IN a declaration of American policy in China on January 26, 1927, the Secretary of State mentioned that the United States "holds no concessions in China." The statement was widely challenged on the ground that the United States participates in maintaining the International Settlement at Shanghai, and the Secretary's reply distinguishing between a settlement and a concession brought a rejoinder from the English Contemporary Review that the obligation of defense is the same in either case. The demands of the Chinese for the restoration of foreign concessions and settlements (for example, at the Paris Peace Conference) usually include the International Settlement in such a way as to indicate that in their opinion there is little difference between them. Is the United States in the same position as other Powers which do have concessions, and does this position coincide with our oft-expressed policy of favoring China's territorial integrity?

Another reason for inquiry into the nature of the International Settlement may be the common assumption that experiments in international administration have always failed and that international government of a territory does not work. For more than sixty years the International Settlement and a French Concession have existed alongside at Shanghai, and they may be regarded as furnishing some evidence as to the results of the two types of administration. The two have an approximately contemporaneous history. The Concession is a European controlled area in an Eastern country, the Settlement is an internationally (and for most of its history a European internationally) controlled area in an Eastern country. Their inhabitants are not essentially different in race. Under some conditions, Shanghai would be an excellent place to test the relative merits of national and international government. Whether these conditions prevail may appear more clearly after a review of the records.

Shanghai has a long history. It is said to have existed more than two thousand years ago, and throughout modern times it has been a port of importance. It was one of the five treaty ports opened to foreign commerce by the British treaty of Nanking in 1842, and in recent years it has become a great center of foreign interests, perhaps the greatest in the Orient. On a basis of tonnage it ranks as one of the seven largest ports in the world; in 1925, it cleared more than 32,000,000 tons of shipping. It has become, also, a great center of population; if the various districts of Greater Shanghai be taken together -- the International Settlement, the French Concession, the old city, Nantao, Chapei, part of Paoshan, Pootung and Woosung -- it has a population of two million, of which the foreigners who are largely responsible for its modern development do not number more than 50,000.

In latter years the foreign population has been greatly increased by the immigration of Japanese and Russians. In the 1925 census, which does not include the French Concession, the Japanese population was given as 13,804; while a quarter of a century ago, in 1900, it was only 736. The number of Japanese was more than doubled between 1900 and 1905, and again between 1910 and 1915. The same census gave the number of Russians as 2,766, though it is now estimated that 10,000 Russians have come to Shanghai since the Russian revolution. In 1915, the number of Russians was less than 400. The 1925 census, combined with the census taken in the same year in the French Concession, listed 8,191 British nationals, 3,093 Americans, 1,506 Portuguese, 1,174 French, 1,154 Indians, 1,040 Germans, 327 Danes, 280 Italians, and lesser numbers of more than thirty other nationalities. Shanghai is therefore a very cosmopolitan community, though more than ninety-five percent of its population is Chinese.


The way for other foreigners was paved by the British in 1843. The first Sino-British treaty in 1842 had given to the British a right to reside in Shanghai without molestation or restraint "for the purpose of carrying on their mercantile pursuits," and in 1843 a supplementary treaty provided more explicitly that to this end ground and houses should be set apart by the local officials in communication with the British consul. The boundaries of an English settlement between the Yang-King-Pang and Soochow creeks and fronting on the Whangpoo River, were agreed upon in 1845, and in the same year Land Regulations were promulgated for its ordering. Meanwhile, in 1844, both the United States and France had concluded treaties with China securing to their nationals very similar privileges of residence, and in 1849 the French followed the British example and delimited an area on the other side of the Yang-King-Pang which soon came to be known as the French Concession. The Americans established a center in Hongkew, across the Soochow creek from the English Settlement. An American missionary, Bishop Boone, seems to have attempted to make this an American Settlement in 1848, but though it came to be locally known both as the Hongkew Settlement and the American Settlement, no agreement for its delimitation as an American residential area was made until fifteen years later.

The original intention may have been that these areas, at least the British and the French, should be kept exclusively for the people of a single nationality. For a time Chinese were excluded from residence in them. In 1846, the American consul created an incident when he hoisted an American flag inside the English Settlement. But the exclusive policy was soon abandoned. When disturbances arose in other parts of Chinese territory many Chinese flocked into these areas, particularly during the Triad rebellion in 1853 and the Taiping rebellion a few years later. An American consul urged that they be permitted to stay. The abandonment of attempts at exclusion called for a closer coöperation within the three foreign areas. In 1854, new Land Regulations were promulgated by the British, French and American consuls, all three of whom attended a meeting of the land renters held in that year in the English Settlement. Though the question of defense was not agreed upon, the local French consul seems to have consented to amalgamation, and for possibly a few years the English and French areas were under common control; but the consul's action was not ratified by the French Government and the consent was later withdrawn. There must have been some separate control in the Hongkew settlement, for its boundaries were delimited with the participation of the American consul on June 25, 1863; and at a meeting of the land-renters held at the United States consulate on September 28, 1863, a committee on roads which had been appointed on May 29 recommended that the management of the "Hongque settlement" be transferred to "the existing municipal council on the English Concession." The transfer was actually effected in the following month.

There seems to be little justification for saying that a separate American Settlement existed at Shanghai, except during the four months from June to October, 1863; and no record of the American Government's sanction of the action taken by the consul on June 25, 1863, is known to the writer. The combined English and Hongkew settlements were locally known for a long time as the English and American settlements, or as the English-American Settlement. An election notice issued on November 6, 1866, refers to the "English and American Settlements." In 1893, an American consul assisted in erecting boundary stones which referred to the "American Settlement." And as late as July 15, 1899, a reference was made to the "American and English Settlements," as well as to "the municipality of the Anglo-American Settlements," when the American consul assented to the extension of the Settlement boundaries. But in more recent years the name in common use is the International Settlement, though the official title still remains the "Foreign Settlement at Shanghai North of the Yang-King-Pang."


The International Settlement is governed under a municipal charter called the "Land Regulations," adopted in 1869, with significant amendments and additions made in 1898. They were based upon a revision of the Land Regulations of 1854, to which a Chinese local official -- the Taotai -- had agreed under the pressure of the disturbed conditions then existing in China. It was provided in the Land Regulations of 1854 that any proposed additions or modifications should be "consulted upon and settled by the foreign consuls and intendant of circuits in communication together, who shall equitably decide thereon, and submit the same for confirmation to the representatives of their respective countries in China and to the Chinese Imperial Commissioner managing the affairs at the five ports." In spite of this provision, however, the Land Regulations of 1869 were promulgated without the previous approval of the Chinese authorities, having been provisionally agreed to by the American, British, French, German and Russian representatives at Peking. When they were amended in 1898 the Viceroy declared through the Taotai that the Land Regulations were not of interest to him, but "should be satisfactorily arranged between the Municipal Council and the Consular Body." In May, 1899, when the boundaries of the Settlement were extended, the Taotai issued a proclamation that "the entire area of the International Settlement shall be within municipal control, excepting temples founded by Imperial sanction and sites employed officially by the Chinese Government; with these exceptions, the existing regulations shall operate and must be obeyed." The present Land Regulations must therefore be taken to have been agreed to by a local and somewhat subordinate Chinese official; it is only by acquiescence that the more responsible Chinese authorities are committed by them.

Under these Land Regulations, the chief agency of government in the International Settlement is the body of foreign rate-payers. They meet annually on the call of the consuls of the Powers which enjoy exterritoriality. The meetings are often poorly attended, and in recent years a quorum frequently has been lacking. At the latest meeting, on April 13, 1927, 547 rate-payers were present out of a possible 2,368, with a total of 790 votes out of a possible 2,688 (non-resident rate-payers may vote by proxy). The records of the annual meetings show little attention given to details of municipal affairs, which must in the nature of things be left to a smaller executive agency.

In 1869, an earlier committee on roads and jetties was succeeded by an "executive committee or council," elected by the foreign rate-payers with certain property qualifications. This election is sometimes, as in 1927, arranged in a perfunctory manner, for if the number of nominees does not exceed the number of members they are declared to be elected without any actual voting. The Municipal Council, as it is now called, exercises large powers in the management of the Settlement's municipal affairs. It is limited only by the Land Regulations, and the limit can be enforced only by a "Court of Foreign Consuls," which was created as an "experiment" in 1869. This so-called Court is in reality a committee of the Shanghai Consular Body before which the Council may be sued. It might have become an administrative tribunal with large powers of review, and even of general supervision, but it has never been much employed and in recent years it has heard only a few cases of relative unimportance. The Council is, therefore, to a large extent, independent. It is responsible only to the rate-payers to whom it reports each year, and the latter are responsible in turn neither to the Consular Body nor to their governments. The Settlement is not the "free city" which was once proposed, nor is the term "Republic of Shanghai," which is sometimes used, altogether apt; but it enjoys a large measure of independence from outside control.

It is quite generally assumed that the Consular Body exercises some kind of superintendence over the Municipal Council. But the consuls' powers under the Land Regulations are very limited. They create and compose the "Court of Foreign Consuls." They issue the call for meetings of the rate-payers, and may call special meetings. They fix the dates for elections of members of the Council. They perform certain functions with respect to the registration of land transfers. They must assent to certain changes in the By-Laws. They conduct the relations of the Council with Chinese authorities outside the Settlement. But they have no general powers over the action of the Council. When they do act, the Consuls are responsible to their diplomatic superiors at Peking and to their governments. No reports of their meetings for dealing with local affairs are regularly published, and information concerning their action is difficult to obtain.


The Municipal Council is often said to be an international body, and the Settlement is supposed to have an international government. The rate-payers for 1925 were recently stated in the House of Commons in London as belonging to twenty-two nationalities. Of a total of 2,742 rate-payers, 1,157 were listed as British, 552 as Japanese, and 328 as American. At present, five of the nine members of the Municipal Council are British, two are American and two are Japanese -- a second Japanese having recently replaced a sixth British member. Formerly, before their exterritoriality was abolished, there were German and Russian members of the Council. A member has no strictly representative capacity with reference either to his government or to his conationals among the rate-payers. The municipal staff is very largely British, and the local attitude that the British control the Settlement's affairs is amply borne out by the facts. No person of other nationality holds any of the higher posts in the administration. The commissioner-general is British, as are also the highest officials in the volunteer corps, the fire brigade, the police force, the health department, the public works department, the electricity department, the sewage disposal department, the finance department and the Secretariat. The director of the municipal band, however, is Italian. A recent Shanghai directory listed 1,076 municipal employees, of whom 965 were British; it did not include 792 Sikhs from India serving in the police force. It showed but four Americans holding responsible positions. In recent months, much has been made of the fact that an American is now chairman of the Council, as indicating the international character of the Settlement; but he holds that position largely as a result of British support which he has in no way alienated.

On the other hand, when the Shanghai Consular Body acts with reference to local affairs it is clearly international. The local consular representatives of Austria, Germany, Finland and the Union of Socialist Soviet Republics do not participate, though the German community is relatively large. But most of the "treaty Powers" are represented, and at the present time the Consular Body is composed of the consuls-general of the United States of America, Belgium (in spite of the question whether her treaty is in force), Brazil, Denmark, France, Great Britain, Italy, Japan, The Netherlands, Norway, Portugal, Sweden and Switzerland, and the consuls of Mexico and Spain. The participation of the French Consul-General is hardly more than formal because of the existence of the French Concession.

In this list one country is conspicuous by her absence -- China. In 1925 the total population of the Settlement was 840,226, and of this number 810,278, more than ninety-six percent, were Chinese. But the Chinese have no part in the government of the Settlement, except since the beginning of 1927 in their partial control of the new Provisional Court. Chinese rate-payers are unrepresented at the meetings of the rate-payers of the Settlement. They have recently formed a Chinese rate-payers association, but it is without power. Chinese are not eligible under the Land Regulations to membership in the Council, and it has never had a Chinese member. In 1863, the Powers' representatives at Peking were agreed that there should be "a Chinese element in the municipal system," but they changed their minds before it was arranged. Agitation for Chinese "representation" on the Council has not abated since 1905. Proposals to this end were defeated by the foreign rate-payers overwhelmingly in 1920 and 1923. A Chinese advisory committee, created in 1921, never exercised much influence, and after the incident of May 30, 1925, its members all resigned. After the situation reached a crisis, in 1926, the rate-payers voted in favor of adding three Chinese members to the Council, but that number no longer satisfies the local Chinese, who now demand at least equal representation with the foreigners. No arrangement has yet been consummated, and the North China Daily Herald still urges "Chinese ignorance of municipal affairs" as a reason for caution and moving slowly.

If the Settlement is international, it is so in spite of the British dominance of its administration and the exclusion of the Chinese from any participation.


The International Settlement is in many respects well governed. It has clean streets, it has extensive municipal services, and its affairs are generally efficiently managed. Its annual report might well be taken as a model elsewhere. Perhaps there is some extravagance; the foreign staff receive high salaries, and very liberal provision is made for such privileges as "long leave." Some incongruous things exist; for example, the British chief clerk of the Provisional Court is better paid than the Chinese judges because he is a municipal officer; a British ex-commissioner of police whose resignation was forced by events following the incident of May 30, 1925, receives a pension of £1,500 a year. But these are details. The Settlement doubtless has the best municipal government to be found on Chinese territory.

But it is governed in the interests of a small minority of its inhabitants. In many directions its municipal revenues are expended largely for the benefit of the foreigners, though the Chinese pay a large percent of the taxes. In 1926, the general municipal rate, which is a large source of revenue, was payable on 4,627 foreign houses and on 71,126 Chinese houses; the income from the former was 1,833,968 taels and from the latter 2,188,356 taels. The land tax is less of a barometer because much of the land held in foreigners' names is beneficially owned by Chinese. When license fees of all sorts are taken into account, it seems conservative to estimate that the Chinese pay not less than sixty percent of the taxes, and the actual figure may be considerably larger. Yet a considerable portion of this revenue is expended in such a way that the ratio of benefit to Chinese and foreigners is reversed. Each year about 500,000 taels are expended on education, of which about seventy percent goes for schools for foreign children. The absence of any "absolute duty to undertake the education of Chinese children" was stressed by two special commissioners reporting in 1911 and 1924. Comparative expenditures on hospitals are in much the same proportion. A municipal library maintained at public expense keeps only foreign books, and but 20 out of about 600 subscribers are Chinese. The Chinese may pay sixty percent of the taxes, but they do not get forty percent of the benefit of special expenditures where distinctions are made between the two groups of the Settlement's population.

The question of admitting Chinese to the public parks, maintained out of public funds, has recently become acute. The Land Regulations empower the Council to create and maintain roads and public gardens, "provided always that such roads and gardens shall be dedicated to the public use, and for the health, amusement and recreation of all persons residing within the Settlement." This is taken to mean all foreign persons, and the parks are closed to Chinese -- old residents say that the prohibition formerly read "Chinese and dogs." If the construction can be defended legally, it is bitterly resented by many Chinese and serves as one of the pin-pricks which keep up anti-foreign feeling. "Serious consideration" has been given to the question by the Council for several years past; a committee reported in favor of admitting the Chinese, but the rate-payers who assembled on April 13, 1927, feared precipitate action and stipulated that they must have another chance to consider the matter when conditions are less disturbed. The Chinese continue, therefore, to be deprived of hearing the open-air concerts of the municipal band which is maintained out of public revenue. Elsewhere, it is chiefly the poorer people who depend upon public parks, but in Shanghai most of the proposals for admitting the Chinese would exclude the coolies in the Settlement.

Such questions cannot fail to have repercussions on the relations of foreign Powers with China. Not infrequently the actions of the Council have seriously affected friendly relations with China and even with other countries. Roads leading outside the International Settlement are always a bone of contention. The Council has now taken under its control 43 miles of roads outside the Settlement boundaries, and their policing offers many opportunities for friction. It is for the protection of these roads, and foreigners living on them outside the Settlement, that foreign troops are now stationed in the surrounding territory. The road question is bound up with the effort to extend the Settlement boundaries. The boundaries without doubt are cramping and in normal circumstances ought to be extended. Control of roads is made a substitute for extension.

Quite recently an action taken by the Council might have had serious consequences elsewhere. On its own authority, and without having obtained any permission from the Consular Body, it placed an armed guard around the Consulate of the Union of Socialist Soviet Republics within the Settlement and conducted a search of all persons entering or leaving. The action was avowed to be for the purpose of protecting the Consulate against violence, though the measures taken did not clearly serve such a purpose. Doubtless, too, it was mere chance that the guard was at first largely composed of paid White Russians and later, until protest was made, of American members of the Volunteer Corps.

It seems possible to say, in summary, that the Settlement is well organized, and modernly and efficiently administered. But it is not administered in behalf of the ninety-five percent majority of the population which pays not less than sixty percent of the taxes, so much as in behalf of the four percent minority which pays not more than forty percent of the taxes.


Across the Avenue Edouard VII, once the Yang-King-Pang, the situation is somewhat different. Since the failure of the 1854 attempt at amalgamation the French Concession has had a separate government. The census taken in 1925 gave the Concession a population of 297,072, of whom 289,262 were Chinese and 7,810 (or less than three percent) were foreigners of thirty-three different nationalities. Only 892 were of French nationality; 2,312 were British, 1,403 were Russians and 1,151 were Americans. The population has more than trebled since 1900, and it has almost doubled since 1915.

The Règlement d'Organisation Municipale adopted in 1868 has now been replaced by a new Règlement promulgated by the French Consul-General on January 15, 1927. This provides for a municipal council of fourteen members, of whom the foreign ratepayers are to elect four French members and four members of other nationality and divided among three different nationalities, while the Consul-General is to appoint three French members and three Chinese members. This council has more limited powers than those of the Municipal Council in the International Settlement. Subject to the approval of the French representative at Peking, the Consul-General may refuse to promulgate its decisions affecting the public order and administration of the Concession, and no decision is valid until promulgated by him. He may even suspend the Council for three months, or in time of foreign or civil war or when the security of the Concession is in jeopardy for the period of the duration of such exigency. Early in January, 1927, the Consul-General exercised such power, conferred by the former Règlement, and "on account of the general situation" deferred the election of successors to the council members whose terms expired on January 23, 1927. He thereupon created a provisional commission of administration of sixteen members, eight of whom are French, five Chinese, one American, one British and one Swiss.

The French administration rests very largely with the Consul-General and his associates. In some respects it may have been less efficient than that in the International Settlement. Its annual compte-rendu is less complete than the annual report of the Municipal Council, though fuller reports of minutes seem to be published. The Chinese residents seem to be taxed fully as much if not more than in the Settlement. Perhaps some of the services are at times less well organized. But there has been a marked difference in the attitude of the local Chinese population toward the two administrations. A much more accommodating policy seems to have been followed in the French Concession, and the same problems have been met in a different spirit. For instance, for several years two Chinese have served on the council, though in a somewhat consultative capacity, and under some restrictions Chinese are admitted to the public park. It has therefore proved less difficult for the boundaries of the Concession to be extended, and they actually were extended in 1914 when a similar effort in the International Settlement failed. Even while problems were outstanding between China and France, such as the gold franc dispute, there seems to have been less Chinese hostility to the Concession than to the Settlement. But perhaps there would have been more hostility to the former if the latter had not existed.


Perhaps the different situations in the International Settlement and the French Concession are due in some measure to differences inherent in international and national administration. It has proved difficult to alter the status quo in the International Settlement. The Land Regulations are long out of date. The form of the government is archaic. The power lodged in an irresponsible group of rate-payers, frequently dominated by a faction, continues because of the difficulty of getting agreement among the representatives of the fifteen, formerly eighteen, Powers whose assent is made necessary by the existence of the régime of exterritoriality. Such agreement must exist not only in the Consular Body at Shanghai but also in the Diplomatic Corps at Peking. In the eyes of some of the Foreign Offices to which these bodies are responsible the problems of the Settlement cannot have much importance. When they do receive attention, a government with but slight interest is tempted to try to hold all the power it has. One such government was recently quite reluctant to agree to the rendition of the Mixed Court. That tendency is only increased by the existence of exterritoriality.

Quite as significant, however, is the zeal with which the local community of foreigners attempts to retain its semi-independent position. Aside from the missionaries, for whom Shanghai serves as a sort of base, this community is largely composed of people engaged in trade and in the business incidental to the affairs of a large trading center. They are easily led to assume intransigent positions on local problems where Chinese interests are involved, and are jealous guardians of the privileges connected with exterritoriality. Their intransigence extends also to efforts of their governments to promote peace with China. This disposition may have been accentuated recently by the fact that the British have somewhat illogically borne the brunt of Chinese opposition. The leading British newspaper in Shanghai, the North China Daily News, has conducted a persistent campaign against the British Government's policy in China. It denounced the British declaration of policy of last December as a "showing of the white feather," and the British memorandum in January as an "offer of surrender" and a "graceful gesture that led to the great betrayal." The American Chamber of Commerce memorialized America to join in "unified action by the Powers to suppress disorder" in all of China, for "a protective policy applying to Shanghai alone will not enable China to put its house in order;" and when this effort had apparently failed, it attempted to oust from membership the only independent journal in Shanghai, the China Weekly Review.

Such opinion would be negligible if its influence were confined to the foreign community of Shanghai. But unfortunately it helps to embitter the Chinese. Leaders of moderate opinion among the Chinese have to cope with continuous goading by the foreign press. Reporting on the incident of May 30, 1925, Judge E. Finley Johnson, now acting Chief Justice of the Supreme Court of the Philippines, said that "the foreigners in China have failed to take into account the principles of liberty and independence which they themselves have spread abroad throughout China."


Presented with a tabula rasa, one would plan a very different local government at Shanghai. The interests of the Chinese and of the foreigners are not in conflict. The two groups have united in building much of the city; their commercial relations are intimate; their desire for a peace and order which will stimulate and protect their trade is common. Whatever social distinctions are made, the two groups cannot be segregated in business. Both depend upon Chinese labor, and the living of the foreigners would be on a very different scale if there were no Chinese servants at their command. In spite of the existing form of organization, the two groups form one community.

Not only would the foreign areas be amalgamated, in a de novo arrangement, but the special organization would not be restricted to the present foreign areas. It would include also Nantao, the city, Chapei, Pootung, and for the consolidation of the port administration it might take in Woosung. The needs of the whole community might better be met if some of the surrounding areas, particularly the roads, were also included -- if Greater Shanghai were united.

The government of such a district would be conducted in the interests of all its residents, and of course the Chinese would have a large share in its control. It might be in some respects subject to the provincial Chinese authorities. Certainly the present exemption from Chinese taxes -- not merely of foreigners but also of Chinese -- would never be instituted. Instead of a Provisional Court, justice would be administered in a Chinese court which, though special, might be a part of the national judicial system; and from the point of view of the Chinese themselves, foreign judges, appointed and paid by the Chinese Government, might be much more satisfactory than consular officers or deputies. A council and an administration in which Chinese and foreigners coöperated would be devised, and it ought to prove possible to adjust the percentage in such a way that Chinese susceptibilities would not be outraged and foreign interests would not be neglected. If the district were removed by neutralization from Chinese military operations, it would likewise be agreed that foreign Powers would not use it as a base for operations in China, as they are now doing. All of these arrangements might be effected without much trouble about the dogma of sovereignty.

But the history of the last three quarters of a century has not left a tabula rasa, and a program such as that suggested here is not likely to be attempted. Agreement on a new set of Land Regulations would be reached only with difficulty, even though it clearly is desirable that so archaic a structure should be remodelled. But the demand for large Chinese representation in the Municipal Council will probably be maintained, and it should be met by the Powers. The three representatives which have been "granted" are not enough. In the long run, it might prove wise to give the Chinese a majority, and begin the gradual Chinafication of the municipal services. The extension of the boundaries would then be easily effected. If the compromise of equal representation of Chinese and foreigners is agreed to, the method of choosing a chairman will still give difficulty. In any scheme, the Powers ought to divest themselves of all responsibility for what their nationals on the Council may do. This can be better accomplished if a modern Chinese Court, composed partly of foreign judges, be created to replace the Provisional Court, with a consequent reduction in consular jurisdiction.

But radical changes will probably not be graciously assented to by the Powers. It is discouraging to think that if China were a strong military state events might take a different course.

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  • MANLEY O. HUDSON, Professor of International Law in the Harvard Law School, author of a number of works
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