Why Nobody Invests in Japan
Tokyo’s Failure to Welcome Foreign Capital Is Hobbling Its Economy
WHEN Turkey abolished the capitulations soon after the war China and Egypt were left as the only two nations bound by extraterritoriality. Now that the Montreux Convention has provided for the complete abolition of the Egyptian Capitulations, China has lost her sole companion. Henceforth she will be the only nation bound by the shackles of the ancient system without any definite date of its abolition. The fact naturally intensifies the bitter feelings of the Chinese people; and once again extraterritoriality has become an important and irritating issue between China and the interested Powers.
The story of China's efforts to free herself from extraterritoriality goes back to 1900. Great Britain was the first, in 1902, to agree to relinquish her extraterritorial rights "when she is satisfied that the Chinese laws, the arrangement for their administration and other considerations warrant her in so doing." The next year Japan and the United States made similar noncommittal promises. They of course failed to satisfy China's aspirations.
China raised the extraterritoriality question at Paris in 1919. The Peace Conference was overwhelmed with the postwar problems, and President Wilson had his hands full trying to deliver the League of Nations, repeatedly threatened with a miscarriage. The cry of China was heard but ignored.
The fruitless efforts at Paris disappointed but did not discourage China. At the Washington Conference, therefore, her delegates asked the Powers to take initial steps toward "abolishing the existing system, which is admitted on all hands to be unsatisfactory both to foreigners and Chinese," and urged that a definite date be fixed for such abolition.[i] After considerable discussion the Conference passed a resolution expressing sympathy for China's aspirations and providing for a commission to investigate the practice of extraterritoriality as well as inquire into the laws and their administration in China. This commission, on China's invitation, met in January 1926, and reported in September of the same year. It recommended the release of the old rights gradually as China was able to give proper protection to foreigners and their property. Nothing seems to have been done to carry out this recommendation.
In 1929 China went to try her luck at the League of Nations. Article XIX of the League Covenant provides for the revision of obsolete treaties, and China's delegate proposed that ways and means be found for the application of that article. He did not say a word about extraterritoriality, but evidently he intended to attack the extraterritorial question under the cover of treaty revision, probably by proving that the eighty-year-old extraterritorial treaties are obsolete. The German delegation supported the Chinese proposal heartily, either because it believed in the abolition of extraterritoriality or had some treaties of its own to revise which it thought might be pushed forward in the wake of the Chinese move. But these manœeuvres are not an immediate part of our story. After weeks of endeavor and a final threat to create "a serious situation," the Chinese delegation succeeded in inducing the Assembly to adopt a resolution recognizing that Article XIX of the Covenant gives every member the right to request consideration of any treaty which the member regards as no longer applicable and, hence, dangerous to world peace. But no further steps seem to have been taken at Geneva.
In the meantime China conducted direct negotiations with Great Britain and the United States. As the result of an exchange of notes begun early in 1928, the State Department on August 10, 1929,[ii] stated in restrained but conclusive terms that the United States, while sympathetic, could only "participate in negotiations which would have as their object the devising of a method for the gradual relinquishment of extraterritorial rights, either as to designated territorial areas or as to particular kinds of jurisdiction, or as to both, provided that such gradual relinquishment proceeds at the same time as steps are taken and improvements are achieved by the Chinese Government in the enactment and effective enforcement of laws based on modern concepts of jurisprudence."
Feeling this reply could not be the last word, China appealed to the United States a second time, not with more arguments, but rather by laying emphasis on the historical American policy of proffering a helping hand to struggling republics. Replying to this second appeal, Secretary Stimson reiterated the United States' attitude as expressed in the note of August 10.[iii] Chinese leaders were naturally disappointed, because they had expected the United States to take the lead as she had done in restoring China's tariff autonomy. But disappointment was not accompanied by any ill feeling, and the Chinese representative at Washington has continued pourparlers with the State Department.
The result of China's negotiation with Great Britain[iv] concerning the major issue is somewhat similar to that with the United States. Great Britain, however, is in a happier position in the matter of details. Besides voluntarily returning to China the concessions at Amoy, Weihaiwei, Chinkiang, Kiukiang and Hankow, she also agreed that all British subjects residing within the former Kiukiang concession should pay taxes according to Chinese law. Nanking considers these steps most significant and appreciates them highly.
One of the arguments[v] often advanced against the abolition of extraterritoriality is that the administration of Chinese law is subject to the interference of military chiefs, and even of political associations.[vi] It must be admitted that to a certain extent this charge is sometimes true; but is China the only country cursed by such interference? Foreigners also charge that if their extraterritorial privileges were removed the Chinese judges would accept bribes and torture would be employed to make innocent persons admit their guilt. In reply, the Chinese retort that it is quite possible that foreign consuls and magistrates take bribes and that the famous "third degree" is not much less hideous than Chinese torture.
With regard to the assertion that there is no government in China, impartial observers must concede that this charge is no longer tenable. Under the able and enlightened leadership of General Chiang Kai-shek, China's progress towards unification and the restoration of prosperity has been remarkable. The Nanking Government today possesses more prestige and power than any of its predecessors, while the New Life Movement has done much to transform the mentality and outlook of the people. Even biased critics will have to admit that at the present time there is a "real Government" in China. The Chinese contention, in a nutshell, is that Chinese law and courts may be bad in certain respects, but that the laws and courts of some other countries are certainly no better.
Whatever may be the reasons for the delay in abolishing extraterritoriality, one unfortunate effect is that the Chinese are led to question the sincerity of the foreign Powers. In view of Japan's experience, where the foreign Powers hung on to their extraterritorial privileges long after Japan had done all that could be expected of her, and did not actually give up such privileges until three years after the Japanese victory in the Sino-Japanese war of 1895, Young China began to feel that the East cannot expect justice from the West and that China must find a solution by some other means than negotiation.
The immediate result is that Young China has begun to pay an undue amount of attention to the way in which Turkey and Russia got rid of similar shackles. The laws of Russia and their application under the Bolshevik régime did not appear to the Chinese to be much more suited to the nationals of the foreign Powers than the laws of China, if the criticisms of the press of the nations in question had any foundation; yet no demand has been heard from those nations that Russia grant extraterritorial privileges. Young China began to puzzle over this glaring difference in the attitude of the foreign Powers towards Russia and towards China. They are asking whether the difference is due to racial prejudice or to the Red Army, or both.
The case of Turkey is no less striking. For many years, nationals of other Powers enjoyed extraterritoriality in that country, obviously for similar reasons as in China. For years arguments were advanced against relinquishing such special privilege in Turkey; those arguments were identical with those advanced for the same purpose in China. But soon after Kemal drove the Greeks into the Ægean Sea the objections of foreigners in Turkey against Turkish control suddenly disappeared. The indications were, it seems, that the Turkish laws and law courts had been reformed and by some magic had been raised overnight to the level of the laws and courts of all modern nations. Indeed, the Treaty of Lausanne, which ended extraterritoriality in Turkey, was actually signed three years before the promulgation of Turkey's new codes.
Now that Egypt, Persia and Siam have got rid of extraterritoriality, and with the cases of Turkey and Russia vividly in mind, the Chinese feel increasingly humiliated by the fact that their country remains the only one in the world subject to this nineteenth century bondage. They become impatient as they wait for all the slow-moving vested interests involved to pass a unanimously favorable judgment on Chinese jurisprudence. In so far as extraterritoriality is unilateral in character, they conclude that it must require unilateral action for its removal.
After much deliberation, the Chinese Government issued a mandate on December 28, 1929, to the effect that beginning January 1, 1930, "all foreigners in China, who are now enjoying extraterritorial privileges, shall abide by the laws, ordinances, regulations duly promulgated by the central and local governments of China." The mandate also ordered the Executive and Judicial Departments to prepare, as soon as possible, a plan to execute this mandate.
Though long expected, this measure created a mingled feeling of dismay and indignation among a considerable number of foreigners in China. France at once lodged a protest against the execution of the mandate. Washington also recognized that a serious question had arisen, but deprecated suggestions that gunboats might have to be employed to enforce extraterritoriality. Great Britain took a similar attitude and informed the Chinese Minister in London (January 1, 1930) that she was willing "to agree that January 1 should be treated as the date from which the process of the gradual abolition of extraterritoriality should be regarded as having commenced in principle." In spite of cynical comments in the British press, China seems to have liked this reply.
There is no denying that the Chinese Government seriously contemplated unilateral abolition, and that it was only at the last moment that Nanking removed the "teeth" of the mandate. Evidently they did so because they were eager to avoid unpleasantness. But clearly the milder course was adopted reluctantly. The writing on the wall seems quite clear. If the Powers move too slowly, they may yet be confronted with an ending of the system by China's denunciation of the extraterritoriality clauses in the treaties.
In spite of internal difficulties and external opposition, China has made much progress toward the goal of freeing herself of extraterritoriality. The first God-sent opportunity came when Germany, Austria and Hungary negotiated new treaties with China after the war. A second opportunity arrived when the Soviet Government approached her for the purpose of replacing the old Tsarist treaties. These nations understood perfectly China's attitude in such matters, and hence did not waste any time in asking for the extraterritorial privileges which they had enjoyed before the war. Treaties on the general principle of equality and reciprocity were therefore soon concluded. Then followed the new treaties with a number of South American and newborn nations of Europe which, as a matter of course, claimed no extraterritorial rights.[vii] A number of other nations, such as Turkey, Cuba, Uruguay, Panama, Hungary and Bulgaria, are also conducting their business in China without extraterritorial privileges; while Mexico, whose treaty concerning extraterritoriality expired in 1928, declared on November 12, 1929, that she "has no intention . . . to demand in the future extraterritorial privileges." To this group of nations without extraterritorial rights, must be added a second group,[viii] such as Belgium, Italy, Spain, Denmark, Portugal, Norway, Sweden and Switzerland, which still enjoy such privileges, but agree to surrender them as soon as "all the other Powers will do so."
Thus, out of a total of thirty-one nations having diplomatic relations with China, only six -- Brazil, France, Great Britain, Japan, the Netherlands, and the United States -- are left in the third camp. Of course, the interests of this small group of nations which seem disinclined to give up special privileges are considerably larger than the interests of the other nations. Nevertheless, the fact that four-fifths of a total of thirty-one nations are willing to give up such privileges is, in itself, significant. Another encouraging fact is that the nationals of the countries without extraterritoriality, e.g. Russians, Germans and Austrians, seem to be getting along smoothly in China, and that their experiences under Chinese law during the last twenty years have not justified the horrible predictions of conservative elements.
Once either Great Britain or the United States decides to show the same generosity as was shown in the case of the tariff restrictions on China, then extraterritoriality will end. It is not likely that either will long hold out if the other gives in; and the moment the Big Two lead the way, the rest in camp three -- Brazil, France, Japan and the Netherlands -- will surely follow.
Another favorable factor is that, since 1907, China has been making steady reforms in her judicial system. Under such able leaders as Dr. Wang Chung-hui and Dr. Sun Fo, the Legislative Yuan has done much in the way of modernizing Chinese law and law courts. The penal code, the penal procedure and the civil procedure codes have been promulgated. Company laws and laws concerning commerce, mining, copyright and patents, prison administration and navigation have all been revised. Over 150 modern law courts have been established (including a supreme court) which have given general satisfaction. Reforms in prison administration have also been going on steadily. Over 100 modern prisons, with room for 4,000 convicts, have been established in various parts of the country, while more are being remodelled every year.
While it is a matter of opinion as to whether or not China's laws and their administration have attained the standards to which they are expected to conform, it is impossible to deny that great progress has been made. China's severest critics admit this.
With the whole picture before us, we can see that there is much to be said both for and against the abolition of extraterritoriality in China. The Chinese, while feeling the system a direct infringement of their nation's sovereignty, nevertheless must remember that the fault for its introduction does not entirely rest on the nations which claim privileges under it. Young China must realize that disorder and recurring civil wars have perhaps as much to do as foreign opposition in preventing the abolition of extraterritoriality, and that a strong, united government will provide a shorter cut to China's goal than the elaboration of anti-imperialist slogans. The Chinese must also understand that the abolition of an institution of such long standing as that of extraterritoriality will inevitably involve certain inconveniences for foreigners in China, whose business is built on the foundation of that institution. On the other hand, the foreigners in question must also recognize that extraterritoriality deprives China of one of the most essential attributes of sovereignty, and that its continuation would handicap China's ability to advance politically. Both sides, therefore, must be openminded in trying to find some reasonable solution that meets the legitimate interests of all concerned and that will be conducive to better understanding between China and the nations of the West.
[i] W. W. Willoughby, "China at the Conference," p. 116-117.
[ii] The text of the American note is published in "The China Year Book, 1929-30," p. 95.
[iii] The New York Times, December 30, 1929.
[iv] The British Note appears in the "China Year Book, 1929-30," p. 908-910.
[v] The arguments against the abolition of extraterritoriality are ably set forth in H. G. W. Woodhead's "Extraterritoriality in China: The Case against Abolition" (Tientsin, 1929).
[vi] The British Minister's Note to Nanking, August 10, 1929.
[vii] These include Bolivia, Chile, Czechoslovakia, Finland, Greece, Persia and Poland.
[viii] Treaties with Belgium, Denmark, Italy, Portugal and Spain were signed in 1928. Agreements to relinquish extraterritoriality were signed by Sweden and Switzerland in 1908 and 1918 respectively. Norway in a note dated August 14, 1929, declared she "is prepared to abolish the same [extraterritoriality] when all the other Treaty Powers will do so."