consequences of the threatened action. A section of those who are avowedly hostile to the Reforms Scheme advocate the plan of becoming members of the Legislature in order that they may destroy it and the reformed institutions. The Prime Minister's second purpose was to give confidence to the members of the Civil Services, to allay their apprehensions regarding their emoluments and pensions and general position since the Reforms.

The committee appointed in 1921 to examine the tariff policy of the Government reported in September. It recommended the adoption of a policy of protection to be applied with discrimination along the lines indicated in its Report (issued as Parliamentary Paper, Cmd. 1,764). After a careful analysis of the probable gain and loss, it came to the final conclusion that, apart from the strong Indian sentiment in favour of protection, the balance of advantage on economic grounds is heavily on the side of the policy recommended. It recognised the advantages on broad Imperial grounds of the principle of Imperial preference and suggested that the question of granting preferences on a limited number of commodities should be referred to the Indian Legislature.

The Hon. V. Srinivasa Sastri visited the Dominions, as the representative of the Government of India, to consult with the leaders of political thought in the Dominions and their constituent states and provinces as to the best method of giving effect to the resolution of the Imperial Conference of 1921, recognising and affirming the lawful claims of Indians for equality of status with all other classes of His Majesty's subjects. Mr. Sastri was successful in obtaining the removal of some minor disabilities affecting domiciled Indians: certain disabilities in Queensland, in connexion with the engagement of Indians in the banana industry, and in South Australia, in regard to the acquisition of land, have been, or will be, removed; the Commonwealth Government have undertaken to extend the provisions of old age pensions to Indians in Australia at an early date, whilst the Governments of the Commonwealth and Western Australia promised sympathetic consideration regarding the franchise; schemes for the admission of Indian students and for the interchange of lecturers will be considered by the Australian universities. The Government of the Union of South Africa withheld consent to the Rural Dealers Licensing Ordinance in Natal, reserved the Townships Franchise Ordinance, but assented to the Durban Alienation Ordinance and gave instructions that, as far as possible, Asiatics should be given reasonable opportunity for acquiring adequate residential sites.

A Retrenchment Committee, with Lord Inchcape as Chairman, was appointed in May, to make recommendations for effecting all possible reductions in the expenditure of the Central Governments.

The Prince of Wales continued his tour through India. In

spite of organised attempts to mar his reception on the part of a section of the community, he was welcomed with the traditional loyalty and devotion of the Indian people to the Royal House. The Indian Legislature adopted an address of welcome to His Royal Highness on the occasion of his visit to Delhi.

Considerable progress was made with the development of the Territorial Force in addition to the University Training Corps. Twenty provincial battalions were constituted and the numbers enrolled total more than 10,000. A college designed to train Indian boys who aspire to enter Sandhurst was established at Dehra Dun. Air Vice-Marshal Sir John Salmond examined and reported upon the Air Force and whether economies in defence expenditure can be effected by increased use of the Air Force in co-operation with the Army for the external and internal protection of India.

During the year the Secretary of State sanctioned the Sutlej Valley Canals project, which is estimated to cost Rs. 1,460 lakhs, and will irrigate over 5,000,000 acres in the Punjab and the states of Bahawalpur and Bikaner. The Sukkur Barrage project was approved, both administratively and technically, but final sanction was withheld pending the receipt of the detailed proposals of the Government of Bombay as to the financing of the scheme.

There was peace on the frontier except in Waziristan, where the policy at present being pursued is to open up the country by roads and to impose a loose form of political control by means of these roads and by the enlistment of levies, or Khassadars, for their protection among the Wazirs and Mahsuds themselves. A committee was appointed to report on the advisability of the union of the North-West Frontier Province with the Punjab.

The home Parliament approved Rules required to give effect to the Notification constituting Burma a Governor's province. Elections of members to the new Burma Legislative Assembly took place in December.

CHAPTER VII.

THE FAR EAST: CHINA-JAPAN-DUTCH EAST INDIES.

CHINA.

DURING 1922, the eleventh year of the Republic, nothing was done in China to restore unity, the only means of improving the social and political condition of the country. The North and South remain divided, and the Central Government is still too weak to exercise authority except within the city wall of Peking.

Early in the year, Mr. Liang Shih-yi, then Prime Minister, was opposed by a powerful military leader, General Wu Pei-fu, but, supported by General Chang Tsao-lin, Governor of Manchuria

and rival to General Wu, he was too obstinate to resign. The struggle for control over the Government between these two generals became very intense, and in June they resorted to armed force to settle their difference. As a result of fighting which lasted for a week, the troops of General Chang were defeated and fled to the other side of Shanhaikwan, where they now remain under their old leader who is training more troops to revenge himself upon his enemy. Through his victory, General Wu Pei-fu became dictator of China and forced the President, Mr. Hsu Shih-chang, to retire. To fill up the vacant post, he together with a few other Generals summoned General Li Yuen-hung from his retirement at Tientsin. A new Cabinet was formed with Dr. W. W. Yen as Prime Minister, and at the same time the old Parliament, dissolved in 1917, was restored.

It was expected that this Parliament, which had been dissolved twice, would have become chastened by experience, and would set about restoring confidence by drafting a Constitution. But such was not the case. The Parliament does not content itself with constitution-making but interferes in every way it can with the Executive branch of the Government. Its members are divided into innumerable parties, and every one of them is open to corruption. They take advantage of their position to pursue selfish ends, and as law-makers take law into their own hands. Dissatisfied with the conduct of Parliament, the Yen Cabinet resigned in August, and was succeeded by a Cabinet composed of leading figures of the so-called Young China movement, with Dr. Wang Chung-hui as Prime Minister, Dr. V. K. Wellington Koo as Foreign Minister, and Mr. Lo Wen-kan as Finance Minister. These new Ministers strove to ameliorate China's finances, and to effect re-unification and disbandment of troops. But when the first thing in the way of restoring China's foreign credit was done, namely, a recognition of bonds formerly issued by Austrian banks but now mainly in the hands of British and Italians, the Minister of Finance was clapped into prison by order of the President, under the pressure of the Speaker of the House of Representatives, on a false charge of corruption. The Minister was too strong a character to be tolerated by Parliament, and consequently fell a victim to political intrigues, the object of which was not honest finance but a sacrifice of China's interests to selfish ends.

Mr. Lo Wen-kan is still in prison and no verdict has been issued against him. Meanwhile, the finances of China are fast worsening. The total amount of her debt, foreign and domestic but exclusive of railway bonds, is estimated at 1,686,000,000 dollars (about 168,600,0001, sterling), of which 400,000,000 dollars is unsecured or inadequately secured, and therefore in default. The Government is daily besieged by creditors for redemption of their loans, but so long as the Ministry has no power to compel the provinces to remit revenue to Peking, it has no means to meet its obligations. The only regular receipts of the

Government are surpluses from the Customs and Salt revenue after foreign loans secured on it are paid, and a small portion of the Wine and Tobacco taxes. But, as the greater part of these are mortgaged for the service of short term debts not included in the above figures, the annual amount available for administrative expenditure is averaged at 2,600,000 dollars, whereas the expenses amount to 100,000,000 dollars per annum. It is unprecedented in the history of the budgets of any country that a Government can carry on its work when its deficit is ten times greater than its revenue. It is indeed a wonder that the Chinese Government is still discharging its functions, however imperfectly.

Bad as the financial situation is, the military governors are in no wise abating their ambition of making themselves "great." General Tsao Kun, Governor of Chili, is, as it is believed, prepared to buy up members of Parliament, and make them elect him President of the Republic. He is said to have the support of the Governors of Kiangsu, Chekiang, and Manchuria, but finds an opponent in General Wu Pei-fu. Nor is his idea. favourably received in the South over which Dr. Sun Yat Sen is regaining his control, lost in April of 1922, when he was driven away by General Chen Chiung-ming.

Nevertheless, it would be erroneous to be pessimistic about the future of China. Politicians and militarists may be selfish and corrupt, but the teeming millions always live up to their reputation of being industrious and hard-working citizens. The harvest was exceptionally good in nearly all the provinces, and internal trade has had another fairly successful year. Newly established industries, such as cotton-spinning and mining, are adversely affected by the world's trade depression and political chaos in China, but the volume of foreign trade is larger than in the previous year, and the Customs revenue reached the unprecedented figure of 58,600,000 Haikwan taels (10,987,5007.). Socially also there is much progress, as is evidenced by the increase in the number of both schools and newspaper-readers. Given peace and order, China can certainly transform herself into a great modern state.

China throughout the year loyally carried out her professions of good faith in regard to the suppression of the opium traffic. Sir Francis Aglen, the Head of the Customs, towards the end of the year suggested a temporary opium monopoly, but the Chinese Government at once disavowed any such intention. The Peking Government was moreover represented at the Anti-Opium Committee Meetings at Geneva, where her representative, Mr. Chao Hsin Chu, Chargé d'Affaires at London, defined the position of China, and announced the appointment of Commissioners to conduct the investigation of poppy cultivation in co-operation with the International Anti-Opium Association in Peking, and the various Chambers of Commerce and educational bodies.

R

The Four Power Consortium, composed of representatives of the United Kingdom, the United States, France, and Japan, which succeeded the old Six Power Group in 1920, has proved a complete failure, and, owing to Chinese objections, there is no progress to report. The Consortium standpoint is that while all foreign obligations secured on the Customs and Salt Revenues have been promptly met, the fact that default has been made in the case of certain unsecured loans makes it imperative that the security for any projected new external loan shall be unquestionable. The Four-Power Group requires evidence that the money will be used for constructive, not destructive purposes. On the other hand, China not unnaturally desires that she should be free to borrow money as she likes in foreign markets so that she may be able to obtain the best terms available.

On November 30, 1922, all the British post offices in China were closed in accordance with the Washington Agreement. The first of these post offices was opened by Lord Napier on his arrival in Canton in 1834, while Sir Henry Pottinger opened an office at Hongkong in 1842. The other Powers carrying on post offices in China closed them on December 31, 1922, leaving the work to the very efficient Chinese Postal Service.

As to China's foreign relations, the pity is that she should default on loans, and allow her credit to be undermined. It is expected, however, that when the Special Conference on the Customs Tariff provided by the Treaties signed in Washington in February is convened, and the 24 per cent. surtax on imports to be authorised by it is put into operation, the increased revenue estimated at 35,000,000 dollars a year will be devoted to the service of a Consolidation Loan, to be issued for redemption of outstanding debts. Such a scheme will at once place unsecured or inadequately secured bonds on a well-secured basis, and reduce the amount now charged on the salt surplus, thus making the amount freed available for administrative expenditure.

The Treaties of Washington have settled many a thorny question concerning the Far East. One of them relates to the disposition of rights and interests in Shantung formerly granted by China to Germany but transferred to Japan since the war by virtue of her capture of Tsingtao. In accordance with the conclusions arrived at in Washington, the Chinese and the Japanese Delegates sat in Peking for over six months to discuss ways and means of restoring these rights and interests to China. As a result of these deliberations, the port of Tsingtao was formally returned to China on December 10, 1922, in return for a 14,000,000 gold yen treasury note issued by the Chinese Government in payment of the improvements on public properties made by Japan during her occupation. The Tsingtao-Tsinanfu Railway was returned on January 1, 1923, against China's promise to pay 53,000,000 gold marks to Japan as its purchase price. This promissory note is redeemable in fifteen years and