SHANGHAI and Hong Kong are two of the world's great cities. Until Shanghai became the scene of major Sino-Japanese hostilities in 1937 it was among the five largest ports in the world and was the industrial, commercial and financial metropolis of China. About twenty years ago Hong Kong's annual volume of shipping was the greatest in the world. Though Hong Kong never rivalled Shanghai as an industrial center, it was a southern terminus of one of China's main railway systems, the distributing center for the trade of south and mid-China and a terminus of American, British and Chinese aviation services.

The heart of Shanghai was the Foreign (or International) Settlement. When the Japanese have been expelled from Shanghai, the administrative control of the entire city will pass into Chinese hands. That was made certain by the treaties which the British and American Governments signed with the Chinese Government in January 1943; the treaties provide for the abolition of extraterritoriality and of all other special privileges enjoyed by British and American nationals in China. Many questions relating to Shanghai will nonetheless be a matter of concern to the Anglo-American Powers.

Hong Kong was a British Crown Colony, but a free port, in which shipping, regardless of nationality, received equal treatment and facilities. The British Treaty was silent in regard to the ceded and leased territories of Hong Kong. The future of Hong Kong has yet to be determined. Will the city again be placed under British sovereignty, will it be internationalized, or will it be united with China? There are strong arguments to support each of these three solutions.

Since Pearl Harbor there has been a tendency to be apologetic for all past British and for some American activities in China, especially those activities which resulted in the extraterritorial system and the establishment of colonies, settlements or concessions on Chinese soil. Both Britain and America were motivated by self-interest in obtaining these special rights and privileges, but the manner in which they have been exercised has not been "imperialistic" in the worst sense of that word, and may, in fact, not improperly be regarded with some pride by the British and United States Governments and their peoples.

In 1902 and 1903 the British and American Governments, respectively, signed treaties agreeing to give up their extraterritorial privileges as soon as the state of Chinese laws, the arrangements for their administration, and other considerations warranted them in so doing. The Chinese displayed so little interest in the fulfillment of these conditions that in June 1918 their government concluded a treaty with Switzerland, conceding extraterritorial privileges to nationals of that state. It was not until the Versailles Conference that the Chinese Government formally raised the issues of the abolition of consular jurisdiction, the relinquishment of leased territories, and the restoration of foreign concessions and settlements.

The twenties were a period of great internal confusion in China, but soon after the organization of the new Nationalist Government at Nanking in 1927 the British and American Governments agreed to take up negotiations for the abolition of extraterritoriality. By the summer of 1931 draft treaties for this purpose were virtually completed. The final negotiations were suspended as a result of the crisis produced by Japan's invasion of Manchuria in September of that year and they remained in abeyance until the autumn of 1942, when negotiations were resumed which resulted in the treaties of 1943.


A brief summary of the history of the Crown Colony of Hong Kong and of the development of the International Settlement at Shanghai is a necessary preface to a discussion of the future of the two great ports. In the fourth decade of the last century China, like Japan, was pursuing a rigidly isolationist policy. Such external trade as was permitted was confined to a single port -- Canton -- where conditions of residence and commerce were intolerable to any self-respecting foreign merchant. The Manchu emperors had imposed "a rule of unequivocal seclusion and tyranny," to quote a revolutionary manifesto issued by Dr. Sun Yat-sen and Dr. Wu Ting-fang in January 1912.

In 1839 hostilities broke out between Britain and China. They originated in the seizure of British (and other) opium stocks at Canton, and this conflict has since become known as the "Opium War." To the British Government the question of opium was incidental to the main issue; the seizure of the opium and the holding as hostages of the entire British community brought to a climax a long series of grievances arising out of the denial by China of a status of international equality to any other nation. In the Nanking Treaty which ended the war, opium was mentioned only in connection with the indemnity; this was assessed at half the estimated value of the opium that had been seized by the Chinese. No provision was made for the legalization of the opium trade, as has so frequently been asserted. The most important conditions in the Treaty were those providing for the opening of the ports of Canton, Amoy, Foochow, Ningpo and Shanghai to British trade (and hence to foreign trade in general), the appointment of consular officers who were to act on a footing of equality with Chinese officials, a uniform import and export tariff, and the cession to the British of the island of Hong Kong.

Hong Kong, with an area of about 32 square miles, was then a desolate, rocky region, frequented by pirates and a few fishermen, it had been occupied in 1839 by the British as a base for naval and military operations. It possessed a potentially good and spacious harbor, but was separated from the mainland by a channel so narrow that the island would have been undefendable against the artillery in use even in those days. Following a second war with China, therefore, the British Government, by the Peking Convention of 1860, obtained the cession of a strip of mainland territory known as Kowloon, in which Chinese batteries had been mounted during the hostilities. By the end of the century, artillery range had so increased that control of this strip of land afforded inadequate security, and following the seizure of Kiaochao and Port Arthur by the Germans and the Russians, respectively, in 1898, the British Government sought and obtained a 99-year lease of a larger strip of mainland, since known as the New Territories. This gave the colony a hinterland 16 to 20 miles in depth and increased its total area to 390 square miles. The advent of the bombing plane rendered even this addition to the colony's territory insufficient for defense.

The development of Hong Kong from a barren pirate stronghold into the largest port in the world was attributable to a number of factors, chief of which were the rule of law, the maintenance of peace and order, and the absence of a customs tariff. Save for light duties on alcoholic beverages and tobacco, Hong Kong has always been a free port. At the height of its prosperity, in 1921, 672,680 vessels (excluding fishing junks), aggregating 43,500,000 tons, entered and cleared the harbor. Most of the largest ocean-going steamers plying to and from the Far East loaded and unloaded portions of their cargoes there. Hong Kong became the most important distributing center in the Orient. It was the railway terminus of south China; and before the attack upon Pearl Harbor it had been the most important aerial terminus in the western Pacific.

The colony enjoyed a limited measure of self-government. At the head of the administration was the Governor, representing the Crown. Assisting him were an Executive Council of six official and three unofficial members (one of whom was Chinese), and the Legislative Council of 17 members (three of whom were Chinese). A Secretary for Chinese Affairs was charged with the duty of caring for the interests of the Chinese population.

In 1937, just before the outbreak of Sino-Japanese hostilities, the total population was estimated at a little more than 1,000,000, of whom all but 22,500 were Chinese. Following the Japanese invasion of south China in 1938, tens of thousands of Chinese sought refuge in British territory, the total reaching half or three-quarters of a million by December 1941. It was realized from the outset that the presence of these refugees would impose an additional strain upon the administration and defense of Hong Kong in the event of war with Japan, but their repatriation was considered impossible for humanitarian reasons.

The administration of the colony was complicated during the two decades preceding Pearl Harbor by the intense nationalism of the people of Canton, which at times assumed a violently anti-British character. This was manifested in strikes and boycotts, both at Canton and within Hong Kong. The existence of a British colony on former Chinese soil was, of course, resented by the nationalists. Both in China and abroad there was criticism of the measures taken by the British to restrain Kuomintang propaganda; and there was also criticism of Hong Kong's opium monopoly and of the "Mui Tsai" system, through which Chinese girls were placed in domestic service. The British Government regarded permanent residents, Chinese included, as British subjects and was, perhaps not unnaturally, averse from allowing the Chinese population to become indoctrinated with strongly nationalistic ideas. The opium monopoly, it is true, provided substantial revenue, but the reason usually advanced in its justification was that it would have been beyond the capacity of the colony to maintain a preventive service large enough to stop smuggling from the mainland and Canton. The Mui Tsai system was vigorously denounced in Great Britain as a form of girl slavery. The Chinese, however, maintained that it was a traditional system of adoption prevalent throughout south China and that its repression would involve intolerable inquisitorial activities on the part of the local authorities. As a result of a series of investigations legislation was adopted designed to prevent any girl under 18 from being kept in a household against her will. This included registration of all Mui Tsai and periodical visits by inspectors or inspectresses employed for the purpose.

The question of returning the leased territories (British, French and Japanese) to China was first seriously raised at the Washington Conference (1921-22). Japan declined to consider the return of the Kwantung Leased Territory. France said she would agree to the restoration of Kwangchowan only as part of a general scheme in which all the Powers involved took part. Mr. Balfour (later Earl Balfour), as head of the British delegation, offered to restore the leased territory of Weihaiwei subject to certain conditions. As regards the leased territories of Hong Kong, he pointed out that without the leased territory, Hong Kong was perfectly indefensible and would be at the mercy of any enemy possessing modern artillery. He hoped that he would carry the Conference with him when he asserted that the safeguarding of the position of Hong Kong was not merely a British interest, but one in which the whole world was concerned. Mr. Balfour then read the following extract from the United States Government's "Commercial Handbook of China:"

The position of the British colony of Hong Kong in the world's trade is unique, and without parallel. It is a free port except for a duty on wines and spirits; it has relatively few important industries; it is one of the greatest shipping centers in the world; it is the distributing point for all the enormous trade of south China, and about thirty percent of the entire foreign commerce of China. The conditions of Hong Kong in its relations to commerce are in every way excellent. . . .

This brief story of Hong Kong would not be complete without some reference to the city's influence upon progress in China. Since there is space to quote but one authority I shall take the best. In 1923 Dr. Sun Yat-sen visited the colony. Here are a few extracts from the address that he gave at the University on that occasion:

I feel as though I had returned home, because Hong Kong and its University are my intellectual birthplace. I have never before been able to answer the question properly, but now I feel I am in a position to answer it today. The question is 'Where did I get my revolutionary and modern ideas from?' The answer is: 'I got them in this very place, in the colony of Hong Kong.' I compared Heungshan [his birthplace] with Hong Kong, and although they are only fifty miles apart, the difference of the government oppressed me very much. Afterwards, I saw the outside world, and I began to wonder how it was that foreigners, that Englishmen, could do so much as they had done, for example, with the barren rock of Hong Kong within seventy or eighty years, while in four thousand years China had no place like Hong Kong. . . . Then the idea came into my head. Why cannot we do the same thing in China? . . . My fellow-students. You and I have studied in this English colony, and in an English university. We must learn by English examples. We must carry this English example of good government to every part of China.


So much for Hong Kong's past. Shanghai was never a British colony. Its most important area, the International Settlement, owed its establishment and much of its growth and its prosperity to Anglo-American coöperation.

As already mentioned, Shanghai was one of the five ports opened to British residence and trade under the Nanking Treaty of 1842. A British Consul and a few British merchants arrived there in 1843, and were followed by Americans, French and representatives of other nations. But it was early apparent that the opening of new ports on paper was a very different matter from opening them in practice. Though Canton, for example, was supposed to be open to foreign residence and trade in 1843, foreigners were unable to go into the Chinese city until 1860. Fanatical animosity toward foreigners was not so intense in Shanghai, however, and the newcomers took up their residence within the walled city. But they were not welcome guests; and living within the city walls meant for them deprivation of many hygienic and other amenities. All parties were relieved when the local Chinese authorities set apart certain areas below the city for French, British and American settlements.

In the middle of the last century the Shanghai area was twice overrun by Chinese rebel forces, and thousands of Chinese refugees sought asylum in the foreign settlements. They were admitted and sheltered, and many thousands of them remained; foreigners and Chinese alike discovered it was to their mutual advantage to live and work together. Thus, in areas intended for the exclusive use of foreigners, were laid the foundations of the International Settlement in which the bulk of the population was Chinese, but in which the municipal administration remained in Anglo-American hands. The British and American settlements were amalgamated in 1863 and the French were invited to join; they declined, and continued to administer the French concession as a separate area.

The administration of the International Settlement was conducted under so-called Land Regulations which had the approval of the Chinese and the foreign authorities. For many years the Municipal Council consisted of nine foreign ratepayers, elected annually on property or rental franchises. Three Chinese, who were selected by a Chinese Ratepayers' Association, were added to the Council in 1928; two years later the number was increased to five. The area of the International Settlement was twice extended -- the last time in 1899. In December 1941 it covered eight and two-thirds square miles and embraced a population of about 1,600,000, all but some 125,000 of whom were Chinese. Though Anglo-American influence predominated in the administration, the Council was a most cosmopolitan body.

The International Settlement was unique in many ways. All the Councillors, including the chairman -- whose office was virtually a whole-time job -- served on an honorary basis. Until recently the fire brigade was manned entirely by volunteers. There was also a volunteer auxiliary police force and a Military Volunteer Corps, some 2,000 strong, under a British Commandant and containing American, British, Chinese, Filipino, Japanese, Portuguese and Russian units. There was never any difficulty in finding public-spirited residents to serve on the Council or in its volunteer organizations, and in the 80 years of its existence there was never a scandal involving a Councillor in the performance of his public duties. At two of the most critical periods in Shanghai's recent history -- in 1925 and again in 1937 -- the chairman of the Council was an American citizen. Probably nowhere else in the world have the advantages of Anglo-American coöperation been more apparent and more fruitful.

The administration of the law within the International Settlement was complicated by the existence of extraterritorial rights. All nationals whose governments exercised these rights (e.g., the United States, Britain, France, Italy, etc.) were tried by their own courts in any legal action, civil or criminal. Chinese citizens, and nationals of countries which did not possess extraterritorial rights (e.g., Germany, Austria, Czechoslovakia, etc.) were tried in a Special Chinese Court, the successor to what was known as the Mixed Court. From its early days the Council fought for the principle that offences committed within the Settlement must be tried and punished there, and that a prima facie case must be made out before the extradition of those accused of committing crimes outside the area. There were times when the assertion of this principle saved many Chinese from torture and death. Many Chinese political and military leaders, including Dr. Sun Yat-sen himself, sought asylum within the foreign areas of Shanghai when the tide of battle went against them.

Until the turn of the century the Chinese took little interest in this impairment of their sovereignty, as is shown by their government's willingness to extend the boundaries of the Settlement as late as 1899. Even after the overthrow of the Manchu dynasty, when the return of foreign settlements and concessions to Chinese sovereignty became the avowed objective of successive Chinese Governments, enlightened Chinese realized that there were two sides to the picture, and that the Settlement offered a constructive challenge to progressive Chinese. In 1926 Marshal Sun Chuan-fang, Governor of Kiangsu, the Province in which Shanghai is situated, announced the establishment of a Greater Shanghai Municipality, and called attention to the contrast between conditions in the foreign settlement and the old native city in the following words:

You will remember that when we saw each other last I expressed the idea of creating an organization in Shanghai to unite all the administrative powers into one center, so that it might have the necessary authority to improve the municipal government, plan a new port, and settle long-standing diplomatic disputes, gradually converting the area outside the foreign settlement into a model city, the result of which should form the basis for our demand for the abolishing of the foreign concessions. This has been one of my dearest dreams, for whenever I come to the Treaty Port I feel thoroughly humiliated, not only because a Treaty Port is a standing reminder of our loss of sovereignty, but also because whenever we pass from the concessions into Chinese territory we feel that we are crossing into a different world -- the former is the upper, the latter is the underworld; for nothing in Chinese territory -- roads, buildings, or public health -- can be compared with the concessions. This is the greatest of our national humiliations, much greater in my opinion than the loss of sovereignty.

Marshal Sun appointed one of China's most distinguished scholars -- the late Dr. V. K. Ting -- first Mayor of Greater Shanghai and under him and his successors astonishing progress was made in the development of the new Chinese municipal area. It was cruelly devastated by the Japanese in 1932 and again in 1937. As has already been stated, Japanese aggression halted negotiations between China and the Anglo-Saxon Powers for abolition of extraterritoriality. In one way it was fortunate that these negotiations were suspended; the existence of the International Settlement unquestionably obstructed Japan's plans for the subjugation of China, particularly her scheme for undermining China's currency and monopolizing the trade of the Yangtze valley. The Shanghai Municipal Council stubbornly resisted all attempts of the Japanese armed forces to dominate the administration of the Settlement. History might have taken a very different course had the Council yielded.

The whole of the International Settlement was occupied by Japanese armed forces on the morning of December 8, 1941. From that date it ceased to exist. There is no possibility that it will be restored to its former status. But the Japanese occupation is only temporary. Unless the Settlement is razed to the ground when the Japanese are driven from China, the dream of Marshal Sun Chuan-fang should be realized.


The Shanghai that will revert to Chinese sovereignty will be very different from the muddy flats which Anglo-American enterprise, with Chinese coöperation, developed into one of the greatest and most progressive cities in the Far East.

Nationalist China had many criticisms of the Shanghai administration, some well-founded, some based upon myths or misunderstanding. It was natural that there should be resentment at the existence of an imperium in imperio in which most foreigners were exempt from Chinese jurisdiction and which placed the entire community outside China's fiscal authority, except for customs duties and consumption and land taxes. The Settlement suffered from the paradox of being in some respects virtually an independent state and in others an integral part of China. During the civil wars that followed the overthrow of the Manchu dynasty the Shanghai Municipal Council endeavored to maintain a policy of strict neutrality, using its military and police forces to maintain internal peace and order and to prevent the entry of Chinese armed forces of any faction. Similarly it attempted to exclude both Chinese and Japanese forces from the Settlement in 1932 and again in 1937.

Of course much of China's antagonism to the International Settlement was psychologically understandable. Europeans and Americans who came there to trade and settle brought with them their habits, customs and standards of living, and expected Chinese residing in the areas they administered to accept and in some instances to conform to them. They established for themselves recreation grounds, clubs, hospitals and public cemeteries, none of which institutions was familiar to the Chinese. As recently as 30 years ago there was virtually no social contact between Chinese and foreigners. But it would be unfair to attribute this wholly, or even mainly, to western racial prejudice. The Chinese themselves were at least equally responsible for the social gulf between the races. The fact that Chinese women, for instance, were almost as secluded as inmates of a harem, and were debarred from social contact with men outside their own families meant that practically all the entertaining done between the two communities was confined to "stag parties" at Chinese restaurants. When Chinese women emerged from their seclusion after the establishment of the Republic, and as increasing numbers of young Chinese who had completed their studies abroad returned to China, resentment arose at what was labelled the "superiority complex" of the foreigners. From this resentment arose such myths as the time-worn canard that a notice was once posted outside the Shanghai public gardens reading "Chinese and Dogs Not Admitted," and apocryphal tales of prominent Chinese guests being refused admission to foreign clubs or shown to the back doors. There were similar fables to the effect that Chinese were debarred from travelling first class on trains and coastal and river steamers.

Charges of "exclusiveness" are bound to arise in a community in which two entirely different civilizations collide; to be "different" anywhere is to risk the charge of pretensions to superiority, and above all is this so in the Orient. The ordinary American or Briton residing in countries in Europe or South America usually adopts the diet and style of living of the population. This is not the case in any part of the Far East, if one excepts a few missionaries and a very much smaller number of westerners who "go native." The average American or Briton finds an occasional selected Chinese meal delightful, but would find a continuous Chinese diet unpalatable and unnourishing. And the Chinese style of housing and living appear to him unhygienic and medieval. Dual living standards, resulting in a certain amount of social exclusiveness, were inevitable where Europeans or Americans settled down in Asiatic countries.

It is fair to emphasize that many of the allegations made against the Settlement régime and repeated to this day were not factual. It was said, for example, that the administration of the International Settlement was an obstacle to the Chinese Government's opium-suppression policy. No opium is grown within hundreds of miles of Shanghai; the Municipal Police and the Chinese Maritime Customs consistently attempted to prevent the smuggling of Chinese or foreign opium into the area. During the internal upheavals following the establishment of the Republic there was a serious recrudescence of opium cultivation in mid and western China, and most of the opium which reached Shanghai was imported by Chinese racketeers, who obtained the coöperation of China's armed forces in escorting it from the interior to the coast. For some years these racketeers acted with the connivance of the police of the French concession, whose morale was completely undermined. When the French authorities cleaned up their area, the racketeers simply moved their stocks and selling agencies over the concession border into Chinese territory.

The abolition of extraterritoriality should ease many of the "psychological" problems. There will, of course, be practical problems of no little concern to Great Britain and to the United States, whose nationals have substantial interests in the city, including public utilities, real estate, wharves, clubs, theaters, hotels, banks, apartment buildings, mills and factories. It may be hoped that the complete restoration of China's sovereignty will not be found incompatible with reasonable foreign representation in the local administration. It is to China's advantage, as well as to the advantage of foreigners in the former Settlement area, that Shanghai be a prosperous and well-run city. No city under purely Chinese control in the past possessed public utilities of the size and efficiency of those of Shanghai, or a police force comparable to that of the Settlement. The nationalization of all public utilities is understood to be the policy of the Kuomintang. It would be unjust if the Shanghai public utilities were expropriated without adequate compensation. Further, inasmuch as the Chinese have not had experience in managing power stations, waterworks, gas-works, tramways, and telephone systems as elaborate as those in the International Settlement, common sense suggests that it would be mutually advantageous for the Chinese to retain the services of American and British experts for some years to come.

Apart from a shortage of technicians China may be hard put to find a sufficiency of experienced administrative officials, especially if, as ordained by the Cairo Conference, she recovers control over Manchuria and Formosa, in addition to all territory at present under Japanese occupation. A vast amount of administrative reorganization will be required when China takes over these areas. For her to draw on a body of trained foreign administrators for assistance in rehabilitating Shanghai -- a task for which external financial assistance is almost certain to be necessary -- seems logical and desirable from every point of view. The transition from extraterritoriality to unfettered Chinese jurisdiction would probably be smoother if an experienced foreign element were also temporarily retained in the Shanghai police force. There is a precedent for such a course in the composition of the Police Force for the External Roads Area of the Settlement prior to Pearl Harbor. Foreign members of the Shanghai Municipal Police, though retained on the roll of that force, were temporarily placed under the orders of the Chinese Chief of Police. It would not be easy to avoid friction and misunderstanding if inexperienced Chinese police were suddenly put in sole charge of an area, containing many thousands of Europeans and Americans, which for nearly a century has been under western administration.


Some of the questions raised by a discussion of the future of Hong Kong are similar to those which we have noted in regard to Shanghai. Some are quite different. Hong Kong and Kowloon are British territory, definitely ceded to the British Crown in 1842 and 1860 respectively; and the British lease of the New Territories does not expire until 1997. But though the avowed desire of the Chinese Nationalists for the return of the colony has no legal basis, the future well-being of Hong Kong must depend upon Anglo-Chinese friendship. Whatever may be the status of Hong Kong, the prosperity of the city can be assured only by friendly coöperation between the British and Chinese Governments.

Where strategic considerations are involved, the American Government likewise has a clear interest. Hong Kong may be destined to play a vital part in any international scheme to prevent a recurrence of Japanese aggression. It is not the purpose of this paper to examine the possible forms which such international action may take. The Filipino Government has expressed its willingness to grant naval, military and air bases to the United States on the soil of the Philippine Republic; and there have been suggestions from Chungking that, in the interests of Pacific security, similar bases should be granted to the United States on the island of Formosa. If either or both projects are undertaken, the rehabilitation of Hong Kong as a British base would appear to be a natural corollary. British forces at Hong Kong and American forces at Corregidor would be in a position to close all exits from the East China Sea. If we are alert to nip in the bud any Japanese attempt at rearmament, Hong Kong need not be made a heavily fortified base.

Great Britain, of course, has enormous vested interests at Hong Kong -- in its wharves and buildings, public works and public utilities, docks and shipbuilding yards. It would not be just or reasonable for China to expect these establishments to be handed over without adequate compensation, and the enormous sum that would be required for this purpose could probably be put to much more productive use within Chinese territory. Were the colony to be restored to China, such questions as the carrying-over of experienced western technicians and officials in the city administration would be relevant here also.

Finally, emphasis must again be placed upon the past rôle of Hong Kong as an international distributing and communications center in the Far East. Hong Kong may grow to be an even more important port for the distribution of import and export cargoes than it was in prewar days -- always provided it remains a free port -- and will continue to be a junction and terminus of great international airlines. The international importance of Hong Kong will mount if, unhappily, postwar China should be torn by civil strife -- a possibility which cannot be ignored, much as one hopes that a unified China will emerge from this long and exhausting conflict. And, as a matter of realism, it should be pointed out that in the event of a renewal of civil war in China, the disappearance of all foreign settlements and concessions might make Hong Kong the only place of refuge for the foreign communities in China, as at times it has been in the past.

Prime Minister Winston Churchill may not have had Hong Kong particularly in mind when he said that he had not become the King's First Minister to preside over the liquidation of the British Empire. But neither his Cabinet, nor any that will probably succeed it in the near future, is likely to treat the return of Hong Kong to China as a foregone conclusion. Does any responsible person wish to say today what the conditions in the Far East will be at the time of Japan's unconditional surrender? There may, in fact, be many very good reasons of a strategic or an economic nature -- not to mention questions of "prestige" -- why the British Empire should refuse now to make decisions which may not correspond to its own interest, to its Allies' interest, or the realities of a situation which no man can foresee.

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  • H. G. W. WOODHEAD, long resident in China; formerly editor of the Peking-Tientsin Times and the "China Year Book"
  • More By H. G. W. Woodhead