!
Peking,
No. 32,
Feb. 1, 1918. ("Loans and
Concessions." Part 111, No. 10.)
Feking! No. 177.
July 22, 1915. ("Loans and
Concessions, Part III, No. 43.)
Peking, No. 25, Jan. 24, 1016.
("Loans and
Concessions," Part IV,
No. 5.)
Peking,
No. 41,
Jan 27, 1917.
("Loani and
Concessions," Part V.
No. 38)
12
13
40. Owing to the breakdown which had occurred in the "concurrent loan and indemnity service (see paragraph 37), the Diplomatic Body proposed to the Chines Government, early in 1915, a further revision of article 2 of the original agreement (see paragraph 24). This would have practically amounted to a reversion to its original form under which the balance of customs revenue was to be retained by the custodian banks until all the pre-Boxer loan service for the year was provided for. But the Inspector-General of Customs now assured the Diplomatic Body that such revision was no longer necessary, and the Diplomatic Body in view of his assurances agreed to drop the proposal. In short, the Diplomatic Body agreed to the continuance of the "concurrent" system of loan and indemnity payments from customs revenue assisted from salt funds which had been arranged at the end of 1913 (see paragraph 34). Their consent was, however, subject to the right of any interested Power to insist that, in the event of doubt arising as to the sufficiency of the maritime customps revenue and salt revenue to defray all charges secured thereon in respect of the loan and indemnity services, payments of customs revenue to the indemnity banks should be deferred until full provision had been made for meeting the services of the pre-Boxer loans,
41. From 1915 onwards this " concurrent" service has worked well and smoothly. With the rise in exchange the salt revenues were called upon to contribute less and less, until at one moment the customs revenue unaided was sufficient to meet both services. This is no longer the case, but the position is still satisfactory.
Cancellation of German and Austrian Indemnities and Suspension of German Loan Service.
42. On the 12th August, 1917, China declared war upon Germany. It is unnecessary to go into the negotiations that preceded that event, but one of the considerations that led her to take the step was the consent of the Allied Powers to the suspension of the indemnitywithout interest for a period of five years from the 1st December, 1917.
43. The terms for repayment of the suspended portions since agreed upon by the Allied Powers are as follows:-
To Great Britain
To Japan
To France
1940-45 1923-40
1922-27
13
46. The incident arose as follows: After all calls upon the customs revenues had been met there was still an estimated surplus for the year 1917 of at least ,000,000 taels. The Chinese Government accordingly applied for a release to them of 2,000,000 taels. The Diplomatic Body were disposed to agree, as was clearly only right, but the Italian Minister (Baron Aliotti) made difficulties and refused his sunction to the release unless the Chinese Government, on their part, agreed first to repay certain debts due to Italian nationals. Barou Aliotti was pressed to modify his attitude, but refused to do so. He explained that not only did he wish to show the Chinese Govern- ment that the Italian Minister was in a position to make good his threats, but that he intended to obtain a "ectification" of the Italian concession at Tien-tain. He subsequently withdrew his opposition, but the incident had irritated the Chinese
power of Government and made them critical of a system which placed it in the individual Minister to block perfectly legitimate releases of Chinese Government money in order to gain his own ends.
any
334
47. Profiting by this incident, the French and Japanese Ministers again sought to reopen the question of the position of the custodian banks and the custody of the customs funds. The Deutsch-Asiatische Bank having dropped out on the outbreak of war, they represented that, as the service of the German portion of the loans of 1896 and 1898 had now ceased, the whole distribution of the customs revenue should be reconsidered. They failed to carry their point and the matter dropped for the time Peking, being. But in December 1917, in company with the Belgian Minister, they again Dec. 29, 1917. broached the subject.
No. 453,
17
China," Part LXIII,
48. It will be remembered that, under the existing procedure, any surplus of No. 48.) customs revenue, after all prior claims have been met, is divided up in proportion amongst the various banks charged with the indemnity service, but only up to the amount of the indemnity instalments due to those banks each month. The residue, if any, remained with the two custodian banks (the Hong Kong and Shanghai Bank and the Russo- Asiatic Bank) as to two-thirds with the British, and one-third with the Russian Bank. The French, Japanese and Belgian Ministers, seizing the opportunity afforded by the necessity of making definite arrangements with the Chinese Government for the refund to China of the suspended indemnity to which the Powers had all agreed for the term of five years, now proposed that the whole customs surplus, after all other obligations had been met, should be divided up in proportion between all the indemnity banks, thus depriving the custodian banks of their right to handle the residue after the monthly indemnity instalments had been provided for.
49. At that time, owing to high exchange and other causes, the customs revenues had risen considerably, and the point was one of great importance to the two custodiau banks. The British and Russian Ministers argue the question out with their colleagues, and succeeded in maintaining the existing procedure.
No. 432,
{"Lorus and
30. The arrangement reached was formally recorded in two memoranda signed Poking by all the Allied representatives except the Italian Minister, but as no Italiau bank Dec. 29, 1917. was concerned his abstention was of no importance. The first of these was drawn up Concione," for purposes of record and not for communication to the Chinese Government. It ran Part VI, as follows:-
No. 48.)
1.
Peking, No. 356,
while Italy holds out for repayment in full after five years, ie, in 1922.
The total amount of indemnity due to Great Britain before the end of 1945- the date of final payment is 11,186,5471. This of course includes interest as provided under the 1901 protocol.
44. As regards the German and Austrian loan and indemnity payments, the Nov. 3, 1917. following arrangements have been adopted: On the rupture of diplomatic relations with Germany on the 14th March, 1917, China's indemnity payments to her (about 732,8102. a year) ceased, but the service of the loans of 1896 and 1898 continued. The latter payments were met until the 12th August, the date of the declaration of war. The German and Austrian indemnity payments were thenceforth placed at the disposal of Sir F. Aglen to meet the services of the two domestic Chinese Government loans, with which he is associated. The service due to Germany on the 1896 and 1898 loans were lodged with the Hong Kong and Shanghai Bank in London, and used for purchasing Chinese securities on behalf of the Chinese Government to the amount of about 50,000l. a month.
Peking. No. 276,
Abuse of Control vested in Diplomatic Body. Position of Custodian Banks.
45. It was almost on top of the declaration of war by China that there occurred 27, 1917. the first abuse of the control over customs revenues vested in the Diplomatic Body.
{"Loma and
Concrasions,"
Part 7. No. 109.)
1. The procedure laid down by the Diplomatic Body in December 1913
states as follows:-
"The banks chiefly interested, viz., the Hong Kong and Shanghai Banking Corporation, 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 ou account of loans secured by the customs revenue and contracted previous to 1900 have been fully met, shall be divided pro rata amongst the banks having charge of the indemnity service up to the amount of the instalments respective due to them each month.'
2. In a letter dated the 10th January, 1914, the International Bankers' Commission pointed out to the doyen that as the service of the Russian 4 per Cent. Gold Loan of 1895 was by the terms of the Loan Agreement payable in half- yearly and not in monthly instalments, it would be excluded under the above
upan arrangement from participation in the monthly provision for loana secured
the
* The third custodian bank-the Deutsch-Asiatische Bank-had dropped out on China's declaration
of war.
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