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On China's declaration of war against the Central Powers in 1917, all payments to Germany and Austria were suspended. At the same time, the Allied Powers agreed to defer for five years without interest the payments of the Boxer indemnity, with the exception that Russia officially remitted only one-third of these payments. The Powers interested agreed to spread the repavinent of the suspended portions of the indemnity, which would otherwise have fallen due between the 1st December, 1917, and the 1st December, 1922, over the following years :-
Great Britain
Japan
France
Belgium
1940-45
1923-40
1922--27
1922-27
Italy held out for repayment in full after five years, but intimated
that the matter might be further considered later.
The arrangement agreed to by His Majesty's Government was that the payment of instalments falling due between the 1st December, 1917, and the 1st December, 1922, should be made between 1941 and 1945. Instalments falling due between the 1st December, 1922, and the 1st December, 1940, are to be made at due date in accordance with the existing amortisation table without alteration.
The terms granted by His Majesty's Government were, therefore, far the most generous of those given by the Allied Powers.
In view of the position in Russia, China has since ceased to make any payments on account of the indemnity due to Russia. Prior to the discontinuance of any payments, she had been paying the Russian instalments after the collapse of any recognised Government in that country only on condition that the money remained in the Russo-Asiatic Bank at Shanghai.
Following the precedent of the Allied Powers, the United States Government also agreed to the postponement of their share of the indemnity, but left the period of postponement indefinite and terminable at any moment. No arrangements were made for the eventual redemption of the suspended payments. The suspension seems to have been made rather informally, but the United States Government stipulated for the continued application to specified educational objects of half the indemnity claim which they had previously remitted.
In August last the Senate passed a resolution, introduced by Senator Lodge, authorising the remission of the final balance of the indemnity, amounting to 1,236,858 dollars, such remission to begin as from the 1st October, 1917. and to beat such times and in such manner as the President shall deem just." The resolution was not expected to come before the House of Representatives before the following session.
The neutral Indemnity Powers were not concerned with the question of remis- sion, and have presumably continued to receive their shares of the indemnity as they did before China declared war against Germany.
The machinery for the collection and payment of the indemnity instalments has remained unaffected by the suspension.* The only change made was that the funds obtained from the revenues assigned to the service of the indemnity, which would otherwise have been credited to the different foreign Governments, were remitted by the banks charged with the service of the indemnity to the Chinese Government, by cheque in taels equivalent at the rate of exchange of the day to the gold sum which would have been payable in accordance with the Protocol of 1901.
Under existing arrangements, on the 1st December, 1922, the instalments due on that date will once more be credited to the countries concerned by the banks instead of being paid over to China. Additional payments will also have to be begun in order to pay off the suspended portions of the indemnity. We must, therefore, be prepared for a plea to be put forward by China, or on her behalf, that she should not be required to resume indemnity payments.
In October 1918 His Majesty's Ambassador at Tokio reported that the Japanese Minister for Foreign Affairs had informed the Chinese Minister that the Japanese Government had decided in principle to remit the Japanese portion of the indemnity, but that as payment by China had been deferred in 1917 for five years, there was plenty of time for the Japanese to decide whether remission should be an unconditional gift or whether the money should be applied to special objects. In July 1919 the Chinese Minister in London enquired whether His Majesty's
• For fuller details, see Appendix I.
Government were proposing to remit on certain conditions their share of the indemnity. He mentioned that the Japanese had announced their intention of doing so, and that he believed the French were also considering remission.
was
The balance due by instalments to this country in May 1921 9,740,6007, 98, 2d. The question of the remission of the British share has been frequently raised in connection with proposals for the education of Chinese students on British lines.* The Treasury view has been that the British claim, in contra- distinction to the American claim, was rigidly scrutinised and correctly assessed; it was enacted by Parliament that the receipts should be applied in reduction of debt; the money thus represents the repayment of expenditure originally met from the proceeds of debt created for the purpose and cannot without a violation of all the established principles of rational finance be diverted to another use.
British lines The question of the education of Chinese students, on will be considered by a committee which is being appointed for the
Jordan. purpose under the chairmanship of Sir John
The desirability of the indemnity will no of financing any educational proposals out doubt be examined by the committee, but it must meanwhile remain open to doubt whether Chinese education in itself would be a sufficient reason for remitting any substantial part of the indemnity in the present state of our finances. however, one important reason in favour of the remission of the indemnity. Other arguments which may be cited are the opposition to be expected from the Chinese Government themselves, who will plead that they are unable to pay, and the objections to be urged against the continued muleting of å democratic country and former ally for the sins of the absolutist Manchu Government by means of an indemnity which has the appearance of an inheritance from the days of militant imperialism, and seems to be out of keeping with the changed spirit of the times.
It is
Finally, there is bound to be a tendency to play one Power off against another, especially as the first Power to renounce its claim will secure the lion's share of the credit for such action. Each Power may feel that although the sacrifice of the remainder of the indemnity is not in itself justified on the intrinsic merits of the case, yet it cannot afford the risk of being forestalled by another Power.
It should not be difficult to meet this danger by prior consultation between the Powers chiefly concerned. The proper course would seem to be to consider what policy is desirable on the merits of the case and then to consult with the other Powers in order to decide upon the adoption of a common attitude.
The arguments so far put forward in favour of remission are stated above. The arguments against remission can make less appeal to sentiment, but are also strong. Because China was treated with generosity in 1917 to enable her to meet the expenses of joining in the war, is it reasonable that she should use this generosity as a means of securing further and greater concessions in 1922? This country has already made a gift to China of the difference between the value of the payments due in the years 1917-21 and the present value of those sums when the dates of payment are post- poned for twenty-three years without interest. Why should this very substantial present be made a pretext for further gifts? The other countries have made similar though lesser presents by their postponement of the indemnity payments. China bore no barden in the war, and, indeed, profited through her entry into the war by the seizure of valuable enemy property, and by ridding herself of her financial obligations towards the enemy countries, a consideration of self-interest which no doubt influenced her decision. Why, therefore, should the Powers who bore the burden and heat of the day, and who are still staggering under their financial sacrifices, make further financial concessions to China which they can only do by imposing equivalent burdens on their own taxpayers? It would no doubt be a beau geste to forgo the payments due. but is such a beau geste justified on a sober consideration of the facts, and, if it did seem to be justified, is this the time to make a beau geste at the taxpayers' expense? The The plea that China cannot afford to pay is more specious than real. remission will certainly not rehabilitate her finances, which are disordered by her own incompetence and corruption, seeing that despite the suspension of the payments since 1917 her finances are no better but worse than they were then. China can resume payment, at any rate, of the instalments normally due (the extra pay- ments which will be required to redeem the suspended portions of the indemnity are another matter which my require special consideration) without undue disturb ance, as the revenues assigned to the service of the indemnity have continued to be
* For fuller statement of the various proposals made, see Appendices II and III. [6823]
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