CHINA INDEMNITY (APPLICATION) BILL.

HC Deb 20 January 1931 vol 247 cc95-132

Order for Second Reading read.

The UNDER-SECRETARY of STATE for FOREIGN AFFAIRS (Mr. Dalton)

I beg to move, "That the Bill be now read a Second time."

In the absence of my right hon. Friend the Foreign Secretary, who is at Geneva, it falls to me to move the Second Reading of this Bill, I will endeavour to give the House an account of the facts which have led up to the introduction of the Bill, and some particulars of the Bill itself. The object of the Bill is to implement the friendly agreement which was reached last September between the Government of China and His Majesty's Government in this country. This Bill repeals the China Indemnity (Application) Act, 1925. That Act, passed in the last Parliament, never came into effective operation owing to the disturbed condition of China in 1925 and the two following years, but since 1928 a considerable and fortunate change has come over the Chinese scene, and the provisions of the Act of 1925, for reasons which I will endeavour to explain, are no longer applicable to the new situation.

The past history of this question is summarised in a White Paper which was issued last November, Command Paper 3715, which I have no doubt will have been studied by hon. Members who are interested in the question. In that White Paper there is an outline of the history of the indemnity from 1901, when it began to be paid, until December, 1917, when the situation was altered by the entry of China into the War on the Allied side. Payments were then suspended until 1922. On 20th December, 1922, when the payments were on the point of being resumed, His Majesty's Government of that date informed the Chinese Government that they had decided to devote the proceeds of the British share of the Boxer Indemnity to projects mutually beneficial to China and this country. That declaration is of primary importance in the development of this question. The Act of 1925 was designed to give effect to the pronouncement of December, 1922. The Secretary of State for Foreign Affairs, under the Act of 1925, was to decide what projects were mutually beneficial to this country and China. He was to be assisted by an advisory committee. The advisory committee was duly constituted, and included three distinguished Chinese citizens. Its chairman was Lord Buxton, and one of its leading members was Lord Willingdon, who went out to China at the head of a delegation of six members of the committee to examine on the spot the requirements of the situation and to study Chinese opinion on the subject.

I should like to pay a tribute to the long, arduous and valuable labours which Lord Buxton performed from the moment he accepted the onerous post of chairman of the advisory committee right up to the conclusion of the negotiations conducted by His Majesty's present Government. Throughout that time, despite advancing years and in spite of, at times, I regret to say, considerable ill-health, Lord Buxton always gave fully of his knowledge, his energy and his time to this project, to which he was so much devoted. I should not like this occasion to pass without his knowing that this House remembers, and thanks him for, his work. The report of the advisory committee over which Lord Buxton presided was issued in 1926 as Command Paper 2766. It is a valuable document and, although in certain respects the situation has changed since that time, it lays down very important outlines of policy, and gives a great deal of practical information which might well be studied by any hon. Member who is following this matter closely.

Why is it that the Act of 1925 has now become inapplicable? Primarily for this reason, that whereas in 1925 there was no national government of China recognised by His Majesty's Government, and the Act consequently did not represent negotiated settlement, there has been since 1928 a national government in China recognised by His Majesty's Government. Consequently, it became necessary to substitute, and we have finally succeeded in substituting, a negotiated settlement for a uni-lateral decision by His Majesty's Government. That is the fundamental reason why the Act of 1925 no longer fits the present situation. Under the Act of 1925 the Secretary of State for Foreign Affairs had himself to determine the mode of expenditure of these moneys. He was required under the Act to provide for applying the money "to such educational or other purposes" as were in his opinion beneficial to the mutual interests of the two countries. The Chinese, under the Act of 1925, had no direct share in deciding how the money ought to be spent, and partly for this reason discussion took place in this House in. 1925 on the adequacy of the guarantees contained in the Act of 1925 that the money would be spent primarily upon educational purposes.

7.0 p.m.

There were some hon. Members, of whom I was one, who had doubts. I made a speech of six words, which I have no doubt will be quoted later on. I frankly say that I had doubts at that time, and for that reason I seconded an Amendment moved by one of my hon. Friends, although we did not press it to a Division. That belongs to history and to a different situation. A number of hon. Members, of whom I was one, had doubts at that time, but I hasten to add that the position has completely changed, and changed for the better, and our doubts have now been resolved, for reasons which I will explain. The Chinese Government has been recognised since the end of 1928. It is increasingly in control—I will not say absolutely and completely in control—of the Chinese situation. The destroying flames of the long civil war have sunk to flickering embers in outlying provinces, and we hope that they will not flare up again. The prospects of peace and recovery in China seem brighter now than they have done for many years. This settlement is not an imposed, but a negotiated settlement to which the Chinese Government. recognised by our predecessors, have freely assented. I should like to pay a tribute to the work done in connection with these negotiations by Sir Miles Lampson, our representative in Peking, and by Dr. Wang, the Chinese Foreign Minister. All the moneys covered by this Bill are to be devoted to education, either by direct grants or by the creation of educational endowments. The Bill deals, in the first instance, with accumulated funds of something over £3,500,000 now on deposit in a bank at Shanghai. This sum is to be transferred to London, and out of it two direct educational grants are to be paid, one of £265,000 to the Hong Kong University and one of £200,000 to the Universities' China Committee in London. That leaves a residue of something over £3,000,000 which is to be paid over to the Chinese Government Purchasing Commission constituted under this Bill. It is constituted as follows: The Chairman is to be His Excellency the Chinese Minister in London, and there is also to be a representative of the Chinese Ministry of Railways and four other persons described in the Bill as being persons of standing, with wide experience in business matters. They are to be chosen by the Chinese Government from a panel which will be submitted to the Chinese Government by the Secretary of State for Foreign Affairs.

Lieut. - Colonel Sir FREDERICK HALL

Will any of them be English, or are they all to be Chinese?

Mr. DALTON

We contemplate that they will all be English. Consequently, the Commission will consist of six persons, the Chinese chairman, the Chinese representative of the Ministry of Railways, and four Englishmen. That Com- mittee will sit in London and will invest the £3,000,000 of the accumulated sum in the improvement and reorganisation of Chinese railways. That sum will be spent on railway materials manufactured in this country. I mention that specifically because I understand that some hon. Members object to this provision. If the Bill passes soon, £3,000,000 of orders will consequently become available at an early date in the British iron and steel and engineering industries.

Sir D. HERBERT

Is the hon. Member correct in saying that the sum is over £3,000,000? The accounts published in the White Paper show a total sum of just under £3,000,000.

Mr. DALTON

Is the hon. Gentleman quoting from the figures on page 7 of the White Paper?

Sir D. HERBERT

No, I am quoting from the accounts ending on 31st March, 1929. This is a Command Paper which I got from the Vote Office giving the audited accounts with the report of the Comptroller and Auditor-General.

Mr. DALTON

The figures the hon. Member quotes are not the latest available. If he will look at page 7 of the White Paper, he will see it stated there that the accumulated funds, to which the agreement refers, amounted on 30th June, 1930, to £3,515,000. From that we must subtract the grants of £465,000 paid to the Hong Kong University and to the Universities' China Committee, so that the initial sum at the disposal of the Commission will be slightly over £3,000,000. This will be treated as a loan to the Chinese railways by the Board of Trustees set up under the Bill. They are a body which is going to be appointed entirely by the Chinese Government. We are exercising no voice in the composition of the Board of Trustees. They are nominated by the Chinese Government. They will sit and operate in China, and they will act in the way I shall endeavour to describe in a moment. The Chinese Government have a completely free hand in choosing them, but they have kindly informed us they will appoint a certain number of British members, though not a majority. This capital sum of £3,000,000 will be treated as a loan to the Chinese railways and the future interest on the loan will be devoted, at the discretion of the trustees, to educational purposes in China, and will therefore constitute an educational endowment invested in the Chinese railways.

Mr. LAMBERT

Supposing there is no interest paid on the loan and no revenue arises, what happens then?

Mr. DALTON

Pro tanto and as long as that situation lasts, there will of course be no income from the endowment. No one can gainsay that. I trust, however, for reasons which I hope to explain later on, that we shall have very soon a situation under which interest will be paid. It may interest the right hon. Gentleman, who is the only Member to put down a Motion in favour of the rejection of the Bill, to know that it was from the Chinese that the first proposal to invest this money in railways originated. If he will read the report of the Willingdon subcommittee which went out in 1926, he will find that they went out with the desire to apply the whole sum directly to educational purposes, but they found in China a strong desire for investment in railways. For that reason, we have agreed to this investment in the purchase of railway material while treating it as an investment the interest on which shall be applied to education. Let it not be said that either His Majesty's present Government or the late Government deliberately forced the Chinese Government to depart from education and forced them to invest in railways. Directly the opposite was the case.

Mr. ANNESLEY SOMERVILLE

That provision about using the interest for educational purposes does not appear in the Bill. I suppose that is not possible?

Mr. DALTON

It is in the Notes exchanged between Dr. Wang and Sir Miles Lampson. We cannot put it in the Bill, because it would be binding the Chinese Board of Trustees and we cannot bind their future conduct in this Bill. The Chinese Government have made it perfectly clear that that is their intention.

Mr. SOMERVILLE

That is the agreement?

Mr. DALTON

Yes, that is the agreement. I have spoken so far of the accumulated sum of £3,500,000. Future payments will aggregate round about £8,000,000 between now and 1945, in which year all payments cease. Half of all such payments, about £4,000,000, will be paid to the Purchasing Commission in London, and will be similarly spent by them on British railway material and added to the capital of the educational endowment, to which I have referred, but the other half will be paid direct to the Board of Trustees in China and applied by them to objects mutually beneficial to the United Kingdom and China. It is the intention of the Chinese Government that this sum also shall form an educational endowment. Consequently, the whole £11,500,000 will be applied to Chinese educational purposes, either directly or indirectly. In addition to that, specific provision will be made for the rehabilitation of the Chinese railway systems and the sum of £7,000,000 will be spent in this country in orders for British railway material—£3,000,000 at an early date after the passing of the Bill and a further £4,000,000 between now and 1945.

The provisions made in this Bill do indeed constitute a great programme of mutual benefit to this country and to China. If this Bill is passed, it will bring, first, increased educational opportunities to the youth of China; secondly, increased material prosperity to China by helping her to build up an inland transport system worthy of her natural resources and of a great modern State; thirdly, increased purchasing power and productivity to the Chinese people, as the result of which the Chinese market will increase in value and so will benefit British export trade; and, finally, it will bring increased orders and employment to the workers in the British heavy industries and in the engineering trade.

May I say a word in passing on the Hong Kong University and the Universities' China Committee, as we are asking the House to approve a plan by which both these bodies will substantially benefit. The Hong Kong University, although only founded in 1912 and therefore still young as universities go, had already in 1930 some 340 students, men and women, of whom the great majority, 280, are Chinese. They have adopted a residential system with all the advantages which that connotes, and they have created already three faculties in the University—arts, medicine and engineer- ing. They are very proud of having in recent years turned out a number of skilled doctors and qualified engineers who have been of great value to China. They are also proud of the fact that they have already attracted considerable private benefactions. In 1929, about half their income of 609,000 dollars was derived from interest on private benefactions. They have had much help from the Rockefeller benefaction, but about half of their endowments have been given by Chinese. The Hong Kong University is at a critical stage of its development, and it is greatly cramped at the present moment, cramped for buildings, cramped for staff, cramped for equipment and facilities generally. It could undoubtedly make good use of a larger sum that we are able to allocate to it at present, but the sum which we are able to allocate will be of great advantage in enabling it to increase its work in that borderland where Hong Kong stands between the Fast and the West. I believe that for the future of Hong Kong University we may entertain bright hopes.

As to the Universities' China Committee, that was inaugurated in 1925 by the initiative of the Society of Friends, and the present chairman is the Master of Balliol College, Oxford. The committee is composed partly of university people and partly of people with practical experience of China. It is a large committee but, as so often happens in large committees, only a small minority attends regularly and does the work. The work is probably all the better done for that. The object of the Universities' China Committee is to promote cultural relations between China and this country. I can say without fear of contradiction that the work of the committee has been greatly appreciated in China. They have provided assistance of various kinds to Chinese students in this country, and there is scope for a great deal more to be done in that way. They have organised lectures by eminent Chinese in various centres in this country, and much more might be done in that way; and they are very anxious to go further along this line by organising similar lectures by eminent British citizens in China. Hitherto, they have only had very small sums at their disposal, only a few hundreds of pounds, and the secure additional income of £10,000 a year which they will get by investing this sum of £200,000 to be received under the Bill, will enable them greatly to extend their work.

His Excellency the Chinese Minister in London was kind enough to call and see me at the Foreign Office the other day in connection with this Bill and he has authorised me to tell the House that his Government is anxious that the Bill, which represents an agreement to which his Government is a willing party, should quickly pass into law so that the Purchasing Commission and the Board of Trustees may be set up and get on with their work. The Chinese Minister also informs me that the representative of the Chinese Minister of Railways, who is to sit on the Purchasing Commission, has already left China and is expected to arrive in this country next month. I hope, therefore, if the general principle of the Bill commends itself to the House that we shall be able to secure the Second Reading this evening and the subsequent stages at a comparatively early date. This is not a Bill which raises inter-party rivalries or controversies. It is a Bill in which the Government offer to the House a freely negotiated settlement of a question which for 30 years past has vexed Anglo-Chinese relations. The Boxer Rebellion, and the indemnity consequent upon it, symbolise a long and unhappy chapter in the history of Anglo-Chinese relations. By the passage of this Bill I believe that we shall begin a new and happier chapter in those relations.

Mr. GODFREY LOCKER-LAMPSON

My right hon. Friend the late Foreign Secretary regrets very much that he is unable to be present this evening owing to the fact that he made a very important engagement before he knew the date of this debate, but I have been in communication with him quite recently and am in possession of his general views on the subject. The Under-Secretary of State has given us a very interesting and very full historical account of the Chinese Indemnity question, and really I have nothing further to add to that side of the subject at all. It is true that in 1922 our Minister at Pekin informed the Chinese Government that the British share of the Boxer Indemnity would be devoted to purposes mutually beneficial to both countries and four years later that promise was made even more definite, after the report made by Lord Willingdon's delegation which went to China; and the machinery was outlined by which the pledge was to be carried out. During the last few months of the late Conservative Administration my right hon. Friend the late Foreign Secretary went a step further and prepared an arrangement substantially the same as the arrangement now proposed.

There are two important questions which we have to decide this evening. First, is the time really ripe for implementing the pledge which was definitely given by this country? Up to within three months before the late Conservative Administration left office it certainly was not possible, and I think the White Paper issued by the Government shows that quite clearly. If hon. Members will look at the White Paper, they will see that it was not until 20th December, 1928, that the tariff autonomy treaty was signed and the National Government recognised. In the words of the White Paper: These events changed once more the aspect of the indemnity question. Three months after that great change took place in China the Conservative Government left office. Up to that time there was really no effective control at all by the central Government of China, except over a very restricted area. The position now to my mind, in spite of the intervening desperate civil war which has taken place, has undoubtedly altered for the better, but I agree with the Under-Secretary of State when he says that it is certainly not yet possible to say that the central Government of China exercises effective control over the whole of China. Indeed, I doubt whether the central Government exercises effective control over much more than half of China, but I believe the time has come when the step proposed by the Government in regard to the Boxer Indemnity can now be taken.

I hope the House realises the magnitude of the contribution which we are making to China. As the Under-Secretary has pointed out, the total amount of the Indemnity was fixed at £67,500,000, and the British share was £7,500,000, but the total sum payable by China for interest and the amortisation of principal amounted to no less than £147,500,000, and the British share was £16,500,000. According to the White Paper, we have £3,500,000 in hand in the Chinese Bank, and there is nearly £8,000,000 outstanding on future instalments. We are handing over to the Chinese Government no less than £11,500,000. I am not complaining at all, because this was the policy of my right hon. Friend the Member for West Birmingham (Sir A. Chamberlain); he had already promised exactly the same thing. He was only waiting for the time when China would be in such a state that the step could he properly carried out. But the sacrifice we are making is a very great one when you take into consideration the terrible industrial depression from which we are suffering and the enormous financial burdens which are laid upon us.

Our action compares very favourably with the action of some other foreign countries. In the case of Japan, the funds are theoretically to be used for educational and cultural objects, but I believe that Japan retains control of all these funds, and very little progress has been made as yet. If you take the case of France—I think I am correct—the instalments are used for the service of certain French loans, and very little money has yet been used for educational and philanthropic purposes. No country in the world has met the wishes of the Chinese to a greater extent than this country, and I hope that one of the results will be that the Chinese will have confidence in the good will which we feel towards China.

Then there is the second question, which is very important. Under the Bill, the proceeds of the Fund are divided into four amounts. I will not differentiate between the £3,500,000 we had in hand and the £8,000,000 coming in, but for all practical purposes the fund is divided into four amounts. You have the £265,000, which is being paid to the Hong Kong University, and the £200,000 paid to the Universities China Committee in London. Half of the balance is going to the Chinese Purchasing Commission and the remainder of the balance to the Board of Trustees in China, which is to be appointed by the Chinese Government, for purposes mutually beneficial to both countries. This is the point which I think is important. This amount is going to be handed over to China absolutely. So far as the Bill is concerned, any kind of control by the United Kingdom is completely abandoned. It is true, as the Under-Secretary pointed out, that the Chinese Foreign Minister in his note to Sir Miles Lampson says that the Board of Trustees will include certain British members, but, if he will scrutinise the White Paper, he will see that it is put in very casual language, in half-a-dozen words at the end of a sentence and no emphasis is laid upon the promise from our side. In recapitulating the Chinese promise this particular promise is slurred over and hardly mentioned at all, and so far as this Bill is concerned that attitude is maintained.

This seems to me to be a feature of the Bill where the policy of my right hon. Friend the late Foreign Secretary has been somewhat departed from by the present Government. Under the proposals of the right hon. Member for West Birmingham, the Secretary of State would not only have had a voice in regard to the expenditure on railways, but he would have had a say in the expenditure on cultural and educational objects. As far as the Bill is concerned, we are to have no voice at all in regard to this branch of expenditure. It is true that the Secretary of State will have a say in the appointments to the Commission which deals with the materials for railways, but the Board of Trustees will have complete control over the residue of the Fund. This board is to be appointed by the Chinese Government and there is nothing in the Bill to provide for British representation. We are handing over, when we come to actual money, no less than £5,500,000, perhaps not so much, £4,000,000, absolutely without any say whatever as to how it is going to be spent. This is rather an important omission, and I cannot believe that the Chinese Government would object in the least if words are inserted in the Bill to provide for British representation. It is true that the promise was made by the Chinese Minister rather casually, but I am certain that he made the promise in good faith, and it is all the more desirable to have such words in the Bill, because under the arrangements made between the United States of America and China a good deal of difficulty has been experienced in regard to the interpretation of the promise. There has been a tendency on the part of the Chinese to dispense with American representation and turn it into a purely Chinese body. I speak subject to correction, but I believe that is the case.

The present Government of China will no doubt do its best to adhere to the promise it gave, but we cannot be sure what interpretation will be put upon the promise in the future. After all, this is British money; as the Bill says, it is to be used for purposes mutually beneficial to this country and China, and it seems that British representation should feature as one of the provisions of the Bill. I thought it right just to make that observation. Except for that, it seems to me that the Government are materially carrying out the policy of the late Government, and therefore I feel sure that the Bill will receive the support of my hon. Friends on this side of the House.

Mr. LAMBERT

I beg to move, to leave out the word "now," and, at the end of the Question, to add the words "upon this day six months."

The history of the Bills relating to the Chinese Indemnity has been rather peculiar. There was the Bill of 1923, followed by a General Election. Another Bill brought in by the Labour Government in 1924 was also followed by a General Election. I wonder whether that is an omen for this Bill?

Mr. DALTON

That may depend upon your party meeting.

Mr. HOFFMAN

Perhaps you can tell us.

Mr. LAMBERT

I candidly confess that if it depended on me it would certainly mean a General Election.

Mr. HOFFMAN

But it does not.

Mr. LAMBERT

I want to direct attention to one or two points regarding the record of the present Government. In the first place, in answer to an hon. Member on this side, the present Foreign Secretary said on 4th June, 1930: It will be necessary to introduce legislation to give effect to the agreement between this country and China, when it is reached. Before this is done I propose to include particulars of the arrangements made by other countries in a White Paper to he laid before the House."—[OFFICIAL REPORT, 4th June, 1930; col. 2167, Vol. 239.] Where is that Paper? Has it been laid before the House? That was a direct statement and a pledge made by the Foreign Secretary. There is not a word in the Command Paper that has been published as to what foreign countries have done with their share of the indemnity. A distinct pledge was given that we should know exactly what foreign Governments have done, and that pledge has not been kept.

Mr. DALTON

I am sure the right hon. Gentleman does not imagine that my right hon. Friend the Foreign Secretary desires to withhold information. At the moment I cannot charge my memory with the answer to a Parliamentary question, but we published this White Paper as long ago as November last, and I do not remember having been asked, or my right hon. Friend having been asked, to supplement it with further particulars. If such a request had been made I cannot imagine that there would be any objection to supplying the information.

Mr. LAMBERT

I am sure the present Foreign Secretary would carry out his pledges. The hon. Gentleman says, "Why did you not remind us?" What opportunity have we had of reminding him? The Bill was ordered to be printed on 12th December, a Friday. It was circulated, I believe, on the Monday, three or four days before the House adjourned. A day before the adjournment for Christmas it was announced that the Bill would he taken the first thing to-day. I thought it was an attempt by the Government to smuggle the Bill through without discussion. When the hon. Gentleman says, "Why did you not ask us for more information?" I say it is because we had never seen the Bill.

Mr. DALTON

My point is that the White Paper was issued half way through November. I know the right hon. Gentleman follows this question with close interest. Presumably he read the White Paper soon after it was issued, and if he found that it did not give sufficient information he had only to communicate by question in the House or by private letter with my right hon. Friend, and we should have been prepared to give any further information. I can imagine that the undertaking to provide further details of what other countries were doing slipped out of the minds of those who prepared the White Paper, but the omission could easily have been put right.

Mr. LAMBERT

This Bill was not presented until three or four days before Parliament adjourned, and it is now taken on the first day after re-assembly. What opportunity have we have of raising the matter? We did not know what was in the Bill. My point is, therefore, a good one. The hon. Gentlemen has said that this money is to be devoted wholly to education, but he is taking a very circuitous route to secure that end. The money is to be lent to the Chinese Commission to be spent on railway development in China. How does the right hon. Gentleman know that the Chinese will get any revenue in return? A very large amount is already due to British investors for default on the Chinese railway bonds. I believe that something like £17,000,000 is owing to them. The Government are going the wrong way to work. Why do they not go directly themselves and spend the money on the education to which they attached so much importance in 1924? The Americans have adopted a totally different method of dealing with the Boxer Indemnity. They have taken the Chinese to America and so have developed American trade in China. Let me give an extract from a speech made by the hon. Member for Putney (Mr. S. Samuel) in the debate in 1924. He said: We know perfectly well that in the past many of the large American industrialists, especially in the engineering trade, have been in the habit of educating Chinese in their universities … When we are asked to tender for certain work we invariably find that the Chinese engineers have drawn up the specification in such a form as to render it impossible for us to get an order, and it has been drawn to suit the factory in which the engineer has been educated in America. Why do we not do the same as the Americans? We first lend money for the development of Chinese railways, hoping against experience that the money will be devoted to education. I want to go more closely into this question. Let us examine the record of Members of the present Government during the 1924 Parliament. The Bill says that the money is to be used to purchase plant, machinery and other articles and materials to be manufactured in the United Kingdom. Does not that conflict with the Washington Agreement of 1922, whereby equality of treatment for all Chinese demands was laid down? I must use rather strong language. It is rather hypocritical, after what was said in 1924, to say now that the money must be spent in the United Kingdom because that connotes a profit. I do not mind a profit; I like profits, but I do not like hypocrisy. Here is what the present Lord Ponsonby (then Mr. Ponsonby) said in 1925 on the Bill of the late Government: Nothing could be more fatal than that this gesture which we are making … should be in any way desecrated by a desire on our Raft to make a profit out of it for individual British subjects."—[OFFICIAL REPORT, 4th May, 1925; col. 705; Vol. 183.] What are the Government doing to-day? Trying to make a, profit contrary to their own pledges in 1925. What did Lord Cushendun, then Mr. Ronald McNeill, say? On the Report stage of the Bill he said: I entirely agree with the hon. Member (Mr. Ponsonby) that it would be disastrous if we utilised this Bill as a means of extracting any commercial or other profit for this country."—[OFFICIAL REPORT, 4th May, 1925; col. 706, Vol. 183.] It is rather hypocritical on the part of the Government to come forward now and say: "We are using this money for education, and we do not propose to get a penny out of it for this country, but the railway materials must be bought in this country." That is not quite cricket. The Government of 1925 brought in a Bill. It was strongly objected to. That Bill stated quite clearly that the money should be devoted to educational "and other purposes." An Amendment was moved to omit the words "and other purposes." That Amendment was moved by the hon. Member for Huddersfield (Mr. J. Hudson) in a very long speech, and it was seconded by the hon. Gentleman who has brought in the present Bill. Is there any consistency in hon. Members opposite? The Under-Secretary of State for Foreign Affairs seems to have adopted a Janus-like attitude. In the late Government it was educational altruism; to-day, I am sorry to say, it is sordid commercialism. I do not know what it will be in the next Parliament. I object to this Bill, in the first place, because it has been hurried on. I have had no opportunity of studying it. We have had no opportunity of putting questions regarding the fulfilment of the pledges of the Foreign Secretary.

Mr. L'ESTRANGE MALONE

You could have put questions to the Foreign Secretary.

Mr. LAMBERT

How is it possible to put questions when the House is on holiday?

Mr. MALONE

The postal service is very efficient.

Mr. LAMBERT

I cannot put a, Parliamentary question through the postal service. Such Parliamentary matters are not dealt with through the post. I want to put these questions in the House of Commons. The Bill will really besmirch the fair fame of Britain in China. It is education plus five per cent. It would have been infinitely better for this country, if the Government made this gesture at all, to have made it freely and to have said that it would not attach any conditions to it. But here the Government are going out of their way to make a profit in defiance of past pledges. As I say, I have no objection to profit, but I do object to hypocrisy, and what is vastly more important than anything else in dealing with this Bill is that the good faith of Britain should be recognised in China. It will always be pointed out that whereas the Americans spent their money on the education of the Chinese, we, on the contrary, laid it down as a condition that railway material should be purchased in this country. Do Members of the Government such as the President of the Board of Trade think that that is carrying out the pledges which we made in 1924 and which we have made over and over again to China? I think that our reputation for uprightness and integrity has been infringed by this Bill, and therefore I move that it be read a Second time upon this day six months.

Mr. MANDER

Following the precedent set in the last Parliament by the hon. Gentleman who is now Under-Secretary of State for Foreign Affairs, I rise to support the rejection of this Bill. The mere fact that the hon. Gentleman has, for once in a, while, found an enthusiastic supporter on the front Opposition bench above the Gangway, does not prevent us on these benches performing the normal functions of an Opposition. I think that the Government are doing a good thing in a very bad way. This handing back of the indemnity money was supposed to be a beau geste which was going to have a good effect throughout China, but the way in which we are doing it is I believe going to destroy the whole moral value of what is intended. I quite agree that the Chinese Government are in favour of this proposal. An agreement has been come to, and that is something in its favour. However deplorable it may be that the Chinese Government are not willing here and now to spend practically the whole of the money on education, yet it has to be recognised that that is their view, but the Government are attaching conditions to this scheme which will have a very bad effect on our prestige throughout China. Here let me quote a passage from the report of Lord Buxton: It is to be borne in mind that the fundamental object in returning the indemnity is thereby to improve friendly relations between China and Great Britain, and enable the two countries to honour, respect and appreciate each other. It is essential to make it clear that there is no intention to utilise the indemnity for the purpose of exploiting China in the interests of British influence or trade or of British educational propaganda. This proposal is in direct defiance of that statement. Of course, we desire to get as much trade in China as we can, and I desire to see the Chinese buy British railway material to the largest extent possible, but to attach a condition that they must buy that material in Great Britain, in many cases probably at far higher prices than they would have to pay otherwise, is going to make our position difficult. Our rivals and competitors, trade and otherwise, will tell the Chinese, "You are paying 20 per cent. more than you need pay for that material." Thus we shall get a thoroughly bad name in that country if we attempt to make profit out of what ought to be a purely moral arrangement.

My second objection to the Bill is that it seems to be a conflict with the Nine-Power Treaty arrived at in Washington in 1922. I would like to ask the right hon. Gentleman if he has considered the matter from that point of view; whether any representations have been received from the United States Government, and what he is going to say, when and if he does receive representations from that Government to the effect that this proposal is in conflict with the open door policy to which we are a party with eight other Powers. The third argument which I submit to the House is that we are here opening up a fund of £3,000,000 for the purchase of railway material in this country when there are already people in this country who are owed £17,000,000 in respect of railway concerns in the past. Is it not very unfair and hard on them, that these people coming in long afterwards should, as part of a bargain on an educational basis, to give a moral benefit to China, receive this advantage? Is it not very hard on those who have no prospect of obtaining any payment of their debts, that their friends and competitors, coming in at this late stage, are going to be paid in full? I do not think that is a wise or fair arrangement. The Secretary of State in a Memorandum on the subject said that this was going to be a test case, as to whether we were going to play the game with the new regime in China. I venture to say that it is a test case and that the Government have come off very badly. I believe that these proposals are ultimately going to do an amount of harm to the good name of this country which will outweigh any immediate gain that we are going to have in trade. For that reason I associate myself with the Motion for the rejection of the Bill.

Captain EDEN

I find myself in an unusual position. I have to give support, even if somewhat qualified, to the Government, and I do it the more willingly, because I find that on this occasion they are following faithfully in the footsteps of their predecessors. I understand also that the action of the Government to-night constitutes one more broken pledge in the record of the Government. If that be true, as apparently it is, then all must be for the best within the compass of this Bill. I think the Government can show precedents for the course which they are following—precedents not only here but in other countries. The United States Government, although by a slightly different method, have in fact yielded up the greater part of this indemnity. Indeed, they were the first to take such action. They discovered that the money was more than they required, and therefore they proceeded to return some of it. I only hope that that action may prove to have been prophetic.

The hon. Member for East Wolverhampton (Mr. Mander) made one or two observations with which I should like to deal. He seemed to fear that the effect of our action in this instance would be to raise suspicions in China as to our motives in granting this money. This money is, of course, a free gift. It would have lain within the power of the British Government to have made any conditions which they thought fit, but actually this Bill is based, as I understand it, upon the recommendations of a body over which Lord Willingdon presided as a result of their researches in China. On that body the Chinese were represented, and I do not think it can be pretended that this gift which Great Britain is offering to China is, owing to the machinations of British capitalists, tinged with some sinister motive. Nothing of the kind. It is a free gift in the form, which China, through her own representatives, suggested. The really important date in this matter is 20th December, 1922, when the British representative at Pekin gave the first verbal undertaking to the Chinese Government as to our intentions with respect to this indemnity. I am not saying now whether I think it was right or wrong, but we gave that undertaking and by that undertaking we are in my judgment compelled to stand. It is interesting to note that actually on that date the Government presided over by the late Mr. Bonar Law was in office, but it is to he presumed, from the time which must have elapsed before the instructions had reached Pekin that the actual instructions were given by the Coalition Government before it left office. So that all parties are, in truth, equally committed to this policy in respect of the indemnity. I cannot see, therefore, that there can be any criticism.

The only thing which we have to consider is whether, having given our solemn word, first verbally and then in a written declaration, we can possibly do otherwise than honour our bond. There can only be one answer. It would be important in any country to do so, but it is particularly important in China, where our British men and women have built up a reputation for fair dealing and for standing by their word which is perhaps the greatest asset of British trade in China. There is absolutely no question that we must honour this obligation. I do not think that anyone in the House will deny that statement.

8.0 p.m.

The only difference which exists in regard to this matter is that some hon. Members below the Gangway appear to be frightened that some taint will be attached to this gift because of the fact that money is to be spent here, but, since China herself has asked for this method of payment, and since this is a free gift, I cannot see wherein the alarm lies. For my part, I am very glad that money is to he spent here. In fact, I think that this is the only contribution which the Government have made to the solution of the unemployment problem, and it took this over from its predecessors, and copied it letter by letter and upon that I heartily congratulate them, except for the one departure to which reference has been made. The work which will be done in connection with railways and bridges is work of which our workshops stand in need, and by which China will benefit. There are some people who think that when the world trade depression comes to an end, one of the first countries to show recovery will be China, once she has placed her credit on a firm basis. That may be true, and, should it be true, surely this country would deserve to share in that recovery from having fully and honourably met its obligations. If China is better equipped in railways and public utilities for such a recovery, then we shall have actually given a very considerable benefit to the Chinese people, perhaps even greater than the benefit from the money which will be spent also on educational purposes. We ought to have some explanation from the Government as to why this one change has been made between the proposals of the late Government and the present proposals. If hon. Members look at the White Paper they will find at the bottom of page 7 the only declaration which affects this £4,000,000, and that declaration in the words of Dr. Wang is: For the control, apportionment, and administration of the above-mentioned endowment the Chinese Government will duly appoint a Board of Trustees in China which will include a certain number of British members. That is the only undertaking of any kind that this money is going to be spent in the method of which we are asked to approve. In the same White Paper on page 11 the British Minister repeats in similar terms that guarantee given at an earlier stage. I cannot see why that guarantee could not have been included in the Bill, and, if it could not, it should surely have been emphasised in the correspondence. It does not even have a fresh paragraph to itself, but is thrown in at the last, and anyone who studies the records will find without difficulty that the previous interpretations have caused trouble over these moneys. After all, £4,000,000 is a considerable sum, and it would be helpful if we could have some information from the Government as to why this safeguard has been removed. What was the matter with it before in the proposals of the late Government? Did the Chinese ask for it to be removed? I can hardly believe that, in view of their earlier attitude, so that I think we must ask the Government as to their motive in this matter. It can be argued quite fairly that in passing this Bill now we are taking a risk in view of the present unstable conditions in China. I think we are, but it seems to me that it is a risk which, in all the circumstances, is well worth taking. I am not sure that I am enthusiastic about the changes that the Government have made in the Bill, but in their broad purpose in interpretating it, I think they are right, and without doubt the Under-Secretary of State for Foreign Affairs has shown an improvement in his entire change of point of view since he crossed the Floor of this House. I could only wish that in some other respects the Government had shown that they were glad to educate themselves as the Under-Secretary of State has apparently done.

Mr. WARDLAW-MILNE

I also propose to say nothing which would prevent the acceptance of the Second Reading of this Bi11 by the House to-night, although I have a great deal of sympathy with the views which have been expressed by my right hon. Friend below the Gangway as to the speech with which this Bill has been introduced after the production of it for the purpose of examination by hon. Members. It would have been better if we had had a little more time to examine it, but the reason I am not prepared to accept the rejection of the Bill is that I do not think my right hon. Friend is on very good ground when he bases his argument on the fact that the passing of it may be interpreted in some way or other as the breaking of a pledge to China or may be, in China, looked upon as a gift with a very definite qualification regarding the spending of the money in this country. I say that, because it is clear to those who have followed this matter from the beginning that it has always been understood that the spending of this money shall be for the mutual benefit of this country and of China, and I do not think that when an agreement has been come to, as it was come to under Lord Willingdon and the members of his Committee, as to the method in which the money should be spent, there is any point to be gained by suggesting that we are going behind the original purposes of the agreement, which, as I say, were definitely for spending the money for the mutual benefit of this country and of China.

But there is, I think, one very marked change in the proposals which the Government have now put before us from those which were contemplated by the House on previous occasions, and in that regard I am in agreement with my hon. and gallant Friend the Member for Warwick and Leamington (Captain Eden). If the Committee will turn to page 5 of the White Paper, they will see it quoted there, and again subsequently on other pages, that the Secretary of State would in all previous proposals have retained the control. There is only one place in which the Government give any reason for the alteration they have made, and that is where they say: His Majesty's Government were no longer dealing with a China distracted by civil war and by the claims of rival Governments. I am very doubtful whether we have really arrived at the time in which, with all the good will in the world, we are entitled to say that we should hand this money over to China without any control of any kind, and I am not sure that there is not some point in the argument which was put forward by the Liberal benches that if we are going to do that, it would be better to hand it over altogether. It seems to me that we are moving very fast indeed, and no special reason has been given in the White Paper to show why the Government have thought it necessary to make this very remarkable change from the proposals originally put before the House. They say: The only logical alternative appeared, therefore, to consist in handing over full control of the funds to the National Government of China and to rely upon their appreciation of our action in order to obtain fulfilment of the original intention of our policy. As I say, I am not going to oppose the Bill on that account, but I think it is going very much farther than this House has ever previously contemplated, to hand over the whole control of this matter, out of the hands of the Foreign Office altogether, without the Secretary of State for Foreign Affairs having any say in the matter, and although I can only hope that it will work out in a manner satisfactory to this country and to China, I can conceive that there are people who might justly say that the fact that a great change has been made would have justified the House in asking for further consideration of the Bill.

Mr. ARTHUR MICHAEL SAMUEL

The Mover and Seconder of the Amendment have both left the House, and not a single Member of the Liberal party is on the benches which they usually should but very seldom do occupy. I have read this Bill and take some particular personal interest in it, because I took part in the debate on the 1924 Bill, and I sat next, on the benches opposite, to my right hon. Friend, as he then was, Mr. McNeill, now Lord Cushendun, when he spoke in the debates on the 1925 Bill. Although I am not going to oppose the Bill, I think that we on these benches should say a word about the hypocrisy of the action of the Government. This Bill puts the Socialist Government in a ridiculous position. They have had to eat their own words. It puts the Under-Secretary of State for Foreign Affairs particularly in a ridiculous position, because this Bill, introduced, and recommended by him, seeks to carry out Measures which he took part in trying to prevent being carried out in the 1925 Parliament. Political dishonesty and hypocrisy of that kind cannot be allowed to pass without comment. I have taken trouble to dig out the past debates on this matter, because it is such an example of what I may call, in the intellectual sense, dishonest politics by the Government. I turned up my speech in the debate of 1924, before the hon. Gentleman the present Under-Secretary of State was in the House, and in that debate our lamented friend Sir Fredric Wise, on the 16th June asked Mr. Ponsonby, as he then was, who was in charge of the Bill, if it would be used for railway building, and Mr. Ponsonby answered in the negative. Now we come to the 1925 Bill, and I sat through the whole of that debate. It was very vividly impressed on my mind, because, as was mentioned by the right hon. Gentleman who moved the Amendment, there was a powerful, very vehement, and violent speech by the present hon. Member for Huddersfield (Mr. J. Hudson) to whom I wrote last week that I was going to speak in this debate. In it he opposed the China Indemnity Bill on the Second Reading, on the 3rd March, 1925. When Mr. McNeill moved the Second Reading, he said: I observe an Amendment has been put down in the names of three hon. Gentlemen opposite"— I take those to have been Mr. Ponsonby, the present hon. Member for Huddersfield, and the present Under-Secretary of State for Foreign Affairs— who express their wish to throw our the Bill on Second Reading for the reason that there are not sufficient guarantees that the money will be devoted primarily to educational purposes."—[OFFICIAL REPORT, 3rd March, 1925; cols. 282–3, Vol. 181.] They therefore moved an Amendment. Mr. McNeill then suggested that they should use the words "educational or other purposes," and he amplified those words roughly by saying he thought it would be good for the Chinese people if the word "educational" could be interpreted so as to include medical or scientific research. That did not suit the hon. Members opposite, and Mr. Ponsonby said—and I think this extract ought to be well rubbed in, in order to show a first-class example of what I may, without offence, call political hypocrisy: We have shown clearly our bonâ fides in the matter. If they move this Amendment and if there is a division on it, there will be no misunderstanding with regard to the motives of the Labour Government and the attitude of the Labour Opposition. It will be noted merely as a protest against this unprecedented action on the part of His Majesty's Government and as a demand that this money is to be spent primarily on educational purposes."—[OFFICIAL REPORT, 3rd March. 1925; col. 288, Vol. 181.] Following him was my hon. and gallant Friend the Member for Clitheroe, Captain Brass, as he then was, who said If we could use this money to develop some of the railways, roads, and canals in China, we should do far better than educating Chinese."—[OFFICIAL REPORT, 3rd March, 1925; col. 289, Vol. 181.] Mark what reception those words got from the benches on the Socialist side. They were received with jeers. The suggestion they jeered at when suggested by us is now to be enacted in the Bill which the Under-Secretary of State recommends to the House. Then we had the speech of the hon. Member for Huddersfield, who moved the Amendment, and who said: The hon. and gallant Member for Clitheroe (Captain Brass) has shown that in the minds of some hon. Members there is a definite intention, if the opportunity presents itself, to spend this money not at all upon education, but noon such purposes as the laying down of railways, and so on …"—[OFFICIAL, REPORT, 3rd March, 1925; col. 290, Vol. 181.] He went on to say: Possibly £10,000,000 or £11,000,000 …. would provide 2,000 miles of railways That being the position, we cannot pretend that by a proposal of that kind you are going to do something which will bring benefit to all the homes of the 400,000,000 people in China. Then the hon. Member for Huddersfield said: The granting of money for railways, in fact, instead of helping China on to its feet, if the grant be made in connection with some of the military leaders of China, may actually make the present confusion worse confounded …. It is because we to-day suspect that this Committee is likely to use the money, not for educational purposes. but for railways in backing up other commercial enterprises, that we feel we cannot accept the Measure in its present form."—[OFFICIAL REPORT, 3rd March, 1925: cols. 292–4, Vol. 181.] To sum up the whole thing, the present Under-Secretary of State, who recommends this Bill, then put his doubts in the matter into action, because he seconded the Amendment. What hypocrisy for him to come down here. after doing all he could to stop the very policy which this Bill now implements, and recommend us to do the very thing he then wanted to stop! The present Prime Minister said: One hon. Member has suggested that the money should be spent on railways. There is a great deal to be said for that idea, but when you go into the details you find that you cannot do it."—[OFFICIAL REPORT. 3rd March, 1925; col. 314, Vol. 181.] What they said they could not do and ought not to do they come down here now in a white sheet, with their tongue in their cheek, and ask us to do. They went even further, because when the Bill came up on 4th May, 1925, for further consideration Mr. Ponsonby asked to leave out the words "or other" because, he said: The Amendment would make the purposes to which the money is devoted exclusively educational purposes. I will quote Mr. Ponsonby more fully than he was quoted by the right hon. Gentleman below the Gangway. He said: Nothing could be more fatal, than that this gesture that we are making, and which other countries have made before us, should be in any way desecrated by a desire on our part to make a profit. The Under-Secretary boasted that it would be a profitable transaction by bringing trade to this country; I hope that it will, but I hope that the Government will not make this transaction a factor or an item of boast in the number of schemes which their party is to set going to reduce unemployment. Therefore, said Mr. Ponsonby, I want to emphasise the fact that we hope very much that the instruction to the Committee, and the purpose that the Government have before them, will be made clear, in order that the money may be devoted to educational purposes."—[OFFICIAL REPORT, 4th May, 1925; cols. 704–5, Vol. 183.] That is the line taken by the Socialist party in opposing any effort which we made to have the very thing done which is now being carried out in this Bill. I leave that now, having registered any protest against a cynical exhibition of the political hypocrisy of the present Government.

Let me deal with the Bill as I see it. I need say nothing about the £465,000 which the Under-Secretary has mentioned is to go to the Hong Kong University and the Universities' China Committee. In Clause 1, Sections (2) and (3), however, the amount in round figures to be dealt with will he rather more than £11,000,000., which can be divided up into two portions—roughly £7,000,000 for railway material, and about £4,000,000 for education. That is provided for by one-half of every sum received after time commencement of this Act, as it is stated in Sub-section (3). I have read very carefully through the Command Paper No. 3715, and I assume that the Government are in accord with the policy laid down in this Foreign Office Memorandum. It indicates an agreement, for on page 6 is says: A new Act is required to implement this agreement. The Bill drafted, with this end "— that is, to implement an agreement which has taken place between Dr. Wang and Sir Miles Lampson. Let me draw the attention of the House to a passage which I do not think has been adequately mentioned in this connection during the debate. Dr. Wang says, on page 9, paragraph 6 of the White Paper: Funds spent in the limited Kingdom will be regarded as loans, bearing interest and providing for eventual amortisation, from the Board of Trustees to the Chinese Government Railways or other productive enterprises concerned, and strict account will be rendered from time to time to the said trustees. The amounts attributable to the service of such loans will be paid to the said trustees and by them applied to educational purposes at the earliest opportunity. A statement is made by Sir Miles Lamp-son almost in the same words on page 13 of the White Paper 3715. No provision is made, however, for carrying out this undertaking in the Bill, and words giving effect to that agreement should appear somewhere. I hope that that provision will be added on the Committee stage so as to make it a condition, when this Bill goes through, that the Chinese authorities must take proper steps to see that the funds which are to be used for buying railway material, shall be repaid by amortisation and interest provided meantime. At any rate, it must be thoroughly well understood that it is a condition precedent to this House agreeing to the Bill that the Chinese Government must find the interest and amortisation.

A little thing struck me in going through this White Paper. On page 10 the word "donated" appears in a Foreign Office dispatch. It is a dreadful word and ought not to be used by those who wish to speak or write pure English. I find the New English Dictionary says that it is a word mainly of United States usage. It is a word which belongs, I suppose, to that scientific toy, called in the United States language, the "talkie or movie." When English-speaking people wish to say "give" they should say "give," and not "donate." It is a vulgarity. I hope that the Foreign Office will take notice; I cannot imagine that Lord Rosebery or Lord Grey or Lord Balfour would have used that word at all, and certainly not in a Foreign Office dispatch. I shall not oppose the Bill, for it carries out what we wished to carry out in 1924 and 1925, but I make the suggestion that the Government should put in a Clause to implement that section of the agreement which was signed by Dr. Wang and Sir Miles Lampson, which comes under paragraph 6 on page 9 and again on page 13 of the White Paper. There is nothing unfriendly to the Chinese Government about it, or anything in it to which anybody can object, and if it is put in we shall be better satisfied with the Bill.

The PRESIDENT of the BOARD of TRADE (Mr. William Graham)

My hon. Friend the Under-Secretary of State for Foreign Affairs, who introduced the Bill, put the position so clearly and fully that a very brief reply on behalf of the Government to the points which have been raised is all that is necessary. I will not attempt to reply to the charges of change of attitude which have been made by my hon. Friend who has just spoken and other hon. and right hon. Members. I have always thought that it was singularly unprofitable in this House to wander about in the vain path of old speeches in the OFFICIAL REPORT. There never was a case in which that enterprise was more melancholy and more unprofitable than on the present occasion, because I have not the least doubt that hon. Members in different parties held these views with perfect sincerity at the time that they were expressed. What we have to recognise to-night is that we have been dealing with a situation which has changed very largely over a term of years, and that we are now in the presence of an agreement as between the Chinese Government and the Government of this country which is mutually acceptable, and which, being mutually acceptable, is in keeping with that basis of mutual benefit laid down in 1917 when for all practical purposes we waived any claim to exclusive benefit under the Boxer Indemnity.

My right hon. Friend who led the debate from the other side called attention to the position of the Board of Trustees in China, and pointed out, quite properly, that there were only two statements in this White Paper, in the exchange of Notes, reciprocal in character, which said that there should be certain British representatives on that board, whose duty it is to deal with the £4,000,000 portion of the indemnity over the next 15 years. It has been suggested by hon. Members that that should be put in the present Bill. The House will observe on that point that we are really dealing with a question which is within China itself, and which I should think is difficult of inclusion in a Bill of this kind promoted in the United Kingdom. In any event, we have not the least reason to doubt that the terms of the correspondence which has been submitted on this point will be faithfully observed. The whole object is to come to a friendly relation in a very practical way, and to link up provision for education with railway development on an increasing scale in China.

That leads me very easily to certain other points which have been raised in the debate. The basis of this plan is that it should be one which is of mutual benefit to the two countries. It is quite true that over a considerable part of the history of this subject education has been emphasised, and perhaps there is a good deal to be said for the argument of my right hon. Friend the Member for South Molton (Mr. Lambert) that if we were dealing with this afresh, or if there had been no history, a claim might have been made for the sum to be handed over, in the hope that it would have been applied to educational purposes; but, as my hon. Friend beside me has pointed out, it is really devoted to education.

After all, if the Chinese Government consider that that object is served by the two immediate grants to the Hong Kong University and the Universities China Committee and by an investment in a great industrial enterprise designed to yield an income providing further for education in China, I cannot see that there is any real departure from what we previously had in view. I should have thought that, from the standpoint of the two countries that was a very satisfactory arrangement. Be that as it may, the Agreement is here, and I do not think hon. Members have really contested its terms on the points which I have so far summarised in my reply. There is, of course, the other kind of business consideration, and it is here that the Board of Trade more particularly enters the picture. It was argued by two hon. Members on the Liberal benches that there is some departure from the Washington Agreement of 1922 in that it is specified in this plan that the orders for the material for railway construction must be placed within Great Britain. May I say at once that we have taken advice on that point? It is unnecessary to review the relevant clauses of the Agreement of 1922, but in substance they provided for the policy of the open door in China: that is, that countries should not seek to gain advantages over one another, that it should be a kind of open area for commerce.

Our advice is that there is nothing in this Agreement which conflicts with that wider and general policy of the open door, and that in particular as we are here dealing with funds which beyond all dispute belong to the people of this country, we are entitled to make a specific arrangement, if the Chinese Government agree, that goods shall be purchased within these shores. Moreover, the agreement was submitted to the other signatories to that Treaty in good time for observation, but these have not been forthcoming. This, I suggest, is a complete reply to the questions raised by my right hon. Friend the Member for South Molten and by the hon. Member for East Wolverhampton (Mr. Mander)), who supported him in moving the rejection of this Bill.

Another point is raised as to the disadvantage at which the Purchasing Commission, or the Chinese Government generally, might be placed if prices in this country were higher than prices elsewhere. It is unnecessary to stress further the point of mutual benefit, and, further, the Purchasing Commission, which includes representative British men, will be able to compare the prices here with the prices of railway material elsewhere, and I have no doubt that if they think they are unfair in any respect, they may delay their operation or inquire or take steps to see that that point is fully safeguarded. But there will also be competition amongst the iron and steel firms in this country in an endeavour, at the lowest possible rate consistent with efficiency and an economic return, to minister to China's economic development; so I think no considerable difficulty need be anticipated on that point.

Then hon. Members raised another consideration which, I agree, is of importance. They pointed to the debts due to British engineering and other firms in China in respect of railway and other development in the past, which debts are in default or have not been paid. I can inform the House to-night that that matter was considered. It has been suggested—I believe even publicly from time to time—that the settlement of those debts should be linked up to the indemnity obligations, made, as it were, a kind of prior charge, or at all events a charge on those payments from time to time. Both our predecessors and we have been unable to take that view. They remain separate and distinct. But I am able to read to the House to-night, and I propose to read it, in order that there may not be the slightest misapprehension on this important question, a statement made by the Chinese Minister for Foreign Affairs to His Majesty's Minister in China, under date 22nd September, 1930: I have the honour to inform your Excellency that it is the intention of the Chinese Government in connection with their programme of railway rehabilitation to include in the arrangements for such rehabilitation the early settlement of outstanding debts due to British merchants for rolling stock and other railway material already supplied to the lines in question. It is understood, however, that the settlement of these debts may not necessarily be made out of the remitted indemnity funds, in order to conserve the said funds for construction and rehabilitation purposes. That declaration has been made, and I have not the least doubt that every effort will be made to give effect to it.

Mr. A. M. SAMUEL

That is a very important statement so far as it goes. Does that mean that the Chinese Government, which in the past has borrowed large sums on the London market by means of Chinese bonds some in default —Government bonds—and has raised the money for building railways in various parts of China, is saying that the interest and the sinking fund for the repayment of those funds raised for railway construc- tion will be dealt with in the spirit of that letter?

Mr. GRAHAM

No, I think my right hon. Friend has raised a somewhat wider point on which, no doubt, during the Committee stage of the Bill, if it were so desired, my hon. Friend beside me or the Secretary of State for Foreign Affairs would make a statement. The statement which I have just read to the House tonight is confined to the question now before us, namely, those debts due to engineering and other firms relating to past railway enterprises in China, and that is, as I conceive it, the limit of that statement. I think only one other observation is required. All authorities are agreed that it is of the highest importance to the recovery of our industry and commerce in Great Britain that the markets in the Far East should be brought again into a condition of effective purchasing power. Within recent times we have been reminded that in China, India and Russia we have, approximately one-half of the population of the world, 900,000,000 out of 1,800,000,000. China, which has a population of perhaps more than 500,000,000, may, it is acknowledged, become a very valuable market for British goods as it proceeds with its reconstruction. May I mention one very remarkable fact? China has an area considerably larger than that of the United States of America, but its railway lines are less than one-twentyfifth of the railway mileage of the United States. I think that to-day there are not more than, perhaps, 10,000 or 12,000 kilometres of railway line in China, of which, perhaps, 7,000 or 8,000 may be regarded as main line. A very large part of that railway system is urgently in need of reconstruction and repair. This great market cannot be developed for British or any other goods until the transport system of China is far more widespread and efficient than it is at the present day. I think there would be a very great advantage in thus linking up the purchase of railway material, which would assist the heavy industries in this country, and minister to a great educational purpose in China, and, at the same time develop what we hope will be a valuable market. for British goods. With this explanation, I hope that the House will now proceed to a Division on the Second Reading.

Sir D. HERBERT

I want to ask a question with regard to the meeting of existing debts. A number of Chinese Government bonds which were given as payment for services rendered in connection with certain railway and other developments in China are in default. Does the night hon. Gentleman mean that those bonds which are in default will in future have their obligations met?

Mr. HAYCOCK

What is the actual market value of those bonds to which the hon. Member for Watford (Sir D. Herbert) has just referred?

Mr. GRAHAM

I could not reply to a question of that kind without notice, because I have not any knowledge of the value. With regard to the other question put by the hon. Gentleman opposite, I can only say that I have already replied to that point. The exact terms of the statement made on the 26th September by the Chinese Minister are as follow: The early settlement of outstanding debts due to British merchants for rolling stock and other railway material already supplied to the lines in question. I regard that as a narrower proposition than that of any bonds or other obligations. I believe this to be confined at the moment to the cases of those firms in China which have suggested that their debts ought to become a prior obligation in these indemnity payments.

Mr. C. WILLIAMS

I do not wish to say anything which will upset this agreement, but I think the House ought to be very definite on this question. The President of the Board of Trade has just told us that the whole of these funds belong to this country, and that, for practical purposes, from 1917, we are making a definite present of these funds to the Chinese. I agree that it is impossible for this House to do anything except that which has been proposed, and I will not make any further comments on those lines except to say that I think the House has every reason to remember what the President of the Board of Trade has told us about these funds. In the first place, I wish to ask the Government definitely a question which has already been put, and which I noticed the right hon. Gentleman did not answer. At the bottom of page 7 of White Paper 3715, there are the following words: For the control, apportionment, and administration of the above-mentioned endowment, the Chinese Government will duly appoint a Board of Trustees in China, which will include a certain number of British members. I want to know whether that cannot be definitely laid down in the Bill. I know how far we have gone to meet the Chinese, and it is only right that we should go a long way. I agree with everything that has been said in the way of doing nothing which would depreciate the value of the work of this country in China and the necessity of recapturing our markets in China. In Clause 2, Subsection (I, i), there is a, proviso: to enter into, and to supervise and secure the carrying out of, contracts for the supply and the delivery in China of such plant, machinery and other articles and material to be manufactured in each case within the United Kingdom. I congratulate the Government most thoroughly upon having got that proviso in this particular part of the agreement. I do not join with the right hon. Gentleman the Member for South Melton (Mr. Lambert) in accusing the Under-Secretary of having changed his mind. I would like to ask if this stipulation means that the railway trucks and engines, and the material required for the building and running of these railways, will be purchased in this country, or does it mean that the Chinese will make their own railway material in the future by setting up factories in China? I find on page 3 of the Memorandum that: The United States of America were on the point of remitting their remaining balance. I think we ought to be told what the United States have actually done. We have heard a good deal about the education of the Chinese here and in the United States, but I would like to know if the United States have really given the whole of this money for educational purposes. Another question I would like to ask is, What has actually happened to the money which went to France? The statement as it stands is very vague and indefinite, and the House should know whether some of it has gone to relieve the French people of their burdens. We might be told where the money has gone in those two cases. I will not inquire where it has gone in the case of Japan.

It has always been agreed that this money should be spent upon educating the Chinese.

Would it not be equally a matter of mutual benefit both to the British people and to the Chinese if some institution could be established in this country so that a larger number of British people might have a thorough educational knowledge of the Chinese language and of China, with the idea that they would go out, as missionaries if necessary, but, even better, As trade missionaries, for the purposes of opening up British trade in that country? [Interruption.]. I only mentioned missionaries as one alternative; I should be much keener on a certain number of British people being given a very much greater knowledge of Chinese, so that they might go out to that country and do everything they could to sell there the products of the work of British men and women. I think the suggestion is worth making that some of this money might have been applied in that way, which would have been of mutual benefit to both the Chinese people and ourselves. I hope that these questions will be answered by some Member on the Front Government Bench, and I should like to congratulate them most respectfully on being rather better in their attendance now than they were earlier in the afternoon.

Mr. A. SOMERVILLE

This Bill grants to the Universities' China Committee a considerable sum of money, namely, £200,000, and I should like to take the opportunity of expressing the hope that part of that money will be spent in establishing a hostel for Chinese students in this city. A source of trouble in foreign countries is that students of those countries, when they come here, come under wrong influences, and, if such a hostel were established under responsible management, it would go some way towards counteracting possible evil influences on Chinese students. My right hon. Friend the late Under-Secretary for Foreign Affairs, and my hon. and gallant Friend the Member for Warwick and Leamington (Captain Eden), mentioned the point that no definite British influence is guaranteed on the Board of Trustees. The President of the Board of Trade told us that he did not see his way to introduce into the Bill a definite guarantee with regard to that matter, but I should have thought that it would be quite possible to do so, and in any case I should like to express the hope that the Board of Trustees will see their way to supplement the efforts of the Universities' China Committee to provide for the essential needs of Chinese students in this city. The Bill seems to me, although apparently inconsistent with the Act of 1925, to be, nevertheless, in substance and in principle the same. I have followed with much interest the progress of this question in 1923, 1924, and under the Act of 1925, and although it is not often, as my hon. Friend the Member for Torquay (Mr. C. Williams) has suggested, that one has the opportunity of congratulating the Front Bench opposite, I do congratulate them on having produced a Bill which combines two very useful objects, the encouragement of British trade and the encouragement of education.

Bill read a. Second time, and committed to a Standing Committee.