(2).
revenues by the machinery of the diplomatic bodyĄ 15 inspector general and custodian banks. In ite essentials this means that customs revenues collected all over China reach the hands of the Peking govern- ment only because the foreign powers have been prepared to use force against any Chinese official attempting to prevent their doing so. If this system is perpetuated and enlarged to deal with the much larger revonues accruing from surtaxes and later tariff autonomy and the loan services swelled by the inclusion of a thousand million dollars odd of unsecured debts, I fear that the present disastrous situation at Canton may be duplicated all over China, and the foreign secured bondholder may be dragged under by the load of unsecured debt tacked on to him and the customs administration which is the sheet anchor of our trede may be destroyed. The only way to guard against these dangers is to substitute for this system a policy of non interference in China's domestic affairs, the main feature of which as expleined in my telegram No. 375 would be the distribution of customs revenues among the provinces involving complete modification of existing control machinery.
In order to give effect to this new policy we contemplate that you should announce that His Majesty's Government can no longer support the system initiated by the agreement of January 30th, 1912, by which control of customs revenues is vested in the diplomatic body inspector general and
custodian