six months of active civil war, with Nanking on the one side and the
Christian General Fung and the Model Governor Yen on the other, China
settled down in the middle of September to a truce. That truce was
made possible by the sudden intervention of the Young Marshall of
Manchuria, Chang Hsueh-liang on the side of Nanking. Nanking and
Mukden have now reached an agreed settlement as to their respective rights
and responsibilities. Manchuria will administer, and will retain the
revenues from, all the railways as far south as Tsinanfu (including the
Shantung railway); and as far west as Chentow on the Shansi border.
Manchuria will also retain, or have remitted by Nanking, the whole or
considerable proportion of taxes from Salt and Tobacco; the customs
revenues are so largely pledged nowadays for foreign and domestic debt
that there is probably very little surplus to be divided. The
point is however there is an agreed peace between the only two real
combatants remaining in the field. Fung and Yen are still in
Shansi Province and still retain a certain proportion of their old armies,
but they are hard put to it for money, and no resistance is likely in the
near future. We say that the general position is healthier than it
has been since the Revolution in 1911.
Forces against the Government
main difficulty of the Government is the extreme poverty of the people
caused by 10 years of civil war. The farmers have become
disheartened because they cannot get their crops transported on the
railways; merchants and traders have restricted all enterprise owing to
the lack of security; and the main medium of exchange – silver – has
vanished from the countryside and is all locked up in the banks in
Shanghai. Poverty has bred general dissatisfaction, which has shown
itself in various forms, notably in banditry and communism. The
bandits are mainly disbanded soldiers who have retained their rifles.
The communists are mainly disgruntled young men who have learned a good
deal of their vocabulary and a certain amount of their ideas from Russia.
Communism and banditry are now being dealt with in a vigorous way by the
Government. They have divided the country up into small areas, in
which the old-fashioned Chinese methods of mutual responsibility are
enforced, and there seems a fair prospect that the Government will be able
to cope with these troubles before long.
Chances of Stability
has reached an agreed with Manchuria. The Government at Nanking contains number of very able men,
including the President Chiang Kai-shek and the Minister of Finance, T.V.
Soong. The President has
proved himself a soldier. Mr.
Soong has proved himself a financier of quite outstanding ability. Quotations
on the Stock Exchange will show that the Chinese credit stands wonderfully
high in spite of civil war and all the other disadvantages. There is only one real black spot in regard to the credit position,
the railway credit, but of that later. Mr. Soong is making heroic efforts to cut down military expenses and
balance the budget. It seems
likely that he will succeed. There
is an intense self-consciousness in China at the present moment and it is
called “National Consciousness”. It manifests itself principally by antagonism to something else,
which it calls “Imperialism.” Imperialism can be roughly defined as
anything, which appears to the Chinese to conflict with their quick
development as a nation, politically, industrially, commercially and
socially. We cannot prophesy
about China. She has made
rapid progress towards stability within the last two years. Whether she remains stable, will depend, to some extent at least,
on the attitude of the world towards her. If we want her to be strong we better get behind the Central
Government at Nanking and help it in every possible way. Moral help will go along way.
Financial help will also go a long way. There is no need for military adventures.
mileage of railways is small, only about 10,000 kilometres. But the railway system is very important because it links up with
the Trans-Siberian Railway at Harbin and runs down south to the Yangtze.
Control of he railways is the deciding factor in civil war. Free operation of the Railways on the other hand is the one thing
that makes the internal and external trade of China possible. The railways are now in a thoroughly run-down condition.
They are the best paying railways in the world, and yet they are
badly in default as regards interest on bonds, and their debts for
materials run into several million pounds. The first constructive act, which is necessary in China, is the
restoration of the railways to commercial use. This will involve money and the support of the government in
is now the only silver using country in the world. The value of Silver in relation to Gold is greatly depreciated for
various reasons. The Chinese Dollar, which not long ago was worth 2 shilling,
is now worth 1 shilling. It
will be seen that England, which produces on a gold basis, must either
receive double the amount of Dollars from its Chinese customers (i.e.
multiply its Silver price by 2) or else cut its gold cost of production by
half. It is impossible to raise prices just now in China because
the country and the people are too poor. There seems little prospect also of reducing production costs
radically at home. This does
not mean that trade has stopped – far from it. It is increasing every year, but it is badly handicapped by cheap
silver. This fairly generally held by practical men that no artificial
method of bolstering up silver would have effect for long. The best way of helping silver would be to get China on her feet
again. As soon as her
internal trade begins to move there will be immense demand for silver all
over China and the price will begin to rise in relation to Gold – which
would have a quick effect on Chinese foreign trade and on British exports.
and Russia have a long common frontier and have always been watchful of
one another. From 1924 to
1927 Russia gained a definite ascendency in China, chiefly owing to the
successful personal work of two men, Borodin, a political organiser, and
Galens, (General Blucher) a soldier. Between them they put the Nationalist party on the map and deserved
well of Nanking. They crashed
because the Chinese discovered unquestionable evidence that they are
working really for Russian domination in China and not in order to make
China a strong and independent nation as they had claimed.
is probably very little direct Russian influence in China at the moment.
They still control the Chinese-Eastern Railway, the Chinese are
boycotting it and its financial is growing weaker day by day. That is their only big economic interest in China.
Politically they maintain an unostentatious flow of propagandists
between Moscow and China, and thus tend to keep up a certain Bolshevik
atmosphere, especially among the young. This will not be a very serious factor provided that poverty is
replaced by prosperity.
interest in China is the China market. It is the most elastic market in the world and has marvellous
powers of recuperation. The
revival of British trade in China is entirely dependent on the restoration
of general conditions of security in China. This can only be accomplished in a quick and practical way by
holding the Nanking Government to its obligations and helping it to fulfill
those obligations. By helping
it to get control of the railways, to put them in order, to extend them
and to use them for commercial purposes. Peace, trade, railways and Silver are all part of the same problem
in China – a problem which we can only help forward by backing up
Nanking and seeing that it plays up to its responsibilities.