(a-m. / / Cl.Vil'na- Svbua:ho'T(\ THE ECONOMIC ASPECTS OF THE SHANTUNG QUESTION Published by CHINESE PATRIOTIC COMMITTEE New York City August. 1919 IMPORTANT ANNOUNCEMENT Owing to the absence of Mr. K. P. Wang, the Secretary of the Committee, please address all communications temporarily to MR. Q. K. CHEN (^Treasurer and Acting Secretary) P O. Box No. 3 Station J. New York City THE ECONOMIC ASPECTS OF THE SHANTUNG QUESTION CHINESE Published by PATRIOTIC COMMITTEE New York City August. 1919 Digitized by the Internet Archive in 2017 wjth funding from Columbia University Libraries https://archive.org/details/shantungquestionOOchin The Economic Aspects of the Shantung Question Considerable light has been thrown on the moral, legal and ’political aspects of the Shantung question, but its equally important economic phase seems to have been entirely neglected. Under articles 156, 157 and 158 of the Peace Treaty, generally known as the Shan- tung clauses, Japan has acquired a right, so to speak, to succeed to all mining and railway concessions which Germany exacted from China before the war and to all German public properties in the territory of Kiao- Chau. In order to know what such a right includes it is necessary to advert to the text of the Shantung pro- visions which read as follows: ARTICLE 156. — Germany renounces, in favor of Japan, all her rights, titles and privileges— partic- ularly those concerning the territory of Kiao-Chau, railways, mines and submarine cables, which she acquired in virture of the treat}' concluded by her with China on March 6, 1898, and of all other arrangements relative to the Province of Shantung. All German rights in the Tsing-tao-Tsinan-Fu Railway, including its branch lines, together with its subsidiary stock of all kinds, stations, shops, fixed and rolling stock, mines, plant and material for the exploitation of the mines are and remain acquired by Japan, together with all rights and privileges attaching thereto. The German State submarine cables from Tsing- tao to Shanghai and from Tsing-tao to Che Foo, with all the rights, privileges and properties at- taching thereto, are similarly acquired by Japan, free and clear of all charges and incumbrances. 3 ARTICLE 157. — The movable and immovable property owned by the German State in the terri- tory of Kiaochow, as well as the rights that Ger- many might claim in consequence of the works or improvements made or of the expense incurred by her, directly or indirectly, in connection with this territory, are and remain acquired by Japan, free and clear of all charges and incumbrances. ARTICLE 158. — Germany shall hand over to Japan within three months from the coming into force of the present treaty the archives, registers, plans, title deedsi and documents of every kind, wherever they may be, relating to the administra- tion, whether civil, military, financial, judicial or other, of the territory of Kiao-Chau. Within the same period Germany shadl give par- ticulars to Japan of all treaties, arrangements or agreements relating to the rights, title or privileges referred to in the two preceding articles. These articles only set forth in general terms the concessions and properties Japan has acquired, say- ing nothing about their economic value or earning capacity. This ommission consequently leads super- ficial observers to forget that the railroad and mining concessions now transferred to Japan are of vital economic importance to China and the outside world. As worked out by the Germans these concessions served and will serve as very effective weapons to capture the whole trade in the Shantung province and to debar outsiders from having a due share in its market. In brief, the railway concessions in Shantung amount to 575 miles, exclusive of the Tsingtao-Tsinan Railroad which was constructed and has a mileage of 310 miles. Within a distance of 30 lis (about 10 miles) from each side of these railways the Germans 4 had the right to develop the mines. These railway and mining concessions are dwelt upon at length else- where in this booklet and the treaty stipulations rel- ative thereto are also set forth in somewhat detail. General Economic Conditions Commercial developments and possibilities in Shantung deserve wide attention. In the year of 1912 Tsingtao, the only important commercial port in Shantung, carried two-fifths of the entire German colonial trade, and the articles imported through this port into Shantung amounted to $45,000,000.00 ex- clusive, however, of the materials imported for rail- way construction and mining which were usually supplied by German corporations. In 1913 the import trade jumped over $50,000,000.00, and had not the outbreak of war in 1914 interrupted the importation of foreign goods, there is reason to believe that the total value of imports would soon have passed the 100 million mark. It is interesting to know that the articles imported consist principally of kerosene, petroleum, papers, cot- ton goods, cotton yarns, sugar, dyestuflFs, etc. Accord- ing to the returns of the Chinese Maritime Customs, there has been a steadily increasing demand for kero- sene and cotton goods. Before the war Shantung relied upon Russian and American kerosene as the two principal sources of supply, but the war and the civil strife in Russia have entirely cut off the Russian source, leaving the market to American oil. With Russia still in political chaos, this favorable situation will continue for several years. Cotton goods and cotton yarns have a big and ready market in Shan- tung and large profit has been reaped in this field. Shantung is chiefly an agricultural country, pro- ducing in large quantities such products as wheat, barley, beans, maize, millet and other grains. The principal exports are peanuts, straw braid, bean cake, tussore yams, cattle-hides, live stock, eggs, fmit. 5 p>ongee or Shantung silk as it is commonly called. Be- fore the war the Germans established in Kiao-Chau various factories equipped with modern machinery to put these agricultural products in a better shape so as to command a better market abroad or elsewhere. The wider the market for the native products, the higher will be the purchasing power of the population, and this would in turn enable the people to absorb more foreign imports such as sugar, cotton goods, luxuries, etc. The commercial records for the past few years support this statement. In connection with this description of the general economic conditions in Shantung, the American public must bear in mind that no matter how rich Shantung is or will be, yet under the Versailles treaty, foreign investors or exporters could not expect to gain a foot- hold in the Shantung market because the present Shantung clauses virtually authorize Japan to close the open door. With the assistance of railways the Germans were able to put foreign competitors hors de combat, and their disciples, the Japanese, are even in a better strategical position to do so by virtue of the tacit assent of the other Powers. Railway Rights In virtue of article 156 of the Peace Treaty Japan holds the right to construct railways in Shan- tung— a right that has an economic as well as a polit- ical significance. Politically, such a right is usually the forerunner of peaceful penetration and political domination; economically, it helps in monopolizing trade and exploiting the people. The history of the railways in the United States is replete with instances of how a mighty railroad could develop an industry in one section of the country and cripple it in another, how it had wrested business from its competitors, how it compelled consumers to pay exorbitant prices for transportation service. This is no less true of the rail- ways in Shantung. According to German reports, the German merchants diverted in 1912 nearly the whole 6 trade of the province to Tsingtao by utilizing the aid of the Tsingtao-Tsinan Railway, although they act- ually did only 6o per cent, of the total business. By the same means the Japanese will try their utmost to bring trade wholly within their hands. In regard to the railway concessions in Shantung, Clause I of Section II of the treaty of 1898 between China and Germany provides ; China agrees to permit Germany to construct two railway lines in the Province of Shantung; one from Kiao-Chau, past Weihsien Ch’ing Chau, Poshan Hsien, Tzu-Ch’uan and Tsou-p’ing to Tsinan-Fu zmd the Shantung frontier; the other from Kiao-Chau to Ichow and thence past Lcu-wu Hsien to Tsinan-Fu. The railway from Tsinan-Fu to the frontier of Shantung is not to be begun until the line to Tsinan-Fu has been built, in order that arrangement may be made for a junction with the main lines constructed by China. The route of the line is to be left for future arrangement. Before the outbreak of the war Germany wrested from China three railway concessions, one from Tsingtao to Tsinanfu, another from Kaomi to Suchow-Fu via Ichow and still another from Tzinan- fu to Shuntehfu on the Peking-Hankow line. The Tsingtao-Tsinan Railway was constructed and com- pleted in 1904 by the German Schantung Eisenbahn Gesellschaft with a capital of $14,000,000. The ori- ginal cost of construction was $13,000,000 but in 1912 it ran up to $14,500,000, It has a mileage of 256 miles on the main line and 54 miles on the branch lines. The most important branch line, 28 miles in length, runs from Changtien to Poshan Hsien where considerable coal deposits are being worked. The Tsingtao-Tsinan-Fu Railway has been in operation for the past ten years. It has done a very prosperous business since it was opened to traffic. Ac- cording to the figures of 1913, the traffic over the line amounted to 900,000 freight tons, the passengers car- ried numbered over a million and a quarter, and the 7 receipts for the year 1912 reached the mark of $2,400,- 000 as over against $1,200,000 for expenditures. And the dividend declared was 7.5 per cent. Be it remem- bered that with the aid of this mighty railway the Germans were able in 1912 to draw almost all the traffic in Shantung to the harbor of Tsingtao. The railway project running from Kaomi (near Kiao-Chau) to Suchow-Fu was not carried out, and under a protocol signed in 1909, Germany relinquished to China the right to construct this line but on con- dition that China should employ German capital and German engineers, and on further condition that China should undertake to begin construction not later than 1915 after which it is questionable whether the right of construction would revert to Germany. This railway project has a mileage of 334 miles, and, if constructed, will form the base of a triangle of which the lines from Suchow-Fu to Tsinanfu and from Kiao- Chau to Tsinan constitute the other two sides. Like the Tsingtao-Tsinan Railway this line would draw off traffic from Lunghai to Shantung ports as is shown on the map. It is rather unfortunate that China should have failed to hasten to the construction of such an important project. The Kaomi~SuchoW“Fu line appeared so impor- tant to the Germans that they felt uneasy and irritated when the Tsin-Pu Railway built with British capital made connection with the Tsingtao-Tsinan line at Tsinanfu and passed down to the south. Writing in Deutsches Kolonial Monatshlatt for the year of 1913 a German authority expressed the opinion that the Tsin-Pu Railway would eventually cripple all German commercial, financial and political interests in Shan- tung and urged that Germany should by all means con- struct the Kaomi-Suchow-Fu line in order to safe- guard her interests. It is thus clear that railways in Shantung have a strategical value and may be used as a bulwark against aggression, to say the least. Another line contracted for but not constructed runs from Tsinanfu to Shunteh-Fu on the Peking- 10 Hankow Railway. This project has, at least, a mile- age of 241 miles. Should it be realized by the Japa- nese, this would bring Honan and adjacent provinces imder Japan’s economic and political control. With this vast colony in the center and a stronghold in Man- churia in the north, Japan’s grip on China will be im- measurably strengthened and will spread in all direc- tions tmtil she controls the whole of northern China both economically and politically. The railway concessions that Japan has acquired under the peace treaty thus amount to 885 miles, and to realize these projects a capital of $40,000,- 000.00 would be required. Under the present cir- cumstances, China can neither supply capital nor materials for construction. She has only unskilled labor. The capital therefore must come from Japan or other Powers. Even granted that non- Japanese capital is invited, there is no assurance that Japan will not discriminate against it in one way or another as she has repeatedly done in the building and operation of the Manchurian railways. The consequent result will be that non -Japanese capitalists will hesitate to invest, and the whole enterprise will be financed by Japan alone— a danger that threatens to drive out foreign trade from the provinces where Japan alone has a free hand in the administration of railways. The situation in Manchuria has fully demonstrated all this. History will repeat itself again in Shantung and its adjoining provinces. Mining Concessions Shantung is full of such mineral resources as coal, iron, gold and other metals, but as recent investiga- tions show, coal is the most abundant of all. As in- dicated on the map, rich coal deposits and coal fields are found here and there, along the Tsingtao- Tsinan-Fu Railway, and two of these coal fields are being worked very profitably. Mining concessions in Shantung were granted to Germany under Clause 4 of Section II of the treaty of 1898 which reads as follows: II Within 30 lis (about 10 miles) of the above rail- ways (as specified in Clause i. Section II) — as, for instance, in Weihsien and Pashan, on the north- ern line from Kiao-Chau to Tsinan-Fu, and in Ichow Fu and Laiwin Hsien, on the Southern line, from Kiao-Chau via Ichow to Tsinan-Fu — Germany is permitted to excavate coal etc. — The necessary work may be undertaken by German & Chinese Merchants combining their capital. In accordance with this Convention German cor- porations began mining operations in the places speci- fied, notably at Weihsien and Poshan Hsien. Of these two the Poshan deposit is perhaps the largest, for its output in 1913 was put at 414,000 tons while the Weihsien district yielded during the same year only 199,000 tons. So far as statistics and investigations show, the Poshan coal field has a wonderful future for devel- opment; the quality and quantity of its products out- rival all the rest. According to an authentic state- ment in the Far Eastern Review it was discovered in 1904 that just 268 metres (878 feet) beneath the sur- face there were three strata groups with varying quali- ties. The first group 100 metres (328 feet) below the characteristic top layer shows about 16 metres (52.5 feet) 4 single strata of 2j4 metres (8.2 feet) alto- gether of a really first class rich coal, having about 17 per cent, gas and about 8 per cent. ash. The second group, situated about 60 metres (196.8 feet) from the first, contains three strata in 17 metres (55.8 feet), having altogether 1.8 metres (5.9 feet) coal, likewise of the best quality, but containing on the average 15 per cent, gas and 10 per cent. ash. At a further distance of 100 metres (328 feet) a third group of 4 strata is found in an extensive mountain layer of about 20 metres, (65.6 feet) containing 4.2 metres 13.8 feet) of an anthracite coal, having 12 per cent, gas and 12 per cent, ash, but of considerable heating value. 12 The Poshan coal is largely used in the manu- facture of coke in Shantung and elsewhere. Its heat- ing value varies from lo per cent, to 17 per cent. It is therefore very suitable for oven heating. Another excellent quality of the Poshan coal is its smokeless- nesSj and, for this reason, it bids fair to substitute for the expensive Cardiff coal used on warships. By the end of 1913 the total works in the coaling operation consisted of the following: 2 principal shafts for rich and poor coal, I emergency shaft, I coal washer for poor coal, I coal washer for rich coal, I coal separator with carriage, I large repair shop, I electric shop. The annual quantity produced by these works is as follows: 1910- 1911 544.3s tons 1911- 1912 „„283,2o8.5o tons 1913 ._.„„___4i4, 000.00 tons The Weihsien coal field was operated, beginning from 1902, by the German Schantung Bergbau Gesell- schaft with a capital of 12,000,000 marks. Its output is in the main bituminous, containing about 15 per cent, ash and 30 per cent. gas. The Weihsien coal has a high heating power — almost 7,000 calories— -and it also has the advantage of having a lighter smoke. The principal seam of coal is about 9 feet thick, at a depth of 450 ft., running from N. E. to S. W. The top seam is of 6.6 feet thick. Beneath the prin- cipal seam is a third stratum of about 9.8 feet depth. The producing capacity of the Weihsien coal field is : igio-1911 igii-1912 1913 13 .193,497.05 tons .205,185.00 tons 199,000.00 tons Besides the Poshan and Weihsien mines there are other rich coal fields scattering around the Tsingtao- Tsinan Railway. These are Hunghsan with an annual output of 414,000 tons, Fangtze with 199,000 tons, Yihsien with 198,000 tons, Tawenkow with 72,000 tons and Ichow with 30,000 tons, the figures being taken from the statistics of 1914. The Poshan, Weihsien, Fangtze, Hungshan and other minor mines are being exploited by the Japanese as a result of the Germans being expelled from Shantung. It will be seen from the map that most of these rich coal mines lie near the Tsingtao-Tsinan Railway, and this special location will facilitate transporting their output to all parts of the world. Iron ores are found in abundance in Shantung, notably in Chinlingchen and Ichow. The Chinlingchen mine is only seven miles from the Tsingtao-Tsinan Railway. It is now worked in conjunction with the Hungshan Colliery. The ore contains about 66.4 per cent, of iron, 28 per cent, residue, .02 per cent, sul- phur and traces of phosphur. It also contains cal- careous substance which makes it self-fluxing and faci- litates the smelting process. Gold mines have long been discovered at two places, namely, Fengkia in the Shantimg peninsula and Szemeitze in Kiao-chau, but as yet no statistics are available concerning their operation and producing capacity. Conclusion Writing in Geographische Zeitschrift for 1914, Herr Schmitthenner stated that Japan’s covetous de- sire to attack Tsingtao in 1914 was undoubtedly attri- butable to the rich coal and iron deposits in Shantung and the tremendous earning capacity of the Tsingtao- Tsinan Railway. In this view we entirely concur, but Japan’s ultimate objective seems to be a conjunc- tion between Manchuria and Shantung and the conse- quent domination of all northern China. This goal, otherwise unattainable, the Japanese will surely reach 14 with the aid of the peace treaty. And it is a matter of course that Japanese economic domination will be fol- lowed by commercial exclusion similar to that hitherto witnessed in Manchuria and elsewhere. The brief sketch in the preceding pages has clearly shown that under the peace treaty Japan gains a title to railway and mining concessions worth hund- reds of millions of dollars. All these concessions, to be sure, are Chinese property. They will yield to Japan, an annual income of at least 50 million dollars. Besides, the railway concessions will contribute mater- ially towards Japan’s control of northern China. This is one of the good reasons why China refused to sign, the principal reason being the legal argument which has won so much sympathy and support out- side the conference at Paris. Indignation against such control has been clearly indicated in the numerous recent anti-Japanese demonstrations throughout all the length and breadth of China, particularly in Shantung. China can not without protest submit to being robbed of her valuable properties, nor should the self-professing champions of right and justice consent to such robbery. Had China signed the peace treaty, that act would have amounted to signing a death warrant for her economic and polit- ical life. Fortunately, she did not. In the last analysis, the Shantung question is a business proposition — a proposition that confronts China as well as the outside world. It has beeni point- ed out that a huge capital of $40,000,000.00 will be required to build the new railways in Shantung, and no doubt a considerably greater amount will be nec- essary to open the undeveloped coal, iron and gold mines in the province. It has also been pointed out that foreign imports such as cotton goods, petroleum, sugar, etc. find a ready and wide market in Shuntung, and that such imports had already jumped over $50,- 000,000.00 in 1913. These are, in brief, the golden opportunities for foreign investment and foreign trade. Now under the terms of the peace treaty Japan 15 holds the power to close the door, a power she will surely exercise in the course of time. Consequently, all the profits to be derived from the railway, mining, and commercial enterprizes in Shantung will go to Japanese coffers as a compensation for what certain American senators call “war labors.” And eventually American trade already established in the northern provinces will be driven out. The Japanese menace does not stop here. It may go further than the average person can imagine. There is reason to fear that the continuous influx of wealth from China to Japan will enrich the latter to such an extent that in the course of ten or twenty years Japanese junkers will be able to dream of world conquest. Once let loose to organize and draw upon the resources of China these jingoes may run at large and prey upon everything that can (add to tiheir territory or wealth. Then it may take, as it did in the European catastrophe, the united effort of all peace-loving nations to make the world a safe place to live in. It may again cost millions of lives and billions of treasure. How expensive, and inef- fective such a policy would be. Under no circum- stance should we allow the new danger to knock at our door. There is a better and more righteous way to frustrate Japanese imperialistic schemes, namely, to defeat the Shantung settlement as it now 'stands. It is a way that costs neither lives nor treasure ; it needs only firm and enlightened public opinion to make defeat sure and lasting. i6 LIST OF PUBLICATIONS 1. China vs. Japan, February, 1919. 2. China’s Claims at the Peace Table, March, 1919 3. The Kiao-Chau Settlement. May, 1919. 4. Might or Right? May, 1919. 5. Why China Refused to Sign the Peace Treaty. July, 1919. 6. The Economic Aspects of the Shantung Question. These publications will be mailed upon application to Mr. Q. K. Chen whose address is given on the second page of the cover.