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Peking Syndicate.---As is well known the Peking syndicate obtained a concession and have spent vast sums of money and getting no returns. Now, however, that they have struck a mine and are raising large quantities of coal the local gentry of the province say that while the concession was given to mine, the document contained no permission to sell the coal locally, consequently they forbid them to sell a single pound of coal anywhere in the province. The position is so ridiculous as to be almost incredible and yet such is the fact. The Peking Government spent their time on the one hand negotiating with the British Minister and on the other hand almost begging the Honan gentry not to get them into trouble but to allow the coal to be sold. It is a sorry spectacle. The central Government is in a pitiable plight, afraid to move either one way or the other. In the meantime the British Government have lodged a claim for an indemnity of 1,000 taels a day for every day the selling of the coal is thus held up.
The above examples will show you the state of affairs prevailing at the moment and will illustrate my remark that Government is being allowed to drift. What the upshot of it will be it is difficult to say.
China is not fulfilling her national obligations: she is not carrying out her treaties any more than she has ever done in the past. Indeed it is a question whether now that foreign prestige has sunk so low as it has whether she is not more open in her disregard of the treaty rights of other countries than ever before.
There is no one great outstanding question pending which would seem to be likely to lead to war in the immediate future. At the same time there is no doubt but that there is an accumulation of grievances which might easily precipitate a crisis. This is especially true of the many differences between China and Japan. Not one of them of overwhelming importance, but lumped together they are producing a state of tension between the two countries. China is in no sense of the term prepared for war and will yield to the demands of Japan or any Power as soon as she understands quite clearly that the Power concerned intends to bring the unreasonable attitude of China to the supreme test. I cannot believe China will permit things to go to extremes so as to bring on a war for which she is totally unprepared and out of which she will come very badly crippled. Neither does there seem, as I have stated above, to be any possibility of a successful revolution against the Manchu dynasty under existing conditions. If no foreign war occurs to hasten improvements we shall probably have to muddle along hoping for some amelioration from the pressure of economic forces. It is, however, to be expected that the situation will steadily become worse until the Chinese Government reach the end of their tether and are warned in unmistakable language by the British or some foreign Government that their patience is apidly being exhausted and that affairs will not be allowed to continue in their present unsatisfactory state. Not till such a move is taken can we look for improvement. The Chinese Goverument have a shrewd idea as to the condition of Western politics and know pretty well that no foreign Power is likely just now at any rate to find the occasion opportune to use the threat of a resort to force. increasing number of enlightened Chinese appreciate the injury being done to the country by the present policy but they are without influence to mend things and bring about more rational methods.
Commercial.
An
1. The financial situation.--Chinese obligations to foreign Powers are steadily If increasing. All the recent loans have been contracted for reproductive works. these works are badly managed, as they certainly will be if left to exclusive Chinese control, then it will be a very serious question how China will find the money to meet her obligations for interest and sinking fund. The provinces are all in the same condition as the imperial Treasury, that is, at their wits end to find the money. They have instituted many reform measures such as police, and an establishment of military force on Western lines all involving the expenditure of funds. High officials are harassed to know how they can provide money to meet the daily increasing The more demands. Revenues are as dishonestly administered as they ever were.
There is as much money passing through official hands, the richer they become. pilfering, waste and extravagance as of yore. Should China by any chance default a very serious crisis will at once be precipitated, leading perchance to foreign financial control of the revenues and their collection. Some competent observers do not think such a disaster will be allowed to take place. The Government will probably be able to squeeze the money from some quarter or other as they need it to meet their
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national obligations and avert the overthrow of the independence of China. Nevertheless, there is a distinct political danger arising from the financial operationTM of the State.
The Government, central and provincial, made considerable profits a few years ago out of a debased copper currency, which was recklessly minted regardless of consequences all over the Empire. The nation and the trade of the country are now suffering from this mad adventure. Warnings as to the probable results were given to the authorities, but unheedingly they plunged into the greedy grab for immediate profits. The minting of dollars and copper coins has now practically ceased and attention is being turned to the profits to be derived from the issue of bank notes. Quite recently one or two severe lessons of the dangers of this sort of finance have been given to them by the failure of irresponsible native banks to redeem their notes. Here in Shanghae during the last few weeks there has been public distribution day by day at the mixed court of tens of thousands of dollars provided by the Chinese Chamber of Commerce and the local authorities to redeem the notes of a provincial bank which had become hopelessly bankrupt. A few examples of this nature will teach them more than a hundred treatises prepared in the most convincing style.
It is of the first importance that China should reform her currency, or rather create a uniform currency, for there is no national currency existing at the present in this country as we understand the term in Western lands. The British Mackay Treaty of 1902 provided for the establishment of a uniform coinage, but so far practically no steps whatever have been taken to make this clause of the treaty effective. Endless investigations, disputes, and wrangles have taken place, and are now taking place, with the result that we are worse off than we were a few years ago, and the confusion is more pronounced. Many feel that the fearful debasement of the copper coinage is one of the prime causes of the many difficulties in which foreign trade finds itself.
2. The long extended Depression with outstanding Liabilities.-Through a long period my letters have conveyed to you an idea of the depression which has existed, and stili continues to exist, in the China trade. I wrote you fully from Tien-tsin and sent you documents which will have shown you how things are there, and have informed you of the efforts being made to find the 10,000,000 to 14,000,000 taels required to put things straight at that port. The time will come sooner or later when the facts will Trade does not recover. It is the have to be faced and large losses written off. opinion of many, both Chinese and foreign, that conditions are worse than they were last year.
The revival which seemed to set in during the first few months of the present year has long since ceased, and the month of June has been with everyone with whom I have spoken a particularly bad one.
In a country like China, with an enormous area, there are at all times, in some section or other, plague, famine, drought or flood. These calamities, like the poor, we always have with us. At the present moment a fierce famine is raging in Kansuh, right away in the far east of China, where no rain is said to have fallen in many areas for three years. In the Yang-tsze and the north floods are threatened as a result of the con- tinued terrific downpours of rain for the last forty days. I should not like to assert that present conditions differ very much from those which have obtained through centuries. Probably the only difference is that, with the increase of telegraph and postal commu- nication, we know now what is going on much more quickly than in former years. It is generally conceded that the country requires development. It is also certain that it is not being developed, and cannot be developed, under present conditions. The Chinese must employ foreign capital and foreign brains and experience in the many highly technical undertakings which will follow the opening of the country, especially by mining enterprises. In discussing this question with intelligent natives they all admit the force of the arguments, but they all point to some intangible opposition to any development under foreign auspices.
Merchants, both Chinese and foreign, had hoped that this year better prospects would prevail. The year has, however, now gone without improvement so far that it Firms are holding on is feared we cannot look for brighter conditions till next year.
in the midst of adverse circumstances and the greatest depression, hoping for a boom of which at present, unfortunately, there are no signs.
3. German Influence. As stated in the opening part of this memorandum, there has been a very strong effort on the part of the Germans to increase their prestige and their hold upon this country. They are working with the Chinese to upset British
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