CO129-362 - Public Offices - 1909 — Page 533

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refusal of the native firms involved to acknowledge their liabilities and make honest proposals towards settling their accounts with the foreign merchants,

The matter has constantly occupied the attention of the consular body in Tien. tsin and voluminous correspondence has passed between the senior consul, the Tien-tsin General Chamber of Commerce, and the Chinese authorities and merchants, but as yet no satisfactory solution has been arrived at, and there is considerable division of opinion among the consuls themselves as to the steps which should be taken.

The first proposals came last year from the native Chamber of Commerce in the shape of a petition that no resource should be had by foreign firms to legal procedure in enforcing their claims, but that time in all cases should be allowed. The affairs of a Chinese firm called T'ai Lung Ch'eng, which was looked upon by the whole mercantile community of Tien-tsin as a test case, may be taken as an illustration of the existing state of affairs. The firm is indebted to an amount of over 400,000 taels to foreign firms, chiefly Japanese and German, and has been hopelessly insolvent for some time. The commencement of an action against this firm in June of last year was made the occasion of the above-mentioned petition from native merchants against any legal steps being taken in this and similar cases. At present the only possible solution of the question, a declaration of bankruptcy, is delayed by the action of the Japanese firm, the principal creditors who have persuaded their Consul-General to refuse to join his colleague in pressing the case as they apparently hope by some means or other to reap greater advantages from postponing the bankruptcy.

The proposal that no proceedings in bankruptcy should be taken against the insolvent firms with a view to saving both them and their foreign creditors is unjust on the firms that have not indulged in speculative trading, and the English merchants appear to be of the opinion that the sooner the insolvent firms are made bankrupt and their assets realised, even though such a course may involve a certain loss to their creditors, the better it will be for the future of trade in Tien-tsin.

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A second proposal of the Chinese Chamber of Commerce was equally unacceptable. They suggested dividing the liabilities under the three headings of debt proper, interest, cargo ordered on account but not delivered, and proposed that interest should eease on the debt proper, and the debt be paid off in ten annual instalments, that subsequently interest at a fair rate to be settled should also be paid in instalments, and that the loss on the undelivered cargo should be divided up equally between debtor and creditor.

Meanwhile the consular body has made a proposal for the appointment of a committee consisting of representatives of the Chinese authorities, the consular body, the General and Chinese Chambers of Commerce, the Japanese merchants, and the foreign and Chinese banks; the committee to investigate the amount of the foreign claims against Chinese firms and the assets of the latter, and to consider what assistance should be given to the debtor firms and what measures taken for improving the situation gencrally.

In October last the German consul put forward a scheme for asking the Chinese Government to come to the assistance of the debtors by establishing a so-called Government Relief Bank to take over liabilities and issue negotiable bonds amounting to 14,000,000 taels, the bonds to be repayable in gold within a period of twenty years, and to pay interest at a rate of from 4 to 5 per cent. As far as I can understand the memorandum explaining this proposal, the idea is that the Chinese Government should accept responsibility for a liability amounting to 7,000,000 taels, admitted to be outstanding for goods actually delivered to the Chinese dealers on credit, and, in addition, for a further liability of 7,000,000 taels for goods imported on Chinese account but not delivered. The Government is to deliver the goods still in stock to the native dealers on credit, and continue to carry on trade on terms of credit through the medium of the Government Relief Bank.

The German consul sought to justify this appeal for Government assistance by ascribing a commercial crisis to various actions of the Chinese Government, e.g., their failure to deal with the currency question, heavy taxation, omission to take steps to prevent floods, and other far-fetched causes.

The whole scheme, indeed, appeared to me to be so wild and to offer so little chance of putting trade on a healthy basis, while establishing a most inconvenient precedent, that I refused to allow His Majesty's consul-general to support his German colleague, in spite of a suggestion to that effect from the German Minister.

I beg to enclose a copy of a letter addressed by the Shanghae branch of the China Association to Sir Pelham Warren, unequivocally condemning the scheme,

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which also met with the unanimous disapproval of the British merchants at Tien-tsin. At a meeting held at the British Consulate-General, Tien-tsin, the opinion was freely expressed that the scheme was financially unsound, and was not in the interests of the British firms. Instead of giving support to such a wild-cat scheme, they were in favour of pressing for the enforcement of individual claims.

While refusing, therefore, to authorise Mr. Ker to join in any action in support of the German scheme, I directed him to join his colleagues in a joint representation to the Viceroy in his capacity of Superintendent of Northern Trade, calling his Excellency's attention to the serious state of affairs and to the shortcomings of the local judicial administration, and urging him to take some steps to ameliorate the commercial situation and to expedite the hearing of the pending cases. In conference with the consuls the Viceroy referred to the proposal of the Chinese Chamber of Commerce for the payment of the principal of the debts in ten yearly instalments, but this plan was definitely rejected by the consuls. His Excellency, however, promised to facilitate the collection of debts owing to Tien-tsin Chinese firms by merchants in the interior, to use his good offices to lighten the burden of taxation borne by the Tien-tsin merchants, to establish a fair rate of exchange between copper coins and silver currency, to have a day fixed for the hearing of each case, and to appoint new judges of the court and revise its procedure, rules, and the code to be administered by it.

The Japanese and German and French consuls have continued to press the Viceroy to adopt the scheme for Government financial assistance, but his Excellency has replied that, while he was willing to carry out the measures he had already promised, and while offering further to provide a relief fund of 1,000,000 taels, such a scheme as the one now proposed was entirely outside his province, and must be decided by the Central Government, to whom he had already reported fully. He let it be seen that he thought the proposal unreasonable, that it would create a dangerous precedent, and would overtax the resources of the Central Government. He added that the foreign merchants were themselves largely to blame for the deplorable state of affairs on account of their unsound methods of business and the incapacity, or worse, of their "compradores."

The Viceroy has lately agreed to another proposal made by the German, French, and Japanese consuls to appoint a commission to enquire into the commercial situation, to devise means for its amelioration, and also precautionary measures for the future. The consuls at first suggested that Prince Ch'ing, the President of the Board of Commerce, the Viceroy, and their own three Ministers should be presidents of the commission, but the Viceroy in accepting, so modified the list of Chinese members that he practically reverted to a suggestion, put forward by himself on a previous occasion, that the foreign merchants should consult with the native Chamber of Commerce as to the measures to be adopted. The foreign merchants, and especially the British, have consistently objected to this course, on the ground that the native Chamber of Commerce is largely composed of defaulting Chinese merchants. His Majesty's consul-general will take no part in the work of the commission beyond watching the course of the proceedings and intervening, if necessary, for the protection of British interests.

It is difficult to believe that the Chinese Government will come to the relief of the native debtor for the benefit of the foreign creditor in the manner proposed by the three consuls, or, indeed, that their scheme will come to anything, in spite of the pressure being brought to bear on the Wai-wu Pu by the German and Japanese Ministers here. The French chargé d'affaires has, he tells me, taken no action, and gives me the impression of being a little ashamed of the scheme. My own view is that the matter is one for the decision of the merchants interested, and the British merchants are all opposed to the scheme as unjust and unbusinesslike, and one which, while creating a dangerous precedent, will merely prolong the unsound trading which has resulted in the present evils.

There may have been certain contributory actions on the part of the Chinese Government, but the real cause of the commercial crisis has been unsound and risky methods of trading in the hope of securing large gains, and it is hardly just to expect the Chinese Government to come to the rescue of the firms that have indulged in such reckless trading. Such a course, even if temporarily successful, could only result in encouraging speculation both on the part of the foreign merchant and the native retailer.

The firms involved have themselves to blame, and I am inclined to share the

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