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collected and paid to the banks, and their retransfer to the purpose for which they were assigned is only a matter of a book entry. These revenues will, moreover, probably be increased precisely in 1922 by the raising of the customs dues to make them yield an effective 5 per cent. (at present they yield less).
As regards the other Powers, their financial difficulties may make them less inclined to be unnecessarily generous than they would have been in 1919, when the impoverishment caused by the war was still largely obscured by inflation. There are reasons which cannot be quoted here for thinking that the Japanese Government are not anxious to forgo their share of the indemnity, and are afraid of being forced into doing so by concessions to China on the part of His Majesty's Government, The attitude of the United States Government, whose share is, in any case, compara- tively small, may be more largely swayed by sentimental and idealistic considerations than that of the other Powers, who may therefore decide upon a common attitude, irrespective of whether they are joined in it by the United States Government.
A telegram from His Majesty's Minister at Peking of the 4th August, 1921, suggests that the remission of the indemnity might be considered for educational purposes under proper guarantees, but Sir B. Alston is of opinion that if the matter is raised at the Washington Conference we should be prepared to make it clear to the Chinese delegation at the outset that the question of remitting the indemnity can only be usefully discussed with representatives of a united and stable Government which is ready to accept the degree of foreign assistance which recent events have proved to be essential. The existing Chinese Government have shown themselves too utterly incompetent and insincere in dealing with the financial situation, opium and the question of the disbandment of troops to be allowed any increased power without proper control. It appears, therefore, that Sir B. Alston is opposed to the remission of the indemnity as a gift, but thinks it might be con- sidered as part of a bargain in which we should secure the education of Chinese on British lines and a greater degree of efficiency in Chinese administration.
Foreign Office, October 10, 1921.
F 1408/179/10]
APPENDIX I.
Memorandum on the Control of Chinese Maritime Customs Funds by the Diplomatic Body at Peking and Payment of the Boxer Indemnity Service.
SINCE 1912 the revenue derived by China from her Maritime Customs has been under the control of the foreign Powers, acting through their representatives at Peking. The reasons for this apparently anomalous state of affairs will be shown later, but, before going further, some account of the rigin of the Chinese Maritime Customs may be useful, and some explanation of the circumstances in which that service came to be administered by foreign nationals serving under the Chinese Government.
Origin of the Chinese Maritime Customs.
2. British trade with China may be said to date from 1670, when the British East India Company established a footing at Amoy and in Formosa. In 1685 an Imperial edict was issued, opening all the ports of China to foreign trade, but this was rescinded in 1757, when another Imperial edict appeared, confining all foreign trade to Canton.
3. In 1702 a Chinese official, known as the "Hoppo," was appointed to act as the sole channel through whom the foreign merchants must conduct their trade. Under him was established, a few years later, an institution known as the "Co-hong," composed of a body of thirteen Chinese merchants enjoying a monopoly of all trade with foreign firms. 4. The foreigners at Canton were confined to so-called "factories" (thirteen in number), and all their dealings with China had to pass through the "Co-hong." They were subject to a system of irritating regulations and restrictions; for instance, ny arins of any kind must be brought to the factories, foreign traders must not engage Chinese servants, they must not row for pleasure on the river, &c.
5. There ensued continual friction between the foreign community and the local Chinese officials, and eventually conditions reached breaking-point. With the appoint- ment as Imperial High Commissioner at Canton of the high-handed Lin Tse-su, in December 1839, matters came to a head. The ostensible cause of dispute was the opium trade, in which Lin, after only eight days in office, prohibited all foreigners from indulging under severe penalties. But the real cause of the war that broke out was not the opium question, but the intolerable position of foreign merchants under the existing régime.
6. The war ended in the Treaty of Nanking (1842), which opened Canton, Amoy, Foochow, Ningpo and Shanghai to foreign trade and residence, abolished the monopoly of the "Co-hong" and did away with other irritating restrictions; it also stipulated for a published customs tariff. This was the first step toward the formation of a recognised Chinese Maritime Customs service.
Introduction of Foreigners into Maritime Customs Service.
7. During the Taiping rebellion the city of Shanghai fell into the hands of the ils, and though the neutrality of the foreign settlement was declared and maintained, the Chinese Government, having lost control, were unable themselves to enforce collection of the customs duties to which they were now entitled by treaty. There had, moreover, been the inevitable difficulties inseparable from any attempt by native customs officials to enforce tariff regulations upon foreign traders unaccustomed to comply with Chinese official requirements. The upshot of all these difficulties was a proposal by the consuls of the countries concerned of a modus vivendi in 1854, under which the foreign element was first introduced into the Chinese Maritime Customs. On the nomination of the Consuls-British, French and American-three foreign inspectors of customs" were appointed at Shanghai by the Tao-tai. They were M. Arthur Smith (French), Mr. Lewis Carr (American) and Mr. (later Sir Thomas) Wade (British). Each inspector received a salary from the Chinese Government of 6,000 dollars.
8. The success of the new institution was immediate, in spite of a certain friction that arose from time to time with the foreign merchants, and the desire was soon general to extend the system to the other treaty ports.
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