Group V consisted of the sweeping demands which would have virtually deprived the Chinese Government of the substance of control over its own affairs. The employment of effective Japanese advisers in political, financial, and military affairs; the joint Chino-Japanese organization of the police forces in important places; the purchase from Japan of a fixed amount of munitions of war—50 per cent. or more; and the establishment of Chino-Japanese jointly worked arsenals, were embraced in these demands. The latter involved effective control over the armament and military organization of China.

So stunned was the Chinese Government by the Japanese stroke that it missed its first opportunity. It might have immediately given notice to the friendly Treaty Powers of the demands, which affected their equal rights in China, as well as the administrative independence of the Chinese Government.

A member of the Foreign Office consulted me about the best method of dealing with the demands; I expressed the opinion—which was not given by way of advice—that the detailed negotiation of individual demands, with a view of granting only the least objectionable, would be likely to give most force to considerations of equity. Time would be gained; the other nations interested would come to realize what was at stake. If certain liberal grants and concessions should be made, China could then with greater force refuse to create rights and privileges incompatible with her sovereignty. The situation would then be more fully and clearly understood by foreign nations.

As the negotiations proceeded the Japanese minister hinted to the Minister for Foreign Affairs that the Japanese public looked askance at the present Chinese administration, because of the hostility often demonstrated by Yuan Shih-kai; still, this feeling might be conciliated. It might even be possible for the Japanese Government to give President Yuan assistance against rebel activities. The sinister quality of this hint was fully appreciated. It was at this point that the Japanese minister used the simile which promptly became famous throughout the Far East. He employed this picturesque language: "The present crisis throughout the world virtually forces my government to take far-reaching action. When there is a fire in a jeweller's shop, the neighbours cannot be expected to refrain from helping themselves."

Notwithstanding powerful efforts on the part of Japan to enforce silence by menacing China and by muzzling the press in Japan, accurate information got abroad; whereupon the Japanese Government presented to the powers an expurgated version of its demands, from which the more objectionable articles were omitted. Later on, it was admitted that the demands of Group V had been "discussed," and statements were again issued on "the highest authority" that these so-called demands were merely overtures or suggestions, which violated no treaty and involved no infringement of Chinese territory and sovereignty. The Japanese Legation in Peking asked local correspondents to send out a similar statement, which, however, was refused by them, as the true nature of the demands was already known.

The British, who had more extensive interests at stake than any other foreign nation, had shown agitation. British residents and officials expressed deep concern because their government, being necessarily preoccupied with events in Europe, could not give full attention to the Far East. As the action of Japan had been taken under the ægis of the Anglo-Japanese Alliance, it seemed to the British that this was being used to nullify any influence which Great Britain might exercise, as against a plan on the part of Japan to seize control of the immense resources of China and of her military establishment.[2] It was believed that some sort of communication relating to the demands had been made to the British Foreign Office before January 18th. When the expurgated summary came out, the Times of London on February 12th published an editorial article describing Japan's proposals as reasonable and worthy of acceptance; it was understood in Peking that this approval related to the summary, not to the demands as actually made. But the Chinese officials were apprehensive lest a ready acquiescence of public opinion in the less obnoxious demands might encourage Japan to press the more strongly for the whole list. As late as February 19th, the State Department informed me that it inferred that the demands under Group V were not being urged. The full text of the actual demands as originally made had now been communicated to the various foreign offices; but because of the discrepancy between the two statements, they were inclined to believe that Japan was not really urging the articles of Group V.

The Japanese minister had at first demanded the acceptance in principle of the entire twenty-one proposals. This was declined by the Chinese Minister for Foreign Affairs. When the Japanese asked that Mr. Lu express a general opinion on each proposal, he readily indicated which of them the Chinese Government considered as possible subjects for negotiation. Forthwith the Japanese minister replied that the expression of opinion by Minister Lu was unsatisfactory; that negotiations could not continue unless it were radically modified. Mr. Lu was evasive and Mr. Hioki on February 18th became more peremptory; he informed Mr. Lu that the negotiations might not be confined to the first four groups—that the whole twenty-one demands must be negotiated upon.

Thereupon I telegraphed inviting President Wilson's personal attention to the proposals which affected the rights and legitimate prospects of Americans in China. The President had already written me in a letter of February 8th: "I have had the feeling that any direct advice to China, or direct intervention on her behalf in the present negotiations, would really do her more harm than good, inasmuch as it would very likely provoke the jealousy and excite the hostility of Japan, which would first be manifested against China herself.... For the present I am watching the situation very carefully indeed, ready to step in at any point where it is wise to do so."

Shantung was first taken up in the negotiations. The negotiators were: the Chinese Minister for Foreign Affairs, Mr. Lu Tseng-tsiang; the vice-minister, Mr. Tsao Ju-lin; the Japanese minister, Mr. Eki Hioki; and Mr. Obata, Counsellor of Legation. Vice-Minister Tsao had been educated in Japan, and was generally considered as friendly to that country. The Japanese minister, genial in manner and insistent in business, was aided by a counsellor noted for tenacity of purpose and for a grim dourness. Point by point the demands on Shantung and Manchuria were sifted. By the preamble to Group II, in the original version, Japan claimed a "special position" in south Manchuria and in eastern Inner Mongolia. The Chinese took decided objection. The Japanese minister complained on March 6th of slow progress, giving thenceforward frequent hints that force might be resorted to. Finally, on March 11th, the Chinese were informed that a Japanese fleet had sailed for ports in China under sealed orders.