15 MARCH 1935, Page 9

BRITAIN, CHINA, AND JAPAN

FROM A SPECIAL CORRESPONDENT

LORD LOTHIAN'S recent writings in The- Times have . given a stimulus here to the hope that the dangers threatening British. investments and -trade in China are -being realized- in London, though it is feared (perhaps wrongly) that the old complacency about the East still rules, and that the cherished belief survives that all an Englishman- in China has to do is to sit in his office while Chinese -come in to buy what he has to offer for twice its value, . That has long ceased to be true, if it ever was.

Many British merchants in China are now gravely apprehensive and see a position developing which is full of peril for them. They visualize their own position in China ; they visualize Japan's ; they put the two together and get a total which is anything but satisfactory. Events, moreover, in the last six months have moved quickly and show more and more -clearly that the volcano on which we sit is boiling up rapidly.

At the end of the last century and the beginning of this, Great Britain led the way in China, built railways, began to open up mines and inland trade such as piece goods, oil, cigarettes, and so on, founded modern banking and developed shipping, in fact initiated the commercial 'development of the country. But following a time of disorganization due to the Revolution, we began to slip back and back, until about ten years ago a prolonged land- slide brought us to our present state, leaving us mere shadows of our former enterprising and progressive selves.

At the moment China is deep in the trough of the wave of world depression.. Customs figures of imports and exports show a lamentable decrease compared with previous years. Trade is falling off rapidly. Although there are signs of- political stability in the country— Chiang Kai-shek is secure in the Yangtze Valley—Canton seems dormant, and Japan dominates the north. The economic position is deplorable, and this is largely due to Shanghai, where we are in the middle of a financial crisis which amounts to a-virtual banking moratorium. Interest on loans' is as high as 20 per cent., export trading credits, known as "packing" credits, are closed to all but the richest, while the leading foreign and Chinese- banks are as " tight " as the grip of an Arctic winter. The main cause of the debd de is the adverse balance of trade, which came to a peak with a violent flight of silver, due to America's purchasing programme. The immediate result of this was a runaway exchange, which though checked by official action, left the bankers in an awkward fix,. Unfor- tunately the big Chinese banks were already in an unsatis- factory' position, for over the last few years they have become choked. with their own Government Bonds (forced on to them by various Ministers of Finance) and at the • same time they have pursued an over-enthusiastic land ..policy. The Shanghai land boom over the last six years _has been. phenomenal, and Chinese bankers have been making advances up to 90 per cent, of inflated values— which unfortunately will not always remain inflated. Thanks to these factors the front door of China's trade is jammed. An objective picture of China shows. a huge unde- veloped country in the doldrums of depression, with a well- founded British enterprise tottering under the weight of Chinese Nationalism and a diplomacy which during the _last few years has been entirely ineffective.

What of Japan ? Her position, in some ways, was little better, and is still not very encouraging. The past .tense "was " is used because in 1931, with the adoption of her Manchurian policy, Japan entered on a new era in China. The prospect of success or failure in Manchukuo , does not affect the present issue, because the Japanese are there in Manchukuo and there they will remain. •What does affect us is that there is every indication that Japan is going to pursue the same policy in China proper. Short of actually sending troops and garrisoning the country, she will do everything in her power to dominate, and eontrol the Nanking Government, In fact, her definite .airn appears to be to put into effect the old Part V of the -notorious Twenty-one Demands of ,1915.

What is alarming for Great .Britain about., this policy is, first, that Japan is completely self-seeking--a request that other nations should not negotiate with China until present Sino-Japanese problems are cleared up is the Oriental way of saying "we and we alone are going to win China "—and secondly, the terrifying speed with which Japan is putting her plans into effect. A few months ago China made revisions in her tariffs, and the tone of the announcement as well as the nature of the revisions themselves savoured strongly of Mr. Ariyoshi's (the Japanese Minister's) dictation. They were predomi- nantly pro-Japanese, especially as regards cotton goods, at a time when the Chinese cotton industry is at its lowest ebb. The tone of Chinese . statesmen's utterances during the last few months has shown a sudden transformation. Not so long ago . the Waichiaopu (F.0,) was fulminating and keeping up an outward show of anger over the loss of Manchukuo, but quite recently Wang Ching-wei (Chiang Kai-shek's right-hand man) issued a statement which, if Mr. Swim. (the permanent representative of Japan in Nanking) -had written it himself, could not have been more to the liking of the Japanese. There is proof that The diplomats from Tokyo are putting pressure on their • Chinese colleagues to be more .pro-Japanese, arid the ' results are remarkably successful.

In Shanghai now there is news that Japan has made big progress in the settlement of her Nishihara loans, and in the Military world it is said that she has demanded that the Several hundred Gerinati advisers should be re- Placed by Japanese. • The facts of the position in Swatow, where the Japanese are reported to be building a military wharf at their' own convenience, are not yet clear; but there is rio doubt in the minds of those who - know the ways of the Japanese that rumours' such as these ' invariably turn Out to • be true, and that many other rumoured moves—regarding, for example, the appoint- ment of Japanese advisers in all the Ministries in Nanking, more Japanese influence in the Customs, and a measure of control on certain railways—will sooner or later - represent accomplished facts. .

Take this sketch of Japan's- present trend in China and compare it With a picture' of Our own. To those who have lived and traded in China and Japan it means . simply the eclipse of Great Britain and the usurpation by Japan of the position We held 40 years ago.' Is this to be accepted without a murmur ? Eclipses in Japan are total and we have too much at stake (our investments run to some M00,000,000) to allow ourselves to be snuffed out like candles. But inunediate action is necessary' if it is tO-have effect before Japan's programme develops beyond possibility of check.

Very briefly the ,steps needed are to intimate to Japan that though she says she believes that China . cannot help herself, and that Japan is the only nation who can assist her, We do not share tliis view. We are already -entrenched in China and we intend to safeguard our position in conjunction with all Othe'rs who share our views.._ .First of all it is suggested (arid this is of immediate importance) that we help Shanghai out of her financial. plight and thus give China, as o: whole ,a jerk. out of depression. Japan would, of course; -be asked to 'join us and others in so doing. Then it is to be hoped that we may pursue a. more actiN'e diplomatic Policy by, first, having our representatives 'on the see— ne of Action, at Nanking rather than Peking; and secondly, fortifying them with the knowledge that there exists in Whitehall the deter- mination to put Britain back where she belong S iri China.

Far be it from Us to antagonize Japan in China'. There is room for both of us, And to the 'mutualadvantage of all concerned: But Japan i ursuing an exclusive poly of Asia for the Asiatiesprimarily for Japan: If we' act • at once we can Prevent that. On the other hand' if our policy is to evacuate in Japan's favour, -let us' say so and liquidate , .