially, could not contribute one dollar toward maintaining the financial independence of China as undivided attention was needed to the requirements of the west front. The Lansing-Ishii notes, undoubtedly intended to express a friendly attitude toward any legitimate aspirations of Japan while safeguarding the rights of China, were perverted by the Japanese into an acknowledgment of their privileged position in China. Now at last, when the pressure has been released, America as well as the European countries must face the issue which has been created, that is, whether a vast, peaceable, and industrious population whose most articulate desire is to be allowed to develop their own life in the direction of free and just government, shall become material to be moulded by the secret plottings of a foreign military despotism into an instrument of its power. If it is said that the aims of Japan are now but economic and in just response to the needs of Japan's expanding population, it must be remembered that every advantage is gained and maintained by political and military pressure and that it is exploited by the same means in a fashion, taking no account of the rights of other foreign nations or of the Chinese themselves. Divested of their political character and military aims the economic activities of Japan would arouse no opposition.

Only the refusal to accept the results of Japanese secret manipulation in China during the last four years, particularly, the establishment of Japanese political influence and a special privilege position in Shantung can avert the result of either making China a dependence of a reckless and boundlessly ambitious military caste which would destroy the peace of the entire world, or bringing on a military struggle inevitable from the establishment of rival spheres of interest and local privilege in China.

Peace is conditioned on the abolition for the present and future of all localized privileges. China must be freed from all foreign political influence exercised within her borders, railways controlled by foreign governments, and preferential arrangements supported by political power. If this is done, China will readily master her own trouble, particularly if the military bandits hitherto upheld by Japan shall no longer have the countenance of any foreign power.

The advantages enumerated above were gained by Japan when she was professedly acting as the trustee of the Associated Powers in the Far East, and they could not have been obtained at all but for the sacrifices made by them in Europe. They are therefore not the exclusive concern of any one power. With respect to Shantung the German rights there lapsed, together with all Chino-German treaties, upon the declaration of war. A succession of treaty rights from Germany to Japan is therefore not possible, and the recognition of a special position of Japan in Shantung could only proceed from a new act to which conceivably some weak Chinese officials might be induced but which would be contrary to the frequently declared aims of international policy in China and which would amount to the definitive establishment of exclusive spheres of influence in China leading in turn to the more vigorous development of such exclusive spheres by other nations. The present situation of affairs offers the last opportunity by common consent to avert threatening disaster by removing the root of conflict in China.

Never before has an opportunity for leadership toward the welfare of humanity presented itself equal to that which invites America in China at the present time. The Chinese people ask for no better fate than to be allowed freedom to follow in the footsteps of America; every device of intrigue and corruption as well as coercion is being employed to force them in a different direction, including constant misrepresentation of American policies and aims which, however, has not as yet prejudiced the Chinese. Nor is it necessary for America to exercise any political influence. If it were only known that America in concert with the liberal powers would not tolerate the enslavement of China either by foreign or native militarists the natural propensity of the Chinese to follow liberal inclinations would guide this vast country toward free government and propitious development of peaceful industrial activities, even through difficulties unavoidable in the transition of so vast and ancient a society to new methods of action.

But if China should be disappointed in her confidence at the present time the consequences of such disillusionment on her moral and political development would be disastrous, and we instead of looking across the Pacific toward a peaceable, industrial nation, sympathetic with our ideals, would be confronted with a vast materialistic military organization under ruthless control.

CHAPTER XXIX

JAPAN SHOWS HER TEETH

Mr. Obata had succeeded Baron Hayashi as Japanese minister in December. He was a dour, silent man who had been much in China, as consular officer and in the Legation. He had sat with Mr. Hioki in the conferences in which the twenty-one demands were pressed on China. He was known to be a very direct representative, in the diplomatic service, of the militarist masters of Japan. His appointment was to the Chinese ominous of a continuance of aggressive tactics. A wail of indignation went up from the Chinese press, but Mr. Obata remained. In my personal relations with this secretive man I thought I saw gradually emerging a broader and more humane outlook.

The new Japanese minister called on the 2nd of February, 1919, at the Foreign Office and expressed resentment at the attitude of the Chinese delegation at Paris. The Chinese representatives had said they were willing to publish all the secret agreements which the diplomacy of Nippon had been weaving around China. Japan objected. The sacred treaties between China and Japan were not to be divulged without the consent of both parties. If China was so anxious to purge herself of secret diplomacy, let her publish first the agreement of September 24, 1918, which gave the special privileges of Germany in Shantung to Japan. The displeasure of the Japanese in Paris was reënforced by Mr. Obata in Peking by what the Chinese took to be a veiled threat. "Great Britain," said he, "is preoccupied with internal disorders. She cannot assist China. But Japan is fully able to assist, as she has a navy of 500,000 tons, and an army of more than a million men ready for action."

The Shantung agreement had been the consummation of the Japanese-controlled Minister of Communications. The Chinese Foreign Office was not consulted when the Chinese minister at Tokyo signed it, and it had not been ratified by the Chinese Government. The Chinese people viewed it merely as a draft, and demanded its cancellation with the return to Japan of the moneys received under it by the politicians.

Mr. Obata's threat, which the Chinese took to be an attempt to intimidate the Chinese delegation at Paris, evoked a deluge of telegraphic messages urging the President and the Government by all possible means to back their delegates. These expressions came from men of all parties. Chen Lu, Acting Foreign Minister, tried in vain to minimize the effect of the interview. Called before the Chamber of Representatives in secret session, he said that the newspaper reports had been "somewhat exaggerated," and added: "In this time when the right and justice of the Allied Powers have definitely destroyed militarism and despotism, we Chinese, although as yet a weak country, may consider every menace of foreign aggression as a thing of the past, and accept it with a smile."

The Government at first cabled the Paris delegation not to make the secret treaties public; they were not held to be valid by the Chinese Government, and publication might lend them force. Later, the Government cabled, leaving it entirely to the discretion of the delegates. The diplomatic commission of the Chin Pu Tang recommended this. Meanwhile, Mr. Liang Chi-chao had gone to France. He meant to go by way of the United States, where I had prepared for him an itinerary and letters of introduction. Then his intimate associate, Tang Hua-lung, was assassinated in Vancouver. Liang, fearful of a similar fate, went straight to France, evading the Kuo Min Tang sympathizers in America. Ex-Premier Hsiung Hsi-ling told me that Liang was to inform the Chinese delegates unofficially about the state of things in China.