The Cabinet Papers banner

British interests and Chinese nationalism

British interests

British economic interests in China were considerable and varied, and the potential market in China for foreign imports held a powerful attraction for Britain. Britain had made loans to China to support <<General Yuan Shih-k'ai>> against Sun Yat-sen's nationalists. A system of treaties enabled British officials to collect revenue for this purpose. The China Consortium, a banking alliance between Britain, USA, France and Japan, was formed in 1920 to oversee political loans to China.

British traders and financiers operated in enclaves around major ports - notably at Shanghai, Hong Kong, Canton and upstream on the Yangtze at Tientsin - which enabled the control of trade and access to potential markets in the interior. Extraterritoriality enabled the British to work outside the Chinese fiscal system. Some of these arrangements were formalised at the 1922 Washington Conference, which, conditional upon reform, provided for the return of sovereign rights to China.

Nationalism and the Kuomintang

After the death of <<General Yuan Shih-k'ai>> in 1916, China underwent a process of political disintegration as warlords took control of different regions. This, together with a growing Chinese nationalist movement, provided the backdrop to Britain's informal empire in the mid-1920s.

Although China had become a member of the League of Nations, the major powers rejected Chinese demands for the restoration of sovereign rights at the end of the First World War. When the Versailles Conference transferred German privileges in Shantung to Japan without consultation, there followed widespread demonstrations and boycotts, known as the May the Fourth Movement. 1922 saw a widespread strike in Hong Kong. Urban conflict between nationalists and Europeans peaked in the May 13 Movement of 1925, centring on the international settlement at Shanghai. Britain used a substantial naval and military force to defend the settlement.

Tension heightened following a massacre at Wanhsien, upstream on the Yangtze. Following a clash with warlord troops in 1926, Britain's gunboats had shelled the town, killing thousands of civilians. The extensive boycott of British trade that followed ended the deployment of gunboat tactics.

China began to default on various loans held under the treaty system and the tariff collection system collapsed. The British feared nationalists might seize foreign enclaves and prepared to defend them. By then, Chiang Kai-shek's Kuomintang Nationalist government was about to begin the reconstruction of China. Austen Chamberlain's memorandum in 1926 acknowledged China's grievances, and led to a more conciliatory period. Concessions followed (most importantly the return of tariff autonomy in 1930) but the British remained committed to maintaining extraterritoriality. The cooperative spirit was epitomised in the mission of the chief economic adviser to the government, Sir Frederick Leith-Ross, from 1935 to 1936. He assisted with currency reform and negotiated a settlement of existing loans to enable further investment.

Content