CO129-497 - Public Offices - 1926 — Page 31

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They were prepared to grant them only upon conditions which ensured that the proceeds would be placed under

foreign control and applied in great part

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liquidation of the unsecured debt.

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to the

(10) From the very outset His Majesty's Goverment

were opposed to the question of the unsecured debt being dealt with by the Tariff Conference at all and they frankly expressed this view in a confidential memorandum

communicated to the Consortium Powers early in 1923. They foresaw that it might defeat the intentions of the

Washington Conference, which were to assist the economi and political development of China and to relax not to

tighten foreign control. They held that, the object of the concessions proposed at the Washington Conference being to benefit China, the principal purposes to which the Customs surtax should be devoted ought to be pro- ductive objects such as railway construction, and social or economic reforms which would be a permanent benefit to

China as a whole. The most promising of these reforms was in their opinion the abolition of likin, which moreover was expressly contemplated in the Treaty itself.

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(11) It has been argued that debt consolidation would also be a permanent benefit to China because it would restore China's credit. This argument would doubt- less be valid if there were a government in effective control of the whole country, but in China today debt consolidation could only enable the faction which happened to be in power in Peking to resort to fresh ruinous and unproductive borrowing.

His/

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