CO129-491 - Public Offices - 1925 — Page 79

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ANNEX (G).

Extract from Minutes of 4th Meeting of the Sub-Committee on Chinese Revenue,

Mr. Odagiri stated that he would read a statement, under instructions from his Government, which he would not be at liberty to discuss at all:-

Japan accepts the levying surtax because of her sincere desire to see China's political situation stabilised and her finance placed upon a secure basis, although Japan's trade with China stands to suffer severely from the proposed increase. Japan therefore attaches the greatest importance to the use to which the additional customs revenue will be applied. It is hoped that the countries interested will adopt a practical arrangement whereby the proper use in future of the additional customs revenue will be assured. In our opinion, the addi- tional revenue should first be used for the service of foreign loans, which are the most pressing of China's needs to-day. In view of the present state of affairs in China it would not be practical to use the customs revenue on public utilities, as was suggested by the Chinese representatives. There is always, in the existing circumstances, a grave possibility of such revenue being used to support internal political feuds, with the result that the increase of tariff revenue, instead of promoting the welfare of the Chinese people, would rather add to their troubles.

"On the other hand, the suggestion that the supervision of the use of the additional revenue should be entrusted to the Audit Department shows a lack of knowledge of the real character of this office. Long experience points to the utter futility of any such arrangement.

"

ANNEX (H).

Extract from Minutes of 4th Meeting of the Sub-Committee on Chinese Revenue.

M. Kammerer agreed with the Japanese delegate with regard to the use of the revenue to be collected by China. He suggested that the following be added to article 3 :-

•

The increase in revenue derived from the increase in customs duties provided above shall be pledged primarily to the service of the foreign loans guaranteed by the customs receipts, when the latter are insufficient, as well as for the reimbursement of the matured bonds of the Chinese Treasury, payment of which has been suspended."

ANNEX (I).

Custodian Banks

Extracts from Minutes of 29th Meeting of Committee on Pacific and Far Eastern Questions.

SENATOR UNDERWOOD said that at the time the sub-committee considering the customs revenue of China was holding its sittings, a question arose which met with the general approbation of the members of the sub-committee, but was not reported to the full committee. Since that time it had been suggested that the Chairman ought to call the matter to the attention of the full committee in order that the record of the full committee might contain the statement. It related to the question of the deposit of moneys collected under the customs revenues in the banks of China.

After the treaties were made in relation to the indemnities growing out of what was called the Boxer movement, it was provided that certain portions of the Chinese customs revenue should be set apart to meet the interest and amortisation charges on the bonds issued at that time, and those customs revenues were deposited entirely, or

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almost entirely, in the Hong Kong-Shanghai Bank and the Russo-Asiatic Bank. The amount of those revenues had been great, and, of course, were of great value to those institutions as compared to the other banks in China. He thought it was admitted that the allocation of those funds under the agreement made at the time of the issues of these bonds that he referred to a moment ago was a matter of contract and that portion of the revenue derived must continue to be deposited according to the under- standing or the contract at the time.

Of course, the free revenue above the charge for amortisation and interest on these bonds was at the disposal of the Chinese Government.

As a matter of fact, he thought, on account of the revenue being collected paying less than 5 per cent. effective, there had not been much of a balance-sheet on the side of the Chinese Government, but under the resolution passed to make this 5 per cent. effective, that revenue would be largely increased. Of course, so far as the revenue was concerned, that was allocated to this particular purpose; that is, still controlled by the original allocation and the terms of it; but as to the balance, it was free revenue for disposition in any bank, of course, controlled primarily by the Chinese Government.

Now, at the time the sub-committee was preparing its report, Mr. Odagiri, representing the Japanese Government on the sub-committee, made a statement which Mr. Underwood would read. Although other statements were made of a similar nature, as far as could be found out from the record of the sub-committee, the other statements were not taken down in detail. The statement of Mr. Odagiri, however, represented what was said by most of the others present at the table, and he would therefore read it:

Japan not only has no objection to, but welcomes, the proposal that the existing customs system of China should not be disturbed. In the meantime she must express the hope, in view of the important position which her Chinese trade occupies in the entire foreign trade of China and Japan's resulting large con- tribution to the Chinese customs revenues, that a fair and suitable adjustment may be effected with the above fact in view in regard to the future operations of the customs system; that is to say, concerning such matters as the custodian banks and the proportion of foreign nationals to be employed in the customs staff. We desire to make it clear, however, that this is not proposed as a condition of our acceptance of this agreement, but only as a frank expression of our desire. It is hoped that such special conference as is mentioned above in its deliberations upon the conditions involving questions such as custody and supervision of tariff revenues should take into consideration the above expressed desire of Japan."

E

And then the notes reported by the secretary-general's office added :—

The delegates of France, Italy, Belgium and Holland associated themselves with the Japanese delegation."

Senator Underwood wished to say that at the same time he also stated that he recognised the fact that the revenues that had already been allocated to the Chinese contracts would not be changed because they were part of an existing contract, but other additional revenues were free to be deposited in such banks as could be determined.

He thought that, so far as the present 5 per cent. tariff was concerned, there could be no question that that which had been allocated to the payment of the interest As on the bonds already issued could not be deposited with the banks named before. to the balance of that 5 per cent., it was free to be deposited in other banks when it was not needed, when it was turned over to the Chinese Government.

Now, as to the new revenue that was to be derived by the additional surtax of 2 per cent., that would be in the control and under the determination of the special conference when it met, and that conference, in determining the putting into effect of this 2 per cent. surtax, would have the right and the power, with the consent of China, of course, to a reallocation of these funds in the various solvent banks in China.

He did not think it was a question that this conference could settle; he thought it was far better to leave it to the special conference that had already been ordered to handle the customs tariff, because its members would meet in China, they would be in touch with the situation, they would know better what to do.

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