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 enterprise from the first, the State can prevent the growth of many of the evils of private capitalism. If China can acquire a vigorous and honest State, it will be possible to develop Chinese industry without, at the same time, developing the overweening power of private capitalists by which the Western nations are now both oppressed and misled. But if this is to be done successfully, it will require a great change in Chinese morals, a development of public spirit in place of the family ethic, a transference to the public service of that honesty which already exists in private business, and a degree of energy which is at present rare. I believe that Young China is capable of fulfilling these requisites, spurred on by patriotism; but it is important to realize that they are requisites, and that, without them, any system of State Socialism must fail. For industrial development, it is important that the Chinese should learn to become technical experts and also to become skilled workers. I think more has been done towards the former of these needs than towards the latter. For the latter purpose, it would probably be wise to import skilled workmen--say from Germany--and cause them to give instruction to Chinese workmen in any new branch of industrial work that it might be desired to develop.