333
Peking,
No. 27, Tal.,
Jan. 2, 1912. ("Chion,"
Part LXXII, No. 124.)
Peking,
No. 144,
10
Problems arising out of Control by Diplomatic Body of Customs Revenue. 30. In the arrangement of the 30th January, 1912, article 6 (see paragraph 2 runs as follows:—
**If normal conditions are not restored by the end of 1912, then at that time an account shall be taken of the surplus available for the indemnity, and such account shall be sent to the Diplomatic Body for their decision as to its disposal." 31. At the end of 1912 this surplus stood at over 10,250,000 taels, and its disposal gave rise to some commotion amongst the Diplomatic Body. The French Minister, M. Conty, complained that it should have been distributed on the 31st December amongst the seven indemnity banks. Sir John Jordan contended that under article 8 of the 1912 arrangement it was not the credit balance that was to be accounted for, but the surplus available for the indemnity at the end of the year 1912. The service of the 1898 Anglo-German loan falling due on the 4th January, 1913, it was absurd to maintain that the total customs balance on the 31st December should be handed over for indemnity service four days before the 1898 loan service fell due, thus leaving no funds for that service available four days later. The French Minister however, backed up by his Russian colleague, maintained that the 1913 loan service must come out of 1913 revenue. Sir John, knowing that the loan service was in fact provided for from other sources (li-kin, eventually gave way, but made it clear he in no way admitted the justice of M. Conty's contention. Some of the foreign representatives took the opportunity for the first time to challenge the position of the three custodian banks, which they naturally regarded with some envy. Sir J. Jordan, recognising that the grievance of the smaller banks was to some extent justified, was prepared to agree that the custodian banks instead of being the Hong Kong and Shanghai Bank, Deutsch- Asiatische Bank and Russo-Asiatic Bauk, should be extended to include all the banks interested in the customs loans and the indemnity, and that the revenue should be distributed in such proportions as the banks might themselves decide on the basis of their respective interests, subject to the proviso that the priority of those interests should be determined according to the loan agreements and the protocol of 1901. the Russian Minister unconditionally refused to agree.
But
32. Eventually the French Minister notified the Diplomatic Body that, unless his April 8,1918. point of view was admitted, bis instructions were to refuse to renew the arrangement of (Part LXXII, the 30th January, 1912 (see paragraph 24). As neither the Hong Kong and Shanghai Bank nor the Bankers' Commission were prepared to dispute the point it was decided :—
(1.) To cancel article 6 of the agreement of the 30th January, 1912. (2.) To amend article 2 of that agreement to run as follows:-
No. 447.)
Feking,
No. 416,
Nov. 30, 1913,
(Chimw,"
Part LXXIII,
No. 307.)
Peking,
No. 472, Dec. 24, 1913,
"The banks chiefly interested, viz., the Hong Kong and Shanghai Bank, the Deutsch-Asiatische Bank and the Russo-Asiatic Bank shall be custodians of the customs funds at Shanghai, but as soon as the service for the current year of all loans contracted before 1900 is provided for by funds in these banks, then the surplus shall be divided pro ratâ till the end of 1913 amongst the banks haring charge of the indemnity service."
33. In November 1913 the Inspector-General of Customs made a fresh proposal, which led to a suggestion that the existing procedure should be modified and a new plan adopted, under which loan and indemnity payments would, as far as possible, be concurrently" month by mouth out of customs revenue, any necessary balance being provided out of salt funds.
et "
34. This proposal was later (December 1918) officially made by the Chinese Government and accepted by the Diplomatic Body. It necessitated yet a further ("Loans and revision of article 2 of the agreement of the 30th January, 1912, which was now marle
to run as follows:
Concesions,"
Part 1,
No. 10.)
Peking,
No. 30, Jan. 20, 1914. ("Loans and
Concessions," Part I,
No. 70.)
2. The banks chiefly interested, viz., the Hong Kong and Shanghai Bank, the Deutsch-Asiatische Bank and the Russo-Asiatic Bank shall be custodians of the customs funds at Shanghai; at the end of each month, beginning with January 1914, the surplus, after all payments due each month on account of loans secured by the customs revenue and contracted previous to 1900 have been fully met, shall be divided pro ratâ amongst the banks having charge of the indemnity service up to the amount of the instalments respectively due to them each month,"
35. The luspector-General of Customs was at this time most anxious that the control of the customs revenue by the Diplomatic Body should be maintained, and he
11
expressed the opinion that it was essential in the interests of the bondholders that the Chinese Government should not be allowed to resume that control. The Belgian Ainister alone opposed this view, holding that the Diplomatic Body had no longer any legal right to impose conditions upon China now that the Government of the Republic had been recognised and had reached a solvent condition; in this attitude he was no doubt to some extent supported by the wording of article 3 of the agreement of the 30th January, 1912, which implied that foreign control was to cease when the Chinese Government were in a position to resume loan and indemnity payments. But good sense was in favour of the continuance of the control and eventually prevailed. In reporting upon this Sir J. Jordan added the comment :---
•
but The question, it is to be hoped, is therefore settled for another year, that an attempt will sooner or later be made to regain control of the customs revenue is morally certain. It is absolutely necessary, my opinion, that the present system of control, which works with perfect smoothness and affords the only adequate security for the vast interests at stake, should be continued intact."
No. 83,
Concessions,"
36. One small matter of technical detail came up for adjustment at this stage. As Peking. the 1895 Franco-Russian loan service was only provided for half-yearly and not Feb. 21, 1914. monthly, as in the case of the Anglo-German 1896 and 1898 loans over which it had ("Loans and priority, it was necessary to authorise the Bankers' Commission to set aside monthly P from the customs revenue a sum sufficient to provide for the service of this loan, as well No. 14. as for that of the other two, so that they should all be placed on a level of equality.
Renewed Danger of Suspension of Indemnity (see paragraph 26).
Jan. 18, 1912.
No. 29.)
37. By the 6th January, 1914, all the 1913 indemnity payments due to Great Peking. Britain had been duly paid. But in August 1914 there was again a danger that China No. 11. might default. The estimates of the Inspector-General of Customs upon which the ("Chins." "concurrent" service of loan and indemnity payments (see paragraphs 33 and 34) had Part XXIV, been based in December 1913 were completely upset by the decrease in customs revenue Peking and heavy fall in exchange caused by the European war. In consequence the No. 319, Inspector-General of Customs was forced to stop all indemnity payments as from Sept. 1, 1914. August and to revert to the original 1912 arrangement (see paragraph 23) under which LXXIV, customs revenue was allowed to accumulate with the custodian banks till the end of each year in order to ensure the service of the pre-Boxer loans for that year. This, though contrary to the "concurrent procedure "decided upon in December 1913 (see paragraph 34), was certainly justified by the circumstance.
("China,"
No. 56.)
38. It will be remembered that one of the securities of the Boxer indemnity is the salt revenue (see paragraph 14). The Chinese Government were at this time in dire straits, and they urged that they were dependent upon the periodical releases of salt revenue to continue the government of the country, and that they should be absolved from devoting these, their only, funds to indemnity payments. But as they proposed to continue from salt funds the service of two loans (the Crisp Loan and the Reorganisation Loan) which were a later charge upon salt revenue than was the indemnity, it was unlikely that those foreign Governments not interested in either the Crisp or the Reorganisation Loan, would agree to the suspension of their indemnity payments so long as the two loans in question continued to be served from that source. Fortunately, with the aid of reserve salt revenue and with the assistance of the banks Peking the difficulty was ultimately tided over by a scheme devised by Mr. Hillier, of the Sept. 29, 1914. Hong Kong and Shanghai Bank, and the request for the suspension of indemnity (Chin payments was not pressed.
Subsequent Developments regarding Control of Customs Revenue.
No. 348,
Part LXXV,
No. 62.)
Concessions
39. In December 1914 the French Government endeavoured to reopen the whole To
M. Cambon, question in London, including the vered question of the custody of the customs funds, Der. 30, 191 but we were able to show that, in spite of the falling off of customs revenue, the "Loans and arrangements for loan and indemnity service were working smoothly and that it was Part II, inadvisable to disturb them.
C 2
[6823]
No. 75.)