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charging the huge and unwieldy unsecured Chinese foreign debt on the increased customs revenues and of retaining the latter as far as possible under foreign control Before the conference had been long in progress His Majesty's Government real the dangers of such a policy and recommended that the foreign Powers should forgo all further attempts to control the customs revenues in the interests of China's foreign creditors, and even went so far as to advocate tentatively a return to the pre-revolution system, when the actual collection and handling of the customs revenues were left in the hands of the Chinese superintendents, thus leaving it to the good faith of the Chinese Government to meet the foreign obligations secured on these revenues and to make their own arrangements for the unsecured foreign debt. Subsequently, a variety of plans and proposals were mooted by the foreign delegates at the conference in accordance with the arguments of those who urged foreign control over the revenues in the interests of the foreign creditors and those who advocated the diminution or abolition of this control in the interests of the future of the Customs Administration. For my part I have always held, and have frequently pointed out, that, no matter what schemes might be formulated, China would undoubtedly in the end do exactly as she pleased with the proceeds of the increased import duties. This is, in fact, what has occurred. Whether we like it or not, China, left to her own devices and untrammelled by the provisions of any tariff-cum-debt-consolidation agreement, has refrained from interfering with the. foreign control, such as it is, exercised through the inspector-general and the Custodian Bank, over the proceeds of the original 5 per cent. duties, while taking entirely into her own hands the disposal of the revenues from the balance of the import tariff. But it is interesting to note that even in the case of these latter funds the Minister of Finance chooses of his own volition to use the foreign inspector- general of Customs to some extent as a custodian, doubtless owing to the necessity of inspiring the necessary confidence for the purpose of raising domestic loans with the Chinese banks. I have little doubt that ultimately China will carry this policy to its logical conclusion and treat her national revenues, as far as possible, as one liquid whole, instead of earmarking specific revenues (salt, customs and so on) for specific obligations. This was, in fact, the pre-revolution system. when, for instance, the Customs-secured loans were met by the Ministry of Finance out of the national treasury, in which the customs revenues were merged. The arrangement is doubtless admirable in theory, but it is hardly one which is likely to appeal to the foreign investor in Chinese Government securities, who has grown accustomed to the safeguards which have been evolved during the past two decades.
6. For the moment, however, the situation in regard to the customs revenues is certainly highly satisfactory, not only in that the existing arrangements for the safe custody of revenues required for the old secured loans and indemnities are permitted to continue, but also in that the entire revenues continue to flow, without interference by the provincial authorities, into the National Treasury, or, in other words, into the banks at Shanghai. For this happy dénouement, which has, I venture to think, justified the policy pursued by His Majesty's Government in the face of considerable opposition at and since the Tariff Conference. the present inspector-general, Mr. Maze, and the present Minister of Finance, Mr. Soong. deserve every credit. The question is, whether these arrangements will continue to work in the future and, for the moment, whether they will weather the political storm which has recently burst upon the country. One must not overlook the fact that the policy of centralisation pursued by the Nanking Government in connexion with the customs revenues, as with other matters, has its dangerous aspects, and in the absence of any definite arrangements for the distribution to the provinces of a portion of the customs revenues, such centralisation places à considerable strain on the relations between the provincial authorities, the Customs and the Central Government. It is instructive to note in this connexion that the customs returns as published are still confined to the proceeds of the 5 per cent, duties, which, as all concerned are well aware, are required in their entirety for the old foreign and domestic obligations.
7. With regard to the position of the inspector-general vis-à-vis the domestic loan services, the attitude of His Majesty's Government has of recent years been in favour of dissociating him from all such financial responsibilities. Nevertheless, Mr. Maze continues, it will be noted, to be saddled with the responsibility for the services of the domestic loans charged on the customs during the régime of his pre- decessor, Sir Francis Aglen, while he is not entirely relieved of all responsibility even for the later domestic loans, the service of which is taken charge of by the
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Sinking Fund Committee of Chinese bankers established for that purpose, to whom Mr. Maze pays the necessary funds from his account in the Central Bank. It is, eed, the old story of the Chinese clamouring for full Chinese control, but finding in the last resort that the foreigner is, after all, indispensable for the purpose of inspiring the necessary confidence in their own people.
8. The vexed question concerning the rival claims of the old unsecured foreign debt and the new Chinese domestic loans to the security of the increased customs revenues has been fully covered in recent despatches.
9.
As regards the conditions in the Customs service and the part played by Mr. Maze in overcoming the dangers and difficulties which but recently threatened its disruption, I believe that the service is, in fact, in a stronger position than it has been for some time past. For this happy state of affairs also Mr. Maze deserves great credit, but we must not shut our eyes to the fact that he has had the inestimable advantage over his immediate predecessors of the support of a Government in nominal control of a united China. As regards Mr. Maze's "capabilities (see paragraph 3 of your despatch under reply), T have never questioned his well-known
'' fitness ability. As regards his
for the post of inspector-general, I am frankly not prepared to offer any comment on that point. He represents, so to speak, a fait accompli resulting from the decision taken in December 1928, which, be it good or bad, we have to accept, and I see no useful purpose in reopening the discussion now. So far as I can judge, the Customs Administration is at present functioning well and smoothly. I would add, in conclusion, that it was not so much Mr. Maze himself as the unfortunate methods by which, and the circumstances in which, he obtained his appointment as inspector-general which caused so much stir and bitterness amongst the British communities in China at the time.
I have, &c.
MILES W. LAMPSON.
Enclosure in No. 1.
Mr. Aveling to Sir M. Lampson.
(No. 87. Very Confidential.) Sir.
Shanghai, November 18, 1929. I HAVE the honour to acknowledge the receipt of your despatch No. 255 of the 14th September last enclosing copy of a despatch from the Secretary of State on the subject of the Chinese Maritime Customs. I regret that, owing to my recent visit to Peking, and the fact that on my return south I was obliged to spend some considerable time at Nanking, I have been unable to report to you sooner.
2. Since my arrival in Shanghai I have had various opportunities of discussing customs questions with Mr. Maze, Mr. Chang Fu-yun (head of the Customs Board), members of the staff of the inspectorate-general and several commissioners of customs in charge of ports. The impression I have gathered as the result of these conversations is that, so far from there being grounds for dissatisfaction with present conditions, there is a general feeling of relief at the restoration of internal harmony in the service, and of growing confidence based on the fact that none of the worst fears entertained at the time when the present inspector-general obtained control of the service have so far been justified by results. The staff of the inspectorate-general, even including those who bitterly resented the methods by which Mr Maze is thought to have secured his appointment, and who cannot, therefore, be expected to have any deep feelings of personal loyalty, are, I believe, unanimous in recognising that Mr. Maze has handled with tact, ability and success a very delicate situation, and that, despite the modification of the status of the service vis-à-vis the Chinese Government and foreign Powers which his appoint- ment connoted, he has not, since he occupied his present position, departed from best traditions of the service or sacrificed any of the essential interests of its members. It is, I find, generally recognised that such changes as have taken place ---for example, the greater opportunities of promotion afforded to the Chinese staff and the control of all appointments to the higher posts by the Customs Board-have been necessitated by changed circumstances, and that, just as the Powers, in readjusting their treaty relations with China, have abandoned certain former privileges, so, in the process of adaptation, the Customs have been obliged to hand over to the Chinese powers that were hitherto exercised solely by the inspector-
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