Battle of Concessions

The story of the development of the railways of China is so interwoven with foreign intrigue, political corruption, and civil war is one of the most colorful chapters in the history of railroading. The results of the war with Japan put a different complexion on everything connected with the railways in China. The indemnity more than emptied the Imperial treasury. It necessitated foreign loans. These loans, and the European assistance in the retention of territory which had been demanded by Japan, involved China in a bewildering maze of diplomatic entanglements. There followed a period in which Russia, France, Belgium, and Germany built railways under concessions, and the representatives of these nations frankly admitted that they did not intend "to be left at the station when the train starts"-a cynical reference to the expected breakup of China. The "battle of the concessions" quite naturally aroused the hostility and suspicion of the Chinese.

Eventually the provinces of Yunnan, Kwantung, and Kwangsi were claimed by France, the whole of the Yangtze valley (including about 8 provinces) was claimed by England, Fukien, Shantung, South Manchuria and Eastern Inner Mongolia were claimed by Japan, while Russia claimed North Manchuria, Outer Mongolia and Sinkiang. The insistence on these extravagant claims by the powers concerned had been in violation of their professed adherence to the principles of the Open Door, and had retarded the normal development of China for over 20 years.

While the Portuguese had controlled the island of Macao, near Canton, since 1537. and the English became owners of the island of Hong Kong, in the same vicinity, by the treaty of 1842, no other nation had possessions on or near the coast of China until within a comparatively recent date. One result of the war between China and Japan was that Japan obtained the island of Formosa, lying 00 miles off the cast of central China.

On November 4, 1897 the German Government seized the port of Kiao Chau, on the northeastern coast of China, asserting as the cause of its action the desire to obtain satisfaction for the murder of two German missionaries by Chinese on November 1 of that year. This port was held by a German war ship until the announcement of a treaty with China by which the port of Kiao-Chau and adjacent territory were leased to Germany for a term of ninety-nine years, the German Government being given the right to land troops, construct fortifications, and establish a coaling and naval station, while German subjects were to have the right to construct railways, open mines, and transact business in the rich mineral and agricultural province of Shantung, in which Kiao-Chau is located, Chinese vessels, however, to have the same privileges in the port of Kiao-Chau that the German Government might decide to give to other nations.

By summer-time in 1898 the scramble among the powers for footholds of territory on the Chinese coast seemed to be giving way to what Lord Salisbury described as "the battle of concessions," for the building of railways and the opening of mines. This newer battle gave his lordship much anxiety. On July 13 he cabled to Sir Claude Mac Donald: "It does not seem that the battle of Concessions is going well for us, and that the mass of Chinese railways, if they are ever built, will be in foreign hands is a possibility that we must face. One evil of this is, that no orders for materials will come to this country. That we cannot help. The other evil is, that by differential rates and privileges the Managers of the railways may strangle our trade. This we ought to be able to prevent, by pressing that proper provisions for equal treatment be inserted in every Concession."

The history of railway development in China falls into three stages. In the first place, the abortive foreign effort, illustrated by the failure of the Shanghai petitioners in 1863; the story of Sir MacDonald Stephenson's attempt in the following year, to induce the Chinese to allow the introduction of railways; and, lastly, by the fate of the Woosung Road. While, secondly, the period of progressive movement emanating from the Chinese themselves, and finding expression in Formosa and in the Imperial Railways of the North, together with the resulting developments in Manchuria.

The third stage followed, and was indeed directly consequent on, the Chino-Japanese War, shortly after the conclusion of which commenced what Lord Salisbury described as "the Battle of Concessions," or, in the perhaps not less appropriate language of a writer in the Forum, "that mad scramble for Chinese concessions," which characterized the closing years of the 19th Century.

By 1895 Germany had adopted a program of purchasing Russia's good will in the Occident by abetting her aggressions in the Orient; a not unnatural policy, since charity begins at home, but assuredly a policy somewhat disagreeable to contemplate from an Oriental point of view. However, having done China the apparently weighty service of rescuing southern Manchuria from the jaws of Japan, Russia was generally expected to claim a reward, as is her wont.

This embodied the wishes which Russia might be supposed to entertain at that particular time. For it allowed her, in the first place, to carry her trans-Asian Railway across the north of Manchuria -which meant that the line would follow the chord of an arc through flat country instead of creeping round the periphery of the arc through mountains; it allowed her, in the second place, to construct a branch from this main road due south through Manchuria to the Liaotung Peninsula; it allowed her, in the third place, to post troops for the protection of these roads-an arrangement virtually amounting to military occupation of Manchuria; and it allowed her, in the fourth place, to hold as military bases, in case of necessity, two ports in the Liaotung Peninsula (Port Arthur and Dalian), and one port in the Shantung Peninsula (Kiaochow).

In May 1897, the Chinese government sanctioned an extension of the British settlement at Tien-tsin from sixty-five acres to about 300. In the next month, it satisfied the complaints of Great Britain concerning the cession of Kiang-Hung to France, by ceding to that power the Shan district of Kokang, about 400 square miles in extent, and leasing to Great Britain in perpetuity a considerable tract at the south of the Namwan river. The same treaty opened new routes to trade across the frontier between Burma and China, and admitted British consuls and merchants to two new ports. At about the same time France secured mining privileges on the Tonquin frontier and rights for the extension of a railway into Chinese territory.

As a matter of logical arrangement, it may at first sight be objected that the Chinese Eastern Railway should have been treated together with the other foreign concessions. A moment's reflection, however, dispels this view. The Manchurian line, as should now be clear, was the outcome of the inevitable collision between China and Russia in the north, which had been hovering on the political horizon visible to observers for more than forty years. Threatened Chinese development, which by no means accorded with Russian policy, was the direct cause of the Russian invasion of Manchuria. That matters took the concrete form of the grant of a concession, and that the Chinese in order to construct their line to Newchwang and keep the Russians on the other, the east, side of the Liao River were compelled to borrow British capital about the same time as the syndicates of other foreign countries appeared in the field, was to a large extent fortuitous.

Inside the Great Wall, on the other hand, with the exception of the case of Germany in the province of Shantung and France in South China, which will be subsequently more particularly referred to, the determining factors were quite different. The war with Japan had been fought, and ended for China in humiliating disaster. But it had left behind it strong progressive tendencies in the breasts of many patriotic Chinese. Among them was H.E. Chang Chih Tung, Viceroy of Hukuang, who vigorously set himself to apply the lessons of the war, as he understood them. According to the view he took of the situation, the time had come when a great trunk railway, putting the capital in rapid communication with the central and southern provinces, was not only commercially but strategically necessary, if China was to maintain her position among the nations.

In the case of South China, on the other hand, the French rights appertained to them geographically as railways in China Proper. Similarly with the German rights in Shantung. Though they may be said, strictly speaking, to have formed no part of the Battle of Concessions, their connection with the Tientsin-Nanking Railway was one of the concessions following on the grant of the concession for the Peking-Hankow line.

In the case of the French and German rights, the Russian rights in Manchuria, and the Japanese rights in regard to the Southern Manchurian and Antung-Mukden Railways, the term "concession " in its strictest sense is quite correctly applied. For in these cases the grants have been made under conditions which deprive China of all control and profit in the several undertakings, and seriously prejudice her sovereign rights within the territory through which these railways run.

In other connections, the convenient term concession has been very generally, and perhaps somewhat loosely, applied. Primarily these arrangements were in the nature of underwriting contracts. The contracting syndicate undertook to provide 90 percent, for example, of a loan of so many millions of pounds or dollars, as the case may be, repayable at a certain specified time and bearing interest at the rate of 5 percent per annum; it took its chance of being able to float the loan upon the public at a higher percentage of its nominal value. What happened in most cases was that on every £100 bond, for example, issued by the Chinese Government the latter received £90, while the syndicate succeeded in getting them taken up at £97 or thereabouts, thus securing a respectable margin on the transaction.

The British minister at Peking, in reply, dissented warmly from Lord Salisbury's opinion. "The battle of Concessions is not, in my opinion," he cabled on 23 July 1898, "going against us. . . . Up to the present, any concessions granted to other nationalities are far out-balanced in financial value by the Shansi and Honan mining and railway concession, with its possible extensions. I have consistently informed the Chinese government that, as to differential rates and privileges, we want none ourselves, and cannot admit that other nationalities have a claim to them." The outcome of the grand "battle" was communicated by Sir Claude MacDonald to Lord Charles Beresford, on November 23, in a full list of the concessions then granted to British subjects, compared with the grants to other nationalities. "We do not seem," wrote Sir Claude, with pardonable complacency, "to have come out second best. . . . Not a single bona fide or approximately practical scheme which has been brought to this Legation has failed to be put through." The summarized result in railway concessions was nine British (2,800 miles); three Russian (1,530 miles); two German (720 miles); three French (420 miles); one Belgian (650 miles); one American (300 miles).

France had now come forward to seize a place in the attacking line, preparatory to what seemed to be the impending partition of China. In April 1898 the French demands on China had been satisfactorily met. They were stated in the semi-official 'Temps' to be:-i. Concession of a lease of a bay on the south coast of China. 2. Concession of a railway connecting Tonquin with Yiinnan-fu by the Red River. 3. Engagement on the part of China never to alienate the territories of the provinces contiguous to Tonquin. 4. Engagement never to cede to any other Power the Island of Hainan. Arrangement in regard to the constitution of the postal service." On April 28, 1899, the governments of Great Britain and Russia exchanged notes, embodying an agreement (practically arrived at in the previous month) concerning their respective railway interests in China

During 1899 there was a notable relaxation of tie hard and ceaseless pressure upon China which governments, capitalists and speculators had been keeping up of late, in demands more or less peremptory for harbor leases, settlement grounds, railway franchises, mining privileges, and naval, military and commercial advantages of every possible sort. But the irritation of the country under the bullying and "nagging" of the treatment it had received from the European nations revealed itself in increasing outbreaks of popular hostility to foreigners; and these called out threats and demands, for indemnity and punishment, which were made, as a rule, in the truculent tone that had become habitual to western diplomacy in dealing with the people of the East. It was a tone which the Chinese provoked, by the childish evasions and treacherous deceptions with which their officials tried to baffle the demands made on them; but it gave no less offense.

In September and November, 1899, US Secretary of State Hay sent to the diplomatic representatives of the United States at London, Paris, Berlin, St. Petersburg, Tokyo, and Rome, instructions to advise the governments to which they were respectively accredited of the hope that they would make 'formal declaration of an open door policy in the territories held by them in China.' An assurance was sought from each power that: first, it would 'in no way interfere with any treaty port or any vested interest within any so-called "sphere of interest" or "leased territory" which it might have in China'; second, 'the Chinese treaty tariff of the time being shall apply to all merchandise landed or shipped to all such ports as are within said "sphere of interest" (unless they be free ports), no matter to what nationality it may belong.

There followed a period in which Russia, France, Belgium, and Germany built railways under concessions, and the representatives of these nations frankly admitted that they did not intend "to be left at the station when the train starts"-a cynical reference to the expected breakup of China. The "battle of the concessions" quite naturally aroused the hostility and suspicion of the Chinese, whose position was made difficult by the lack of natives with technical training and by the fact that the entire cost of construction of the government lines had been made by loans from foreigners.

Then came a patriotic movement to build railways with native capital. The government granted permission for the formation of private railway companies in all the provinces in the coastal plain to build parts of what was intended to be a national railway system. Subscription lists were widely distributed, the shares were made as low as $10, and even coolies bought them. The wealthy classes held back at first, but finally, under the fear of royal displeasure, made large subscriptions.

This "local" movement exhausted itself in about three years and finally blew up in a fury of charges of corruption, much to the embarrassment of the government, which in the interim had denied to foreign contractors the right to build railways on the supposition that native capital would be forthcoming. It turned out that something like $26,000,000 had been collected from native sources by these local companies, the money was gone, and there were only 8 miles of track and a few pieces of rolling stock to show for it.

Foreign interests then reappeared to enforce their claims on the central government, and while the storm of protest by those who had invested their money in the native railway companies was at its height, the government made an agreement with the bankers in England, Germany, France, and the United States, and, in an endeavor to calm the Chinese investors, promised to punish those of its subjects who had been responsible for the failure of the local companies. Instead of appeasing the opposition, this merely added fuel to the flames. The provinces claimed that the agreement with the foreign bankers practically represented a partition of South China among the four powers named. This was the beginning of the rebellion that resulted in the overthrow of the Manchu Dynasty in 1911.