The Northern Government's Financial Difficulties And Its Relations With Japan

Late Qing and early Republican period witnessed China's political turmoil and the financial problem troubled that both the Manchu government and the Republican government. Worse still, during the reign of Yuan Shikai, President of the Republic of China, the financial system was trapped in a vicious circle. Because of frequent civil wars, the government had to cover the rising military spending by obtaining foreign loans. However, Chinese government could only pay off the loans by obtaining more loans rather than by developing its economy. During Yuan Shikai's reign, the vicious circle began when he signed the contract of Gold Loan of 1913 with delegates of foreign banks. During Duan Qirui's reign, the situations worsened. Because of shortage of income, the government had to turn to foreign loans again. During this time, the European countries were involved in the first world war and only the US and Japan had enough money to support China. Japan's Terauchi cabinet intended to enhance Japan's influence in China and offered Duan Qirui a large amount of loans, which was called the Nishihara loan. Duan Qirui used the loans to carry his policy of unifying China by military force, but he failed because of the strong defence of the militray powers in the South of China.This thesis will focus on the loan from Japan and discuss the impact of the financial problem during Duan Qirui's reign on foreign policies. By studying the reasons of Duan Qirui's pro-Japan policy, this thesis will illustrate the indigenous factors on foreign policy. The first part of this thesis will give a general picture of the financial status of Chinese government from late Qing to Yuan Shikai's reign. The second part of this thesis will expound on the Sino-Japan relation during Duan Qirui's reign. The Nishihara loan will be the focus. Based on the analysis of the foreign powers, the turmoil of China's politics and Japan's changing foreign policy toward China, this thesis will discuss the necessity of the Nishihara loan. The third part of this thesis will evaluate the Nishihara loan by studying the use of it by Duan Qirui's cabinet and the impact. The last part of this thesis will point out the relationship between the change of the Sino-Japan relation and the financial problem.