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Rh went up from the British organs of public opinion, and the amplest backing was given to the demand promptly made at Peking by the British Minister (Mr. Thomas Wade) for reparation. The Chinese Government showed at the outset very little disposition to satisfy the claims preferred, which primarily were for an investigation into the circumstances of the murder by a mixed commission of British and Chinese officials. At length, however, it agreed to the proposed inquiry and appointed Li Han Chang, Governor-General of Honkwang, and brother of Li Hung Chang, to conduct the investigations. This functionary, with the British members of the commission, Messrs. Grosvenor, Davenport, and Baber, met in the closing days of the year in the district which was the scene of the outrage and commenced their inquiry. It was soon discovered by the British commissioners that as far as the infliction of punishment on the really guilty parties was concerned their mission was likely to prove futile. Li Han Chang temporarily suspended the for neglect of duty, but this was the extent of the censure of the local officialdom he would permit himself. The responsibility for the murder was thrown upon the lawless frontier tribes, and to lend colour to the view several miserable villagers were seized, on the ground that they were accessories to the murder, and their lives were offered as an atonement for the offence. Very naturally the British Government resolutely declined to accept the course proposed as adequate redress. Sir Thomas Wade (as he had now become) was instructed to bring home to the Peking authorities the seriousness of the situation which had been created by this shameful outrage on a British expedition, and this he did in the most emphatic way by intimating that diplomatic relations must be broken off until the Chinese Government were prepared to satisfy the just demands made upon them. Sir Thomas Wade subsequently quitted the Chinese capital, and his withdrawal coincided with the appearance of a strong British fleet off the Peiho. Alarmed at these evidences of offended British honour, the Peking officials at length consented to discuss under satisfactory conditions the question of redress. Chefoo was selected as the scene of the negotiations, and there the British and Chinese representatives (Sir Thomas Wade and Li Hung Chang acting as principals) assembled in August, 1875. The result of the deliberations was the agreement known as the Chefoo Convention. This document provided for the payment of an indemnity to Mr. Margery's relatives and for the despatch to England of a special mission bearing a letter expressive of the regret felt by the Chinese Government for the murder. An important article of the Convention was a provision calling upon the different Viceroys and Governors to respect and afford every protection to all foreigners provided with the necessary passport from the Tsung-li-yamen, and warning them that they would be held responsible in the event of such travellers meeting with injury or ill-treatment. There were also embodied in the arrangement a series of regulations with reference to trade, and notably one relative to the likin or transit duties.

CHAPTER XVII. The Development of Shanghai—Chinese Commercial Enterprise—The Shanghai-Woosung Railway—Establishment of a Native Cotton Mill—New Municipal Constitution—Later History of Hongkong. the period of the conclusion of the Chefoo Convention, Shanghai trade, in common with Chinese commerce generally, was passing through a somewhat serious crisis. The financial stress was mainly due to over speculation consequent upon the opening of the Suez Canal and the establishment of direct telegraphic communication with Europe. With the completion of those great enterprises dawned a new era in Far Eastern commerce—an era rich in promise for European trade—but merchants, in their impatience to reap the harvest which they confidently expected awaited them, did not take sufficient account of the fact that a period of ripening was essential. As a result serious losses were incurred, which for the time being crippled the resources of a good many of the leading firms, particularly in Shanghai. While European activity was somewhat circumscribed owing to the untoward course that commerce had taken, the Chinese at this period gave evidence of remarkable enterprise. In 1872, under the direct patronage of Li Hung Chang (at that time Governor-General of Chihli) was formed at Shanghai a company under the name of the Chinese Merchants Company, for the purpose of owning and running steamers. Ostensibly the company was established for the purpose of carrying tribute rice to Tientsin en route for Peking, but it soon became evident that its real object was the far more ambitious one of competing with European owned vessels for the trade of the coast and of the Yangtse. Furthermore, the arrangements indicated that the floating of the company was designed for political as well as commercial ends. One of the articles of the company prohibited the holding of shares by foreigners. The offices established at Shanghai, Hankow, Tientsin, Hongkong, and Canton were under Chinese managers; and the only foreigners employed in the company's service were the masters of vessels. Finally, as evidence of the determination to give a purely native aspect to the venture, was the fact that two of the earliest vessels in the company's service were built at the Foochow Arsenal.

In another direction at this juncture was demonstrated in a striking way the determination of the Chinese to stay the march of foreign encroachment. In December, 1872, was formed in Shanghai, by a number of leading residents, a small private company, under the title of the Woosung Road Company. It seemed an innocent, non-committal kind of venture, but its simple title covered a project of deep significance, the