recognised as an ignominious débâcle, in the pious hope that, after the elimination of German competition, it would be possible to impose on the Chinese Government conditions of honest railway construction and administration. Any one acquainted with the political finance methods pursued by Germany in China, Turkey, and other " troubled waters," must have realised the impossibility of attaining any such object by the means suggested; nevertheless, assurances were given and apparently accepted in good faith by the Foreign Office, that, with the admission of Germany to participation with the officially supported Anglo-French group of financiers in Chinese loans, those safeguards and guarantees would be re-established whereby China would be compelled to admit strict supervision of loan funds' expenditure. By an exchange of notes early in 1909, the British and French Governments had declared themselves opposed to any British or French capital being lent to China except under these conditions of control; they might, therefore, have been justified, as a matter of expediency, in consenting to German participation, had steps been taken to ensure fulfilment of the conditions of effective control named in the Memorandum of terms upon which the new Anglo-FrenchGerman combination was established. As events proved, no such conditions were imposed; on the contrary, the terms upon which the Hukuang and Szechuan railway loans were eventually concluded with the Chinese Government revealed an unmistakable tendency to relax still further the supervisory safeguards whereby the best interests of China and of her creditors had in the past been protected. This tendency has since been rapidly accelerated, so that to-day capital is being pressed upon a disorganised and more or less irresponsible Government under conditions likely to lead to grievous waste and corruption, internal unrest in the provinces, and endless complications abroad. The terms of last year's "Currency Reform and Manchurian Development " loan clearly reflected the temporarily profitable, but ultimately fatal policy of floating Chinese loans regardless of their political and economic consequences-a policy, of Teutonic origin which Great Britain for years wisely and successfully opposed as prejudicial to "the independence and integrity of China."

The admission of German participation to the Anglo-French

combination represented by the Hong Kong and Shanghai Bank and the Banque de l'Indo-Chine, in the Yangtsze railway loans, was an event sufficiently significant and important in itself to provoke further political complications. The correspondent of the Times at Peking, telegraphing on May 9, expressed the general wonder that "the British Government should delegate to one British Bank, which is naturally compelled to consider financial rather than national interests, the right to assist the extension of German influence." No sooner had British rights been irrevocably surrendered, however, than the Government of the United States intervened, formally protesting against ratification of the proposed railway loans and claiming the American rights of participation recorded under the agreement of 1903 between Prince Ching and Sir Ernest Satow. This was in June 1909. Chang Chih-tung, advised by the agent of the Deutsch-Asiatische Bank at Peking, showed a disposition to ignore the American protest, whereupon President Taft took the unusual, but highly effective, step of telegraphing to the Prince Regent direct, forcibly insisting upon recognition of American rights. This telegram was described by the Peking correspondent of the Times as directly due to the intrigues of the Deutsch-Asiatische Bank, whose influence over the Hong Kong and Shanghai Bank is so injurious to British interests in China"; he furthermore said that it was "the opinion of many Englishmen that the British Government should bring pressure to bear upon the Hong Kong and Shanghai Bank to dissociate itself from these German intrigues which are persistently directed, here as elsewhere, to bring us into a misunderstanding with the Americans."

The firm attitude adopted by the United States Government at this juncture, and its results, served to throw into relief the vacillating inefficiency of British policy. Chang Chih-tung, who had persistently violated his former pledges to Great Britain and contemptuously ignored the existence of the British Minister, was effectively brought to book in one short interview demanded by the American Chargé d'Affaires. As the result of President Taft's message, American rights were promptly recognised by the Waiwupu, and Chang found himself compelled either to accept them or to abandon altogether the railway schemes to

which he was publicly pledged. In the event of this abandonment, there would be compensation payable to Germany for non-fulfilment of the preliminary agreement, which had been used to force the British position; Germany, having secured her footing in the Yangtsze provinces on terms of equality with England and France, was not prepared to insist on the exclusion of America; her agents contented themselves, therefore, with earning further instalments of Chinese gratitude by sowing discord between the British and American diplomats and financiers. At the annual meeting of shareholders of the Hong Kong and Shanghai Bank held at Hong Kong in February 1910, the chairman faithfully reflected the aims of German policy. After observing that the Bank's protracted negotiations with the Chinese Government had resulted in a satisfactory arrangement" fulfilling all necessary conditions of security and providing for equal distribution of material benefits among the international groups interested," he deplored the fact that "the revival of claims in another quarter had necessitated the rearrangement of terms and had imparted a political character to the negotiations, which had unfortunately retarded this completion." With touching naïveté he contended that the fruits of the impending economic development of China "were likely to be shared most largely by those who, free from suspicion of political motives, are prepared to meet the needs of China in the simplest, fairest, and most practical way." Sentiments like these, coming at a time when Germany, with the plainest of political motives, had used its relations with British financiers to damage British prestige and annex British rights, found no echo in the opinion of Englishmen in China. The North China Daily News observed that "this appeal for the complete divorce of finance from national interests will, we venture to believe, meet with no response outside the financial circles immediately concerned." The writer, with perfect accuracy, charged these financial interests with having "arrogated to themselves the disposal of British Treaty rights and surrendered the British commercial claim on the Yangtsze basin," and justly concluded, "This may be finance, but it is not patriotism."

The Chinese Government, having made a virtue of necessity, and America having been admitted into the "ringed fence" of

Chinese finance, the "Four Nations Syndicate became the recognised centre of financial activity in China. But it speedily became manifest that even so powerfully supported a combination of cosmopolitan activities would not be allowed to enjoy the field undisputed. At an early stage of the crisis in 1909, Japan took occasion to remind Chang Chih-tung and the Waiwupu of certain binding engagements entered into by the Viceroy in 1905, with regard to the employment of Japanese engineers for the Hukuang Railway. In July, the Russian Minister informed the Waiwupu that, in view of Russian interests in the tea trade of the Yangtsze Valley, the Russian Government requested that Russian financiers, as represented by the Russo-Chinese Bank, should participate in the Yangtsze Railway loans. The eagles were gathering to the carcase. The writing was plain upon the wall, foretelling the ultimate administration of China's finances by those who should now become her "purely commercial" creditors, and diplomacy hastened accordingly to peg out its claims. To save China from the dangers of political moneylending, aggravated by the dishonesty of her own officials, a sustained policy on the part of England and France as the chief controllers of international capital, might have been made effective. The necessity for this policy had been recognised and declared as frankly in Downing Street as at the Quai d'Orsai: its abandonment was by no means acceptable to the French Government, whose acquiescence in the Teutonic proclivities of British finance was reluctantly extracted under pressure.

The incursion of American diplomacy into the stricken field of Chinese finance, while primarily brought about by China's non-observance of American rights in the Szechuan railways, actually synchronised with the determination of the State Department actively to assert the principles of the "Open Door" and equal opportunity in Manchuria-principles that were evidently jeopardised by the growing community of interests and political entente of Russia and Japan in that region. The veto imposed by these Powers on China's attempts to introduce British and American capital into the construction of the Fakumen and the Chinchou-Tsitsihar-Aigun railways, clearly foreshadowed the separation of Manchuria from China proper as a field for " open door" enterprise. Mr. Knox's proposal to

66

neutralise the whole of the Manchurian Railway system, as Chinese property under international financing and control, was the outcome of suggestions offered by Tang Shao-yi during his special mission to Washington, and of arrangements made by that official when Governor of Moukden, with Mr. W. D. Straight, then United States Consul-General in that city. The line of policy proposed by the United States State Department was incontestably justifiable and logically incontestable, in view of the terms of the Portsmouth Treaty and of the " open door" pledges given by all the Powers concerned. It coincided exactly with the declared policy and interests of Great Britain; but it failed, because possession is nine points of the law, and because the restraining influence of treaty engagements is a steadily decreasing factor in modern politics. It failed because, against Russia and Japan in possession of positions of obvious advantage and agreed upon joint action for their protection, no benevolent theories or assertions of moral principles could avail anything. When, under Article sixteen of the "Currency Reform and Industrial Development" loan agreement concluded in April 1911, the "Four Nations" Syndicate obtained from China first-option rights for all future loans intended to continue or complete the development of Manchuria, American publicists, undeterred by the fiasco of the neutralisation scheme, rejoiced at so rapid and complete a success of "dollar diplomacy." Their short-lived jubilation served merely to announce the introduction of two more partners into the company of China's actual and prospective benefactors. The fact that neither Russia nor Japan has any capital to lend, did not deter either Power from vetoing this future loan provision of the Manchurian development agreement, and claiming rights which involve repudiation of China's claims to sovereignty in that region. The signature of the "Four Nations" loan was welcomed by the "American Association of China" as relieving the fertile Manchurian provinces from foreign aggression by the "combination of four of the most powerful nations in the world becoming suddenly possessed of vested interests in that region "—a combination whose object it was "to protect a weak and embarrassed nation from avaricious neighbours." The original intentions of the American State Department, when embarking upon its adventurous course in