CO129-384 - Public Offices - 1911 — Page 228

observed that too much importance cannot be attached to the preservation of that happy unanimity between the groups which constitutes the essence and foundation of the agreements just concluded, no less than the guarantee of their proper

fulfilment.

With the present growth of constitutional reform in China it is idle to attempt to impose principles which presume an entirely different set of conditions. Insistence npon these principles was indeed largely responsible for the state of inertia and indifference into which the Chinese Government had steadily drifted. In order to remove this it was necessary to make some concessions, and it was felt that these could safely be made provided the Imperial Government was prepared to assume full responsibility for them. The unusual publicity given to the Hukuang Agreement and to the decrees referring to it, and the responsibility of the Cabinet to the National Assembly under the new constitution, are conditions which have been non-existent in the case of previous loan agreements, and these add materially to the value of the guarantees of the present ones. They, in fact, imply a new channel for the exercise of the Government's legitimate responsibilities, the right to which cannot reasonably be denied to it. In addition to this, we have the fact, that the Chinese Government enters into its engagements jointly and simultaneously with four countries whose political friendship and financial assistance have now become matters of necessity for it. In a strict adherence to the principles here implied, in joint communications on all matters of routine, in joint action where action is necessary, coupled always with a consistent regard for the susceptibilities of China in questions where her self-respect is at stake, will lie the future strength of the international combination, which has it in its power to direct to a large degree the material progress on which China now shows her readiness to enter.

It should never be forgotten that the first impression likely to be created in the Chinese mind by the present international combination is one of suspicion, an impression which political rivals will take every opportunity to foster, and the efforts of the groups should therefore be consistently directed to remove all grounds for such suspicion by proofs of their friendly desire, dissociated from all political motives, to assist China in working out her economic salvation. China, in her present state of national evolution, is like a restive and nervous horse, who must be guided with a light hand rather than controlled by force; and any attempt to impose conditions which are irksome or derogatory to her aspirations for self-dependence, are likely to weaken rather than strengthen the position of the groups.

This policy has been pursued in the negotiations just concluded, and the commanding position which it has secured to the groups is recognised by far-seeing rivals like the Russians, who would seem in fact to have abandoned all attempts to form a competing group; and their friendly proposals for co-operation in regions where their political predominance cannot be challenged should be carefully weighed. It is better to have them as friends than as rivals or opponents, and their political co-operation, by presenting to China an acceptable solution of the problems by which she is now confronted in the regions referred to, would bring an immense accession of strength to the present international combination.

The deposit of loan funds with the Chinese Government banks under the guarantee of the Imperial Government is a step which merely anticipates the necessities of the currency reform programme, namely, the reorganisation of those banks on modern banking lines and the assumption by the Imperial Government of direct responsibility for their administration. The weak part of the currency scheme, in other respects a carefully thought out one, is that dealing with the issue of notes, for the issue and redemption of which the Ta Ching Bank is constituting the sole channel, but no provision is made for their guarantee beyond some very inadequate regulations with regard to a reserve in bullion and securities. It will be necessary, at any rate to begin with, that the notes be guaranteed by the Imperial Government and that a reserve of at least 70 or 80 per cent. be kept in coin of the national currency under the strictest Government control. Insistence on this point will no doubt find a place in the report of the groups to the Chinese Government, and the needs of the moment will thus, it is to be hoped, lead to the establishment of what has long been an urgent necessity, namely, a Government bank, organised in accordance with modern banking laws and forming part of the administrative machinery of the country.

The doubt is frequently expressed whether the Chinese Government is powerful enough to carry into effect any scheme of currency reform in the face of the strong opposition which is to be anticipated from the native banks and official classes, who

C

3

make large profits by the present confusion of the currency. To this it may be replied that a Government which has shown itself capable of effectively suppressing such a widespread national evil as the opium habit may well be credited with the ability to enforce so beneficial a measure as currency reform. Currency reform upon a silver basis, with a subsidiary coinage of fixed value in relation to the standard, will benefit the people at large by cheapening the price of commodities and lightening the burden of taxation. Under the present system of revenue collection the local official fixes an arbitrary rate between copper and silver, and insists upon payment in the standard imposed by himself, thereby extorting from the people of the soil far more than is due from them, while at the same time he accounts to the Government for the minimum sum prescribed by custom as the average collection of his district. With the reform of

the currency these abuses must come to an end; and, when once this is realised by the masses, the Government may, it is to be expected, count upon a popular support equally strong as that which has distinguished the movement for opium suppression.

In conclusion, the question may well be asked how China, with her visible resources now so seriously reduced by the exclusion of opium, and with financial stringency increasing in every province, is to meet her ever-growing load of foreign debt, and at the same time find fresh resources with which to carry out the schemes of material progress and expansion, of education and of constitutional reform, into which she is being irresistibly forced by the pressure of her external relations, and by the demands of her own national aspirations. Apart from the substantial economies to be realised by a reform of the existing administrative machinery, it is evident from what has been said above that the effective introduction of the new currency, by putting an end to extortion and lightening the burden of the people, will automatically create a new taxable margin which can be availed of by the Government without calling on the people to pay more than they actually do at present. It is probably well within the mark to say that, from these two sources alone, the present internal revenue of the country could be doubled. In addition, as the group representatives were informed during the recent negotiations, the Chinese Government has now decided to direct its immediate attention to the question of tariff revision, and it is to be hoped that the Powers, in considering the proposals of the Chinese Government on this subject, will unite in a policy similar to that followed by the British Government in respect to the exclusion of opium, and will ask from China, in return for the sacrifice they are called upon to make, adequate guarantees, not only for the total abolition of li-kin, but for the introduction for such administrative reforms as may prove the sincerity of her desire and the reality of her efforts to rehabilitate her financial position. The first essential is the employment of competent advisers in every department of the executive, and circumstances all point to the time now being ripe for pressing such a measure.

The first step has in fact already been taken in the appointment of Mr. Vissering to assist in the inauguration of the currency reform programme, and he has at the same time been invited by the Imperial Government to advise as to the reorganisation of the Ta Ching Government bank. In pressing China to extend the policy thus inaugurated by the appointment of other advisers in the financial departments of the administration care should be taken to avoid any appearance of attempting to impose an international control of her finances, such as might be implied by specific stipulations as to the number, character, and nationality of the advisers she selects. The selection should be left to China under her general guarantee to the Powers that such appointments will be made wherever obviously called for by the needs of reorganisation, and that competent persons of recognised high character only will be employed.

S. S. Gneisenau, near Socotra,

June 22, 1911.

E. G. HILLIER.

H. CORDES.

225