THE Chinese Government has long been engaged in negotiations with foreign governments to change the treaties granting extraterritoriality in China. It has not yet succeeded in persuading them all to make the necessary modification, though in principle it is agreed that the régime should cease when certain conditions are fulfilled. Meanwhile, the Chinese Government, on May 4, 1931, issued a decree abolishing this privilege, to take effect on January 1, 1932. Regulations governing the exercise of jurisdiction over foreigners have been prepared to assure their appearance before special courts applying the new codes of law.

Realizing that the relinquishment of extraterritoriality will make difficult, if not impossible, the continuance of the present régime, the Municipal Council of the foreign Settlement in Shanghai said on December 6, 1929, that owing to the "publicly announced policy of the foreign Powers, and particularly America and Great Britain, with regard to the relinquishment of extraterritorial privileges in China, "the Council realizes the necessity of devising a constructive scheme which while giving full consideration to the aspirations of the Chinese people will, at the same time, afford reasonably adequate protection during this transition period to the great foreign commercial and business interests which have been developed in Shanghai." Since a plan of merely local origin might be looked upon with prejudice the Council determined to call in a foreign expert "thoroughly to explore the subject and develop its practical possibilities." Judge Feetham of South Africa was chosen. His accomplishments in South Africa and elsewhere in the British Empire have given him an outstanding reputation for clearness of vision and fairness of judgment. His report has now been published.

Judge Feetham's position was that of an adviser to the Municipal Council, not that of a conciliator as between the Municipal Council on one side and the Chinese officials on the other. His principal means of information were drawn from the Shanghai community, both foreign and Chinese, and his contacts, as he frankly says, with the Chinese Government and Chinese districts outside of Shanghai, were very limited.

In his investigations Judge Feetham was given carte blanche by the Council and it was understood that his report should be entirely unbiased and that he should be free to form his own opinion uninfluenced by wishes of the Council. The report bears ample evidence that this condition was observed. It is a very valuable document. Its historical summary bears chiefly on the constitutional and legal development of the Settlement with but enough reference to the events which caused that development to make it understandable. It also contains an excellent description of the commercial situation and of the business and banking interests in Shanghai, tracing the development of the port to its present preponderant position in foreign trade, and especially in banking, in China.

The main part of the report, however, is a description of the government of the Settlement and its relations to the Chinese municipality and the Chinese authorities. Judge Feetham had the advantage of free access to the records of the Shanghai municipality, and, what was perhaps more important, the experience of residents and officials in the Settlement, both Chinese and foreign, with whom he talked freely and without the interference or the presence of officers of the Council. His findings are valuable to any student of political science or of government and he paints a remarkable picture of the development and operation of a most unique institution. That the Settlement has been able to exist and to grow under the peculiar constitutional difficulties which faced it is a great tribute to the political sense of the community.

The Settlement occupies an area of 8.66 square miles fronting the Whangpu River. Adjoining it is the French Concession of 3.94 square miles, entirely separate jurisdictionally, and around both cities extends the Chinese Municipal Area of Greater Shanghai comprising a territory of 320 square miles. There is no natural barrier between the areas; persons and goods are constantly passing back and forth from one to the other. The Settlement is not only a small foreign controlled area in the midst of a great Chinese city, but the foreigners form only a small portion of the population. The Settlement proper contains 26,965 foreigners and 971,397 Chinese. In the French Concession live 12,335 foreigners and 421,885 Chinese. In the Chinese area live 9,790 foreigners and 1,679,310 Chinese. Thus the political problem of the Settlement is not the government of a comparatively small population of foreigners, but the government of a city of nearly 1,000,000 people of whom only a small number are foreigners living in a congested area, and forming part of a much larger native community.

The Settlement is based on two constitutional positions, first, exclusive jurisdiction over foreigners by their own consuls, and second, a widely extended legislative and administrative jurisdiction by the Council within the limits of the Settlement over both foreigners and Chinese. The first, extraterritoriality, is assured by provisions in the treaties which also establish the right of foreigners to inhabit the concessions, and the second is contained in the land regulations which are an agreement between the foreign residents, the foreign diplomatic officials and the Chinese Government. Here arises a first difficulty in the government of a rapidly growing city. Its charter, the land regulations, can be modified or added to only by agreement between the Settlement itself, the Powers, and the Government. Any one of the three may block changes.

The basis of the Government set up by the land regulations consists of the annual meeting of the foreign landowners and rent payers who fix the taxes within the limits established by the charter. They also elect the Council which has a wide ordinance power, especially in the control of police, sanitation, and the construction of streets, but its ordinances, called By-laws, require the approval of the Consuls and Ministers of the Treaty Powers and of a meeting of the rate payers. The Council appoints all officials and servants of the municipality, collects and controls the spending of the revenue. The government of the Settlement thus has legislative power and administrative power, but it has no courts to interpret its regulations and to punish their infraction or to try civil cases or persons accused of crime in the Settlement. The judicial function in the Settlement is exercised by the 14 consular courts, including the United States Court for China, each of which has jurisdiction over its own nationals, and the Chinese courts which have jurisdiction over the Chinese and over those foreigners who have not the right of extraterritoriality. Eighty-four percent of the foreign population of the Settlement have extraterritorial rights. Obviously the Chinese courts are the most important single factor in the judicial situation from the point of view of preserving order, combating crime and maintaining the regulations. It would not normally seem possible that a government could carry on which depended for the enforcement of its ordinances and for the punishment of criminals arrested by its police, upon 15 different courts, each of them entirely independent of that government. Each one of these courts may take a different view of the validity or meaning of a By-law or of the seriousness of a particular violation brought before it.

The Council depends on these independent courts, not only for enforcement of its ordinances, but also for the collection of its taxes. If a foreign resident refuses to pay taxes he can only be compelled to carry out his civic obligation by an order of his own consular court, and there is no other legal way of forcing a Chinese or non-treaty foreigner to pay, than by an action in the Chinese court. There are of course other means of bringing recalcitrant taxpayers to time, notably by cutting off their light or water supply or by refusing to give police protection to them or to their property, but such methods would obviously defeat themselves if they were the principal means of assuring financial support to the Council and respect for its laws. Even though, as Judge Feetham says, there is difficulty caused by this variety in courts, on the whole the régime has worked fairly well and the foreign mercantile colony in Shanghai desires its continuance.

The Council itself may be sued in the Court of Foreign Consuls, established each year by the whole body of treaty consuls, thus withdrawing the municipality from dependence on the regulatory action of the government of the country through its judicial branch. The abolition of extraterritoriality would make this institution hard to maintain. Relations between the Chinese Government and the Council are conducted through the foreign consular body at Shanghai and the ministers at Peiping, thus putting the shield of foreign governments in law between the Council and the Chinese Government just as the troops and warships of the Powers in time of need act as a shield against Chinese armies.

Extraterritoriality plays another very important rôle in the administration of the Settlement. There are no municipal land registers and the municipal government does not guarantee the title to property within its limits. So far as that property is held in the name of foreigners having extraterritorial privileges it is, under the provision of the land regulations, registered in the office of the consul whose national holds the land. That registration fixes the area of the land affected and the title. When one foreigner transfers property to another a new registration must be effected in the office of the purchaser's consul. Titles thus registered are valid in any of the consular courts and are respected within the whole area. They are entirely out of the hands of the Chinese Government and indeed of the Settlement government which, having no control over the consuls, can only accept the registration as valid.

Obviously the greatest constitutional problem in the Settlement has been caused by the rapid increase in the number of Chinese within its borders, who are normally subject to Chinese law and to Chinese administration. As early as 1866 a committee of foreign residents said: "Your committee, feeling that on this question of how far Chinese authorities are to tax residents of the Settlement, hangs the whole success of municipal government and the prosperity of the port, believe that no way out of the situation appears possible, but that a distinct and definite arrangement should be made with the Chinese Government on the subject, and that no Chinese official be allowed to execute warrants of any description within the confines of the Settlement, except in a case publicly heard at the mixed court and through the agency of the municipal police." Thenceforward one of the cardinal points pressed by the foreign government of the Settlement throughout its existence has been the protection against the Chinese Government and its officials, not of foreigners alone, but of Chinese. As a result of steady pressure it has succeeded in keeping Chinese police officials out of its territory, so that there is but one police, the municipal police, within the area. It has prevented the exercise of taxing authority, at one time a serious question, so that it achieved the result that "no Chinese taxes could be collected within the Settlement and that any collectors of unauthorized taxes found operating within the Settlement were liable to be prosecuted and punished." Recently enforcement within the Settlement of certain national taxes has been arranged for, but the taxes are enforced through the Council's own officers. Chinese police legislation has also been refused application.

A vital point has been the control of the Chinese courts. Obviously, if they do not sympathetically sustain the By-laws and enforce the payment of taxes by the Chinese residents, the Settlement government could not go on, and obviously the Chinese courts could by enforcing Chinese law, Chinese taxes and police regulations, establish a sort of dual government in the city which would bring about the result that the Settlement authorities have desired to prevent. Special Chinese courts were established in the Settlement in which there has been by different methods a strong foreign influence, until 1930. Under the new arrangement made in that year, the courts in the territory are modern Chinese courts with judges trained in the modern law, with final appeal to the Supreme Court of China at Nanking. Foreign assessors have disappeared and the Chinese law is now applied by a purely Chinese court in all cases in which Chinese are accused of crime, or in civil cases in which a Chinese is defendant. In the arrangement, however, between the foreign ministers and the Chinese Minister of Foreign Affairs which set up these courts, it is especially provided that due account shall be taken of the land regulations and the By-laws of the International Settlement and the ministers further reserve the right to object "to the enforcement in the International Settlement of any future Chinese laws that affect or in any way invalidate the land regulations or By-laws of the International Settlement, or that may be considered prejudicial to the maintenance of peace and order within this area." The extent of the independence of the Settlement appears in the provision that the Chinese Government has no power to arrest criminals in the Settlement, except through the municipal police. It has no jails there and a person accused by it of any crime cannot be extradited from the Settlement for trial until after an open hearing in the local Chinese courts, at which the Council may be represented.

The Chinese Government has attempted at different times through its influence over Chinese judges to enforce administrative regulations of various sorts within the Settlement. This attempt has been vigorously resisted on the ground that the only Chinese laws applicable under the agreement setting up the new courts are the general criminal and civil laws normally enforced in the courts of China.

Protection of land titles through the registry with foreign consuls has been another means by which Chinese land holders have withdrawn their property from the control of their own government. Judge Feetham remarks that the value of the property owned by British nationals registered at the British Consulate in 1926, was 167,000,000 taels, while that held by British for other nationalities, meaning Chinese, totalled 103,000,000 taels, and since then there has been a large increase in the land held by Chinese. In addition a considerable amount of the stock of Hong Kong companies owning land in Shanghai is held by Chinese. This property is all protected by extraterritoriality.

The amount of Chinese wealth in the Settlement is brought out in another way by the very interesting description of Shanghai's position as a financial market. The Settlement is the principal banking center of China. The most important Chinese banks have their head offices there, including the Central Bank of China, an exclusively government institution. The total of note issue of these banks is estimated at 242,000,000 dollars, Chinese currency, in which the foreign banks share only to a negligible amount. Against these note issues are held huge stores of silver in vaults in the Settlement. The protection and the order which the present independent régime of the Settlement, supported by foreign governments, assures to the Chinese banks against the actions, even of their own government, are stressed in Judge Feetham's report.

It is obvious that improvement in the situation at Shanghai is one which will require coöperation between the Chinese Government and the Settlement authorities and foreign governments. No one can doubt the value of the order and security which the Settlement has succeeded in establishing and maintaining and the great influx of Chinese residents, especially wealthy families, is an evidence of it. However, the figures which Judge Feetham gives are not convincing that it is largely this security and the organization of the Settlement which have attracted business to the port. While the foreign business of Shanghai is about 41 percent of the whole business of the country and has rapidly increased in amount, its proportion of the whole has not very greatly changed and the business prosperity of the port cannot therefore be entirely attributed to the Settlement. As the entrepôt of the richest territory of China, the Yangtse Valley, it would not seem that Shanghai had more than its fair percentage of Chinese foreign trade, and if there is to be foreign trade carried on, it seems likely that Shanghai will hold about the same proportion of the business as hitherto. Obviously, it would be, at least temporarily, an injury to Chinese trade and a loss to all of the people up and down the valley who are concerned in raising, preparing or shipping goods abroad or distributing foreign goods, to have a sudden and great change in the conditions existing in the Settlement. Security is important, not only in the interest of foreign and Chinese residents of the municipality, but in the interests of the territory dependent upon it.

On the other hand the position of the present municipal government is precarious. It depends on the continuance of the protection of the troops and ships of the foreign Powers in case of necessity, and also on a certain degree of tolerance on the part of the Chinese Government. Extraterritoriality alone is not sufficient to maintain the régime of the Settlement. Extraterritoriality applies only to foreigners. Chinese are subject to Chinese courts and to Chinese laws. Having no courts of its own, the Settlement must depend on the consular and Chinese courts for an essential function of its government, and should the Chinese Government be unwilling to coöperate with the Council and endeavor to extend its control over its own people and their property, the situation would become very difficult. Furthermore, the Settlement is a trading community dependent for its success on business in the interior, which in the last analysis means the good will of the people. If the demand of the Chinese people for the abolition of extraterritoriality and a return of the foreign settlements and concessions becomes more insistent, it is always possible that it may be enforced by a boycott against the goods of the countries which are looked upon as standing primarily in the way. The foreigners in China well know the terrible effectiveness of these boycotts which have been used of late years against both British and Japanese. They cannot be met by foreign troops or gunboats; extraterritorial rights do not protect against their consequences, and the foreign trade of Shanghai, which is after all the principal interest of foreign countries, would gain little through the maintenance of municipal administration if foreign goods could not flow from the docks and warehouses of the municipality to the markets of China.

The Settlement authorities have already made important moves to conciliate Chinese opinion and to coöperate with Chinese residents in the Settlement. They have given to the Chinese residents a share in the government of the Settlement. At the present time, of the 14 members of the Municipal Council, five are Chinese. The parks in the city, formerly barred to the Chinese residents, are now open to them on the same terms as to foreigners. The education of children of Chinese residents is being accepted as a municipal duty. These are important concessions to the increasing sense of independence of the Chinese and are warranted not only by the overwhelming proportion of Chinese residents in the district, but also by the fact that more than half of the taxes are paid by them.

It is evident that the Chinese residents of Shanghai and the Chinese Government and people are in an aggressive mood. It is equally obvious that a situation is anomalous under which certain foreign governments protect a municipality on Chinese territory, the population of which is 97 percent Chinese. There is in the situation ample reason for the coöperation of the Nanking Government and the foreign Powers to work out an organization for the territory with the counsel of the Settlement authorities, which will, without too great a shock to existing conditions, continue the security to person, property and health and the orderly administration of the law which have been the result of the Settlement government, but with more consideration for the Chinese residents.

The plan which Justice Feetham suggests is based on a continuance of extraterritoriality in the Settlement. Ultimately he foresees its abolition, but for a long time to come -- until China is united and pacified under a central government and a constitutional government of checks and balance is set up -- the Settlement should continue in practically the same situation as at present. A larger place should be made for Chinese participation in the government of the municipality, but the majority of the Council must be foreign and the foreign governments must protect the area. Only by treaty fixing the rights of the Settlement can it be guaranteed, and this will mean a revision of the land regulations, which is much to be desired.

Justice Feetham's conclusions are definite. They will undoubtedly be taken into consideration by the foreign governments which in the end must, by negotiation with China, determine the fate of the Settlement. They are not approved by the Chinese press, which claims that the Chinese side of the controversy is not fully presented, and they are contrary to the announced policy of the country. Shanghai forms only part of the larger problem of the relations between China and the Powers, and it will not be allowed to dominate them.

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