China and the West

Dewey, John. The issues at Washington. III-IV [ID D28494].
III. China's Interest
China's relation to the Conference and to the possibility of war is a peculiar one. She is admitted on all hands to be the storm centre. But her share is passive, not active. She breeds trouble by exciting the cupidity of other nations, not by what she herself does. Yet what she is and still more what she isn't, her internal disorganization and inefficiency is such a factor in making her a lure for other nations that it must be reckoned with.
There are, so to speak, three Chinas. There is the China which generates friction and antagonism among the nations, the China of international relationships. There is domestic China, torn, distracted, factional, largely corrupt in government. And there is the China of the Chinese people, populous, patient, industrious, self-governing by nonpolitical methods, solid, enduring and persistent beyond the power of the Western imagination to figure, the real China of the past and of the potential future when China is transformed.
In objecting to international coordination of finance for railways and mines as a solution of present difficulties, on the ground that it treats China as a patient rather than as an active living force, it is the second and third of these Chinas that are in mind. Mr. Brailsford expressly provides for the first China. He stipulates that she 'must be an active and willing partner' in the arrangements made; that Chinese bankers must share in the syndicate; that she must retain political control of her railways; that provision be made for ultimate reversion of economic ownership and control; that an arbitral tribunal be established to which China can appeal against the 'tremendous power' of syndicated international finance. There is no slighting on Mr. Brailsford's part of the rightful share of China in fixing her international relationships.
Why, then, object to his plan? Because, to put it dogmatically and briefly, the worst thing in China, its present political and administrative condition, makes it impossible for China to be an active and willing partner, while the good things in China, her transformation into what she may and should become, make it undesirable—first, for herself and then for the world—that she should be a passive and coerced partner. The interest of China is that she have an opportunity to develop, and to develop in her own way. In my judgment, this is also the interest of the peace of the world, since any peace secured by other means is a temporary truce which only postpones an ultimate explosion.
Present domestic internal conditions in China make the formula of China's entrance into an international arrangement as an active and willing partner a barren thing. It is as remote from facts as the formulae of the past about its territorial and administrative integrity. Like them, it is a form of words when realistically confronted with actual conditions. There is danger that, like them, it will become a means by which foreign offices will quiet their consciences and deceive their peoples while predatory activities go on which are harmful to China and in the end productive of new sources of friction among the nations.
There is no Government in China capable of speaking for the country, none having jurisdiction, none having the power to execute the conditions of the proposed agreement. It could be carried out only by continual foreign interference in Chinese domestic affairs. It is natural that Chinese, especially those in political life, speaking to foreigners should put the best face possible on her present state. But it is no kindness to China to gloss over the fact that the Government at present recognized by foreign powers is a hollow shell whose jurisdiction hardly extends beyond the walls of Peking. It lacks the confidence and support of the educated and the commercial class, of all bankers except those political bankers who have profited by its corruption and inefficiency. It is largely dominated by self-appointed military provincial governors and generals.
This does not mean that foreign powers should recognize and deal with some other Government, such as the Cantonese. At present the latter is more decent and progressive. But its active jurisdiction hardly extends beyond two provinces. It is a fiction due to distance and ignorance which causes many Americans to think that the disturbed condition of China is due simply to a conflict between north and south. The importance of this conflict for China is immensely exaggerated. The fact is that there is a double conflict going on all over China which is independent of the conflict between north and south. One is the factional struggle of a large number of military provincial governors for increased power and revenue. To this are due the tremendous unproductive expenditure for soldiers, the ruling administrative inefficiency, neglect of schools and constant interference with normal commercial development. For legitimate industrial enterprises are now only an invitation to governmental graft and plunder.
The other and promising conflict is that of the enlightened class—teachers, students, the more farsighted merchants, the bankers, the convinced republicans—against existing governments, both national and provincial. This movement now finds expression in a desire for local self-government and provincial autonomy. It is a movement based upon recognition of the fact that the revolution of 1911 was abortive, that the republic then established has now become a name, that as respects political administration—though not social and intellectual affairs—the country is now worse off than it was under the Manchus. Its purpose is to change the nominal revolution into a fact. The failure of the hopes entertained in 1911 only makes it the clearer that this transformation will not be accomplished in a day or in a few years.
This state of affairs makes it impossible for China to enter as an active partner into any proposed international arrangement for her economic exploitation. Any agreement to which the nominal assent of China is given would involve constant interference in Chinese domestic politics. It would require increasing supervision of her affairs, a supervision which in a crisis could not be made effective without the presence of foreign soldiers. And Japan, be it noted, is the only country near enough to deliver large numbers of soldiers at short notice, and the country in which there would be least popular objection to armed interference in China. Moreover, Japan in such a situation would act as the authorized agent of the powers that had entered into the agreement involving international regulation of China's economic interests.
To add that such an arrangement would tend to arrest the normal political development of China from within is perhaps a consideration too disinterested to appeal to any but idealists. But it also enlists American self-interest. If the United States became in the present state of China a partner in any arrangement for international exploitation of China, the effect would be to destroy the greatest asset of America in China—the good will of the Chinese people. The future cannot be predicted. But under certain circumstances the scheme might ultimately throw China into the arms of a Japanese Pan-Asianism, especially if Japan were to show more tact and sense than she has in the past. Linder other circumstances, it might create what would be virtually an offensive and defensive alliance with a restored Russia, or with Russia and Germany.
That the proposed arrangement would arrest and distort the normal economic development of China is also a remote and disinterested suggestion. China has so far resisted the rapid introduction of Western industrialism. To most this seems to be a piece of stupid conservative inertia. To a few, it appears to be an expression of a sound instinct to resist the introduction of forces which man has not learned to control and which have caused the exploitation of man by man and brought about bitter class conflict. Educated Chinese have a unanimous and lively sense of the dangers of industrialism. In a vague and ethical sense of the word, they are almost to a man socialistic. If the Chinese are permitted to work out their own economic destiny, it is conceivable that they will evolve some better scheme than that which now troubles Western nations. The natural resources of China in coal and iron have been enormously exaggerated. The capacities of its vast and industrious working population with its habituation to low standards of living have been underestimated. He is a recklessly brave spirit who will take the risks of forcing the pace of the industrialization of China.
There is a practical detailed objection to the proposed scheme. It is proposed that various nations should make pro-rata contributions to the syndicated fund. What nations are in condition to do so at the present time? The existing consortium is cited as a beginning in the right direction. So far the consortium has brought good rather than harm to China, barring the implied reservation of Japanese special rights in Manchuria. But so far its action has been negative and preventive. It has stopped national monopolistic loans. One reason for its failure to function in a more positive way has been the inability of England and European countries to export capital, an inability consequent upon the war. They have no desire to see the United States and Japan the active agents in financing China. An enlarged proposition of the same general nature would, in effect, mean that the United States and Japan would mainly supply the funds allotted to other nations. Hence the scheme would work out to give these two countries an economic lead in China. Such an arrangement does not appear calculated to reduce international friction.
IV. Suggested Measures
Previous articles have been given up to stating some of the conditions in the Far East which produce international friction. Conclusions so far have been chiefly negative. On the one hand, we have China, which moves slowly, which is just beginning her transformation socially and politically. On the other hand, there are acute urgent clashes of interest between Japan and the United States and remoter difficulties between England and the United States. Is it possible to find measures which will both safeguard China’s slow but normal and independent development and also remove the sources of discord among other nations? This seems to me to define the basic problem at Washington. A solution is not easy. It almost reminds one of the old question of what will happen when an irresistible force meets an insurmountable obstacle.
The present writer has no cut and dried solution to offer. It does seem possible, however, to indicate the helpful way of approaching the problem. Coordination of action among other nations in respect to the issues of the Far East is a necessity. But there is a wide difference between a coordination of foreign powers which is directed at China and one which is directed toward one another. A solution should be sought which involves the minimum of international supervision and control of China, while it involves the maximum of practicable international supervision and control of individual nations' activities toward China. Let us try out international regulation on one another before we try it out on China.
This seems to me the first formula with which to attack the problem of combining justice to China—and Siberia—with lessening of friction between other nations. This general formula translates into the concrete in some such fashion as follows: The Conference should establish a permanent international commission for Far Eastern affairs. In order to secure proper supervision of foreign activities in China without unduly interfering with China itself the Conference should establish a kind of constitution to govern the conduct of the commission. This should cover the following points:
1. All monopolies and monopolistic contracts should be absolutely forbidden. More space than these articles occupy would be required to give a history of monopolistic contracts which in the past have brought friction between other nations and limited the freedom of action of China. The nations should agree that every contract of China for public services and properties should be submitted to the commission, not for confirmation but for rejection if it implies any monopolistic features.
2. All consenting nations should agree to submit to the commission all existing contracts involving governmental action of Chinese governments, national and provincial. They should agree to gradual, if not immediate, cancellation of all monopolies provided for in these contracts, though, of course, this need not involve abandonment of specific works already undertaken.
3. All loans to Chinese governments, national and provincial, should be prohibited which make possible a diversion of Chinese funds to unproductive purposes, including so-called administrative loans. Such loans as are made by nationals of any of the countries entering into the agreement should establish credits to be drawn upon as work is actually done in constructing ports, building railways, developing mines, etc.
Why has China given so many concessions and bartered away so many resources in the past? Not wholly because of foreign pressure. Internal corruption and inefficiency have played a part. The ordinary technique is as follows: Some group of Chinese officials needs money, partly for settling accounts, partly for their own pockets. Some foreign concern with banking affiliations offers to loan a certain number of millions, provided they are given a monopolistic concession or provided China will buy some materials, wireless apparatus, airplanes or whatever the foreign concern wishes to dispose of. The loan is not, however, in the form of a credit for the specified purchase. The loan is used to pay current debts and is squandered in 'administration', mostly squeeze. It becomes accordingly another debt to be met when it falls due by a repetition of the same process. If the Conference can take steps absolutely to prevent this sort of operation in the future it will be to the benefit of China, and will also eliminate one source of friction between the lending nations.
4. The commission should make an honest effort to list all Chinese obligations, including indemnities, which are outstanding, with full information regarding their terms. It should then see what can be done in the way of pooling and refunding. At present it is practically impossible in Peking itself to discover just what are the debts and revenues of China, especially the domestic ones. China's ability to avoid bankruptcy and meet its foreign obligations is so great that foreign nations holding Chinese securities are entitled to secure a definite system of auditing and publicity as a precondition of any more foreign loans for any purpose whatever.
This involves some supervision of Chinese administrative finance, just as our third provision requires supervision, technological and by auditing, of expenditure on credits established. But it is a supervision for specific purposes that involves no political interference, and it is in the interest of a more honest and intelligent administration of public funds in China. As such, free from all the interference which accompanies present methods, it would be welcomed by intelligent Chinese.
5. There should be provision for the maximum of publicity about public works to be undertaken whether nationally or provincially, and for open bidding. China recently needed some locomotives for the only railway built wholly under Chinese direction and under exclusive Chinese management. The wants were made known and there was free international bidding. As a result, a Belgian firm secured the contract for most of the locomotives, an American firm for the remainder. If this practice could be made universal and compulsory for all purchases of supplies—in connection with the abolition of monopolies and 'preferences'— it would automatically do away with many of the financial practices which now create international friction and which further domestic corruption in China.
6. The consortium, already in existence, forms a nucleus for the commission on the side of finance. It should, however, be freed from its monopolistic features, its limitation to four powers and to select groups of bankers in the four countries. It should also be openly associated with authorized representatives of the governments concerned.
There is now a tacit, a disguised alliance between the consortium bankers and their respective governments. It should be made avowed, so that there would be political responsibility and publicity for the bankers' activities. Up to the present the consortium has not been recognized by the Chinese Government, largely because the Government wants unproductive administrative loans which the consortium will not make. Its existence, however, has been the chief factor in stopping loans which meant only the further alienation of Chinese resources.
However, the expenses of maintaining a consortium can hardly be kept up indefinitely for the sake of protecting China against the incapacity—and rapacity—-of its own officials. The Governments should assume their share of the expense. Then the consortium might function in a small way as an international syndicate, confining itself, at least until it had been tried out, to minor undertakings, branch railways and those having no strategic or political importance.
7. The Conference should take steps which will result in restoring to China control over her foreign tariffs. Foreign control of Chinese customs was established because of foreign debts and indemnities. It seemed to be the only way—probably it was the only way—by which foreign nations could be assured of repayment of loans and meeting of indemnities. But as a consequence, confirmed by a network of treaties, China cannot now regulate her tariff on imports. Not only that, but the assent of other nations to any change requires unanimity. Any single nation can now block an increase of a tariff which was fixed at 5 per cent ad valorem on an arbitrary basis and is not now over 7 1/2 per cent. The inability of China to increase her national revenues through customs charges is one of the occasions that make her resort to continuous foreign loans. The Conference should by concerted action and by moral or economic pressure on recalcitrant nations remedy this serious abuse.
The suggested program will meet with two opposite objections. It will be regarded as too modest, as failing in constructive sweep. It will also be regarded as going too far, impracticable, involving too much surrender of vested interests by foreign nations, especially by Japan. For it implies a surrender of her claims to 'special' interests in China.
There is no space to argue the whole matter. But it may be pointed out that action on these or similar concrete proposals is a test of the sincerity of the loud profession of the nations regarding their supreme hope for peace. Japan's economic interests, however it may be with her political, lie in establishing good relations with the Chinese people.
At present her industrialists say they are compelled to employ courses which they would prefer not to use in getting hold of raw materials, etc., because of the corruption of provincial officials. Put the whole matter of purchases aboveboard and she would have the advantages of proximity and would not need to resort to measures which give her possession of materials only at the expense of irritating and alienating Chinese and making her an object of suspicion to the rest of the world.
The United States ought also to assist in guaranteeing Japan direct access to oil supplies for industrial purposes, even if that means Mexico. It needs to be borne in mind that general advantage to traders and industrialists as distinct from profit to small groups of concessionaires and bankers depends wholly upon an increase of purchasing power by the Chinese people. China as she now stands isn’t a market that ranks high; it is not worth the fuss made over it. Give her a chance to develop herself and she will become a great market for regular peaceful trade, in which Japan has many natural advantages.
It cannot be stated too often that the essence of the Chinese question is time. The West and Japan are in too much of a hurry. The war has increased impatience till the world is almost in a state of hysteria about the Far East. Such measures as are indicated, even though they are largely negative, will secure a breathing space. During this period the world can recover from the shock to its nerves and regain sanity. There will be opportunity for further needed measures to reveal themselves, and in a normal way. Put a stop to the piecemeal partition of China and the alienation of its resources from without; put a stop to the building of warships and the problems of the Far East will gradually present themselves in a proper perspective. It will not then be many years before the world will be able to look back with a smile at its state of alarm over the problems of the Pacific in 1921. Fail to do these things, and the small causes of friction will go on accumulating and present fears will be realized. After the catastrophe men will realize how little was actually at stake in comparison with the evil done and how a moderate amount of prevision and good-will might have prevented the conflagration.