to the political
problems with which China is faced.

Sooner or later, the encroachments of foreign Powers upon the sovereign
rights of China must be swept away. The Chinese must recover the Treaty
Ports, control of the tariff, and so on; they must also free themselves
from extra-territoriality. But all this can probably be done, as it was
in Japan, without offending foreign Powers (except perhaps the
Japanese). It would be a mistake to complicate the early stages of
Chinese recovery by measures which would antagonize foreign Powers in
general. Russia was in a stronger position for defence than China, yet
Russia has suffered terribly from the universal hostility provoked by
the Bolsheviks. Given good government and a development of China's
resources, it will be possible to obtain most of the needed concessions
by purely diplomatic means; the rest can wait for a suitable
opportunity.

2. _Industrial development._--On this subject I have already written in
Chap. XIV.; it is certain general aspects of the subject that I wish to
consider now. For reasons already given, I hold that all railways ought
to be in the hands of the State, and that all successful mines ought to
be purchased by the State at a fair valuation, even if they are not
State-owned from the first. Contracts with foreigners for loans ought to
be carefully drawn so as to leave the control to China. There would not
be much difficulty about this if China had a stable and orderly
government; in that case, many foreign capitalists would be willing to
lend on good security, without exacting any part in the management.
Every possible diplomatic method should be employed to break down such a
monopoly as the consortium seeks to acquire in the matter of loans.

Given good government, a large amount of State enterprise would be
desirable in Chinese industry. There are many arguments for State
Socialism, or rather what Lenin calls State Capitalism, in any country
which is economically but not culturally backward. In the first place,
it is easier for the State to borrow than for a private person; in the
second place, it is easier for the State to engage and employ the
foreign experts who are likely to be needed for some time to come; in
the third place, it is easier for the State to make sure that vital
industries do not come under the control of foreign Powers. What is
perhaps more important than any of these considerations is that, by
undertaking industrial enterpr