CO129-478 - Public Offices & Others - 1922 — Page 341

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336

Paking,

No. 757, Tel., Sept. 4, 1918.

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Prince Koudachef, that the money would remain in the Ruse-Asiatic Bank at Shanghai, that the Chinese Government consented to continue paying the instalments. Chi has since modified her attitude, and no further payments on account of Russian indemnity are now being made.

The South and the Customs Revenue.

55. An earlier reference (paragraph 53) has been made to the bearing which the war between the North and the South exercised upon the question of the release of customs surplus to the Central Government by the Diplomatic Body. In September 1918 the question was brought to a head by the decision of the Southern Government, who were devoid of all funds, to seize the customis revenue collected at the Southern [182796/18] ports. It was only the threat of action by the foreign Powers (see paragraph 57) that averted a crisis. The incident led to a reconsideration of the whole position. It was obviously inequitable that the Northern Government, which at that time governed less than half the country, should receive the customs surplus drawn from all the ports, including those no longer under their control. It was accordingly agreed by the Diplomatic Body that the release of further customs surplus should be made an attempt by both parties, North and South, to compose their differences.

Paking, No. 772, Tel,

Sept. 10, 1918, [756149 19.]

Paking, No. 891. Tel., Oct. 30, 1918. F1809628/18.]

Peking,

Jan. 16, 1919. [9749/19.]

conditional "Then, therefore, in October 1918 the Central Goverument applied for a

release of 2,000,000 taels, consent was withheld on the ground that a release was not justified until military operations between North and South had ceased.

56. By the following January the situation had apparently changed for the better; No. 41, Tel.. actual hostilities between North and South had ceased. The South, on the other hand, showed no signs of responding to the attempts of the Diplomatic Body to bring the two parties, North and South, together When, therefore, the Central Government, who were now destitute of funds, applied for a reconsideration of the matter, the Diplomatic Body unanimously decided to release the 12,000,000 taels that had accumulated on the distinct understanding that the money should be devoted to certain specified objects, including a number of Southern public utilities, unless in the meantime the conference which was then proceeding at Shanghai between Northern and Southern delegates should reach an understanding as to some other method of disposal of the funds. In coming to this decision the motives actuating the Diplomatic Body were (1) to furnish an incentive for reunion between North and South; (2) to deprive the Southern Government of any reasonable excuse for seizing the Southern customs. And, although, as events proved, they failed in their endeavour to bring Jan. 29, 1919. North and South together, they at least succeeded in disposing of a delicate question, The South had been without giving legitimate dissatisfaction to either side. deprived of all excuse for repeating their threat of seizing the Southern customs, and it had been made clear to both sides that their prospects of obtaining further funds from the customs, over which the Diplomatic Body exercised a sort of trusteeship, were largely dependent upon the good-will they showed in reconciling their differences and reuniting the country under one common Administration.

Poking. No. 44,

[42481, 197

Peking,

No. 160, Tel.,

Mar. 14, 1919 [41883 19.]

To Peking

No. 174, Tel..

Mar. 31.

Peking,

No. 118.

Mar. 28, 1919. [79887,19.]

Peking,

July 2, 1919. 97870/10.)

57. Nevertheless, by March 1919 the Southern Government were again threatening to seize the Southern customs; the same strong counter-measures as in 1918 had to be invoked by the Powers. These measure were

(1.) That the Government of Hong Kong should intercept all cargo for Canton and

refuse entry to all cargo from Canton;

(2.) That the customs duties at Canton should be paid by British subjects to His Majesty's consul-general, who would hold them in trust for the Inspector. General of Customs;

(3.) That, if necessary, a British naval guard might be placed round the customs-

house on behalf of its British owner, the Inspector-General; and (4.) That all Allied vessels should be asked to refuse to carry Chinese postal

matter to or from any port in Kwangtung or Kwangsi.

58. As in 1918, the threat was fortunately sufficient to deter the Southern Government from proceeding further.

59. It was in the summer of 1919 that the second abuse by the Italian Minister No. 368, Tel (Baron Aliotti had been replaced by Marquis Garbasso, whose standards were evidently much the same) of the power of control over the customa revenue vested in the Diplomatic Body took place. The Chinese Government, in applying for a release of surplus, had voluntarily suggested the allocation of a certain proportion to the South; and this step towards conciliation between North and South obviously

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deserved all encouragement. All the foreign representatives agreed to sanction the release on these terms, except the Russian (who soon withdrew his opposition) and the Alian. The latter declared that, unless a claim by one of his nationals (M. Passeri) against the Chinese Government was first settled to his satisfaction, his consent would not be forthcoming. So preposterous was this action in seeking to force through a claim-and at that a claim intrinsically unjust, as a reference to the correspondence in the archives will show-at the possible cost of a reconciliation between North and South, that His Majesty's Minister, in his capacity as the dean of the Diplomatic Body, officially notified the Chinese Government that all the foreign representatives save the Italian Minister agreed to the release.

No. 311,

60. The inexcusable action of the Italian Minister (Marquis Garbasso) had Peking, unfortunately succeeded not only in shaking the confidence of the Chinese Government July 2, 1919. in the fairness of the Diplomatic Body in their fiduciary capacity as trustees for the 118931/19.3 administration of the customs funds, but had also broken the solidarity of the Diplomatic Body for the first time, whose decisions up to that date had been by unanimity. Marquis Garbasso's peculiar conceptious of honesty had rendered the position of the Diplomatic Body impossible. It was out of the question that the bonour of the whole Diplomatie Body should be compromised by the folly of one unscrupulous

member.

61. The incident soon bore fruit.

No. 42%,

In July 1919 the Chinese Government Peking, endeavoured to secure a revision of the arrangements governing the custody and Sept. 20, 1919. release of customs revenues. They claimed that in 1913 there had been a deficit in the [181241 (19.] customs revenue required, and that special arrangements to safeguard foreign interests had been therefore necessary; but that now, with the large rise in the price of silver and the increased customs receipts due to the revision of the tariff, the available revenue was far in excess of the sum required to meet all obligations secured upon the customs. They therefore wished to give the Inspector-General authority, without the necessity of the consent of the Diplomatic Body, to release to them any available customs surplus after due provision had been made to meet all obligations.

62. This proposal was rejected by the Diplomatic Body, both the Japanese and French Ministers having received definite instructions from their Governments to refuse to agree. It is worth recording, as illustrative of the general attitude adopted by these two countries towards China, that, as neither the Japanese nor French Minister had any interest in the pre-Boxer loads, and as the indemnity payments had long since been suspended, their locus standi in the matter was not above challenge. The incident Peking,

It showed the members of the Diplomatic Nov. 41919. had, however, a certain beneficent effect. Body that it was impolitic to press the Chinese Government too far, or to abuse the [16485519.] power of control voluntarily vested in them by the Chinese Government in 1913; and when the next application for a release was received from the Chinese Government it went through without demur.

63. It was on this occasion that the Chinese Goverment first definitely agreed to the principle that the South were entitled to a share in all customs releases. The proportion fixed upon was 13-7 per cent., as representing the equivalent of the revenue collected at the six Southern ports. The accuracy of the estimate was vouched for by the Inspector-General of Customs.

No. 494.

64. During 1919 no less than 22,604,123 taels (say, 7,157,9721.) were released Peking, No. 9,

Jan. 7, 1920. from customs surplus.

[18203/20.] 65. In January 1920 the Central Government again sought to reopen the question Peking. of the arrangements for the control of the customs funds, but, as both the Japanese and No. 72. French Ministers maintained their previous attitude and refused their consent, the [F407/07/101 request was again refused.

66. Sir J. Jordan's comment on this occasion is worth noting, for it remains applicable and must so remain until stable conditions return in China:-

"In equity the claim: of the Chinese Government in this matter cannot justly be denied. But there are certain considerations of a political nature which must be borne in mind. If the Government functioning at Peking were really a Government entrusted with the welfare of China as a whole, the request is perfectly reasonable and should be granted. But as matters stand at present the customs surpluses are wasted on the payment of useless troops, &c., and the advantage in practice of the Diplomatic Boly retaining some control over the money lies in the fact that they can occasionally secure the appropriation of a portion of these funds for productive works, such as the Liao River, Chihli and Min River conservancy schemes, &c. Moreover, the Yang-tsze conservancy scheme

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Feb. 16, 1920.

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