in case of hostility, as was so effectively done at the opening of the great war.

This realignment of British policy produced two outstanding conditions in world politics: the isolation of Germany, and the supremacy of Japan in the East. Germany was not in favour of having Japan dominate Manchuria and Korea and occupy the premier commercial position on the Asiatic mainland, but she was too busily engaged to oppose the Entente Powers in Europe to make any effective resistance against Japan's encroachment in China. The only nation that was in a position to assist China to preserve her autonomy against foreign aggression was the United States. The United States has political reasons and commercial interests as well as a sense of moral obligation which should lead her to help China preserve her national integrity. The Hay "open door" doctrine, promoted by the American Government and agreed to by other nations, provided equality of commercial privileges in, and the preservation of the political independence and territorial integrity of China. By virtue of its origin and of the leadership of John Hay, the United States was made an unofficial sponsor for this doctrine, which is still in existence. Politically, domination of China by one power means the lessening of American influence and prestige in the Far East, and a direct menace to the Ameri

Commercially, the

can insular possessions. monopoly of the Chinese market, or of the market of one province, as in the case of Manchuria, signifies the driving out of American trade in the monopolized territory. There were ample reasons for the United States to propose to neutralize the Manchurian railways. But the immediate occasion that enabled_Secretary Knox to make the neutralization proposal was a concession to build the Chinchow-Aigun railway given by the Chinese Government to an American concern. Thus by neutralizing all railways in Manchuria, America had its share of monopoly to give up.

The proposal provided " to take the railroads of Manchuria out of Eastern politics and place them under an economic and impartial administration by vesting in China the ownership of its railroads; the funds for that purpose to be furnished by the nationals of such interested powers as might be willing to participate and who are pledged to the policy of the open door and equal opportunity, the powers participating to operate the railway system during the period of the loan and enjoy the usual preference in supplying materials. The advantages of such a plan are obvious. It would insure unimpaired Chinese sovereignty, the commercial and industrial development of the Manchurian provinces, and furnish a substantial reason for

the solution of the problems of fiscal and monetary reforms which are now receiving such earnest attention of the Chinese Government. It would afford an opportunity for both Russia and Japan to shift their onerous duties, responsibilities and expenses in connection with these railways to the shoulders of the combined powers, including themselves. Such a policy, moreover, would effect a complete commercial neutralization of Manchuria, and in so doing make a large contribution to the peace of the world by converting provinces of Manchuria into an immense commercial neutral zone."

On November 6, 1909, Secretary Knox sent a formal note to the British Government, asking British coöperation in the American proposal. On November 25th, Sir Edward Grey sent his reply, expressing the approval of his government of the principle involved in the plan, without, however, committing itself to any definite agreement. Secretary Knox presented his proposal simultaneously to Russia and Japan on December 18, 1909. There was a general cry of "confiscation" in both countries, despite the fact that the plan provided a legitimate compensation for their Manchurian railroads properly and impartially appraised. Their charge of "confiscation" is ironically amusing when we

From a statement given to the press by the State Department, Washington, January 6, 1916.

recall that their titles to the Manchurian railroads were based on nothing short of their own confiscation of Chinese property.

Russia rejected the plan on January 22, 1910, and Japan on February 24, 1910. Great Britain and France stood by the decision of their respective allies-Japan and Russia. The American public, instead of supporting its statesman in his attempt to give a legitimate protection to American interests abroad, condemned the Knox policy in China and also in Central America as "dollar diplomacy."

3. "DOLLAR DIPLOMACY"

This "dollar diplomacy" was soon changed with the coming in of the Democratic administration in 1913, and the American Far Eastern policy was correspondingly weakened. The new government of the Chinese Republic, after the revolution of 1911-12, was in dire need of funds, and decided to borrow money from the bankers of the United States, Great Britain, France, Germany, Japan, and Russia. The terms of this loan-commonly known as the "six-power loan "--were none too agreeable to the Chinese. They provided how the money thus borrowed should be spent, and what measures the creditor nations should take to collect the money in case

6 See Fish, "American Diplomacy," p. 459; F. C. Howe, "Dollar Diplomacy," Annals of American Political and Social Science, 68: 312-320, November, 1916.

China failed to meet her part of the agreement as provided in the terms. The Chinese were afraid that such an arrangement might Egyptianize their country; yet they had no alternative. Money they must have to pay the soldiers and to meet foreign and domestic obligations incidental to the revolution. The loan nations were withholding recognition of the Republic of China to press their terms on the newly born republic.

President Wilson promptly reversed the policy of the previous administration, and led the way, on March 18, 1913, to the recognition of the new Republic of China. He withdrew government support of the "six-power loan," declaring that "the conditions of the loan seem to us to touch very nearly the administrative independence of China itself, and this administration does not feel that it ought, even by implication, to be a party to those conditions." As a result, the American bankers withdrew from the syndicate. It must be remembered that doing business in an unstable country like China is not like carrying on a commercial transaction in the United States. Foreign capital is insecure in a country where bandit raids and political revolutions are of common occurrence, unless it be backed by its government.' Here is where the

'See Tyler Dennett, "The Road to Peace, via China," Outlook, 117: 168-169, October 3, 1917.