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 system, an annual statement has been issued by the Ministry of Finance. A Central Bank has been established. A National Financial committee has been appointed, which includes among its members influential representatives of banking and commercial interests. The Ministry of Finance is also trying to supervise the finances of the provinces, where the methods of raising taxes are often still highly unsatisfactory. For all these measures the Government is entitled to credit. It has, however, been forced by recurrent civil wars to increase its domestic indebtedness by about a billion dollars (silver) since 1927. Lack of funds has prevented it from executing its ambitious plans of reconstruction, or completing the improvement of communications which is so vitally necessary for the solution of most of the country's problems. In many things, no doubt, the Government has failed, but it has already accomplished much.

The nationalism of modern China is a normal aspect of the period of political transition through which the country is passing. National sentiments and aspirations of a similar kind would be found in any country placed in the same position. But, in addition to the natural desire to be free from any outside control in a people that has become conscious of national unity, the influence of the Kuomintang has introduced into the nationalism of China an additional and abnormal tinge of bitterness against all foreign influences, and has expanded its aims so as to include the liberation of all Asiatic people still subject to "imperialistic oppression." This is partly due to the slogans of its early communistic connection. Chinese nationalism to-day is also permeated by memories of former greatness, which it desires to revive. It demands the return of leased territories, of administrative and other not purely commercial rights exercised by a foreign agency in railway areas, of administrative rights in concessions and settlements, and of extra-territorial rights which imply that foreigners are not amenable to Chinese laws, law courts and taxation. Public opinion is strongly opposed to the continuance of these rights, which are regarded as a national humiliation.

Foreign Powers have in general taken a sympathetic attitude towards these desires. At the Washington Conference, 1921–22, they were admitted to be acceptable in principle, though there was divergence of opinion as to the best time and method of giving effect to them. It was felt that an immediate surrender of such rights would impose upon China the obligation to provide administration, police and justice of a standard which, owing to financial and other internal difficulties, she could not at present attain. The present single issue of extra-territoriality might lead to a number of separate issues with foreign Powers if the former were abolished prematurely. It was also felt that international relations would not improve but would deteriorate if foreign nationals were to be exposed to the same unjust treatment and extortionate taxation as Chinese citizens were subjected to in so many parts of the country. In spite of these reservations, much was actually accomplished, especially at Washington, or as a result of that Conference. China has recovered two out of five leased territories, many concessions, administrative rights in the area of the Chinese Eastern Railway, Customs autonomy, and postal rights. Many treaties on the basis of equality have also been negotiated.

Having started upon the road of international co-operation for the purpose of solving her difficulties, as was done at Washington, China might have made more substantial progress in the ten years that have since elapsed had she continued to follow that road. She has only been hampered by the virulence of the anti-foreign propaganda which has been pursued. In two particulars has this been carried so far as to contribute to the creation of the atmosphere in which the present conflict arose—namely, the use made of the economic boycott, to which reference is made in Chapter VII, and the introduction of anti-foreign propaganda into the schools.