Mr. Rockhill to Mr.
Hay.
No. 82.]
Commissioner of
the United States to China,
Peking, May 7,
1901.
Sir: The diplomatic corps held a meeting to-day for
discussion of the report submitted to it in its last meeting on the mode of
payment of the indemnities to be asked of China.
Before beginning the discussion of this question the Belgian minister stated
that as a result of instructions recently received from his Government the
total of the claim which Belgium had to present would be 32,358,750 francs,
subject to some slight reduction.
The French minister then stated that the official figures for his claims,
calculated to the 1st of July, would be 286,500,000 francs, which might
possibly be subject to a reduction of 6,000,000 francs. His Government would
ask, for military expenses after the 1st of July, between six and seven
millions of francs per month.
The British minister announced that, following the example of the other
governments, Great Britain would add its naval expenses, and that instead of
the £4,800,000 previously given as its expenditures for military purposes in
connection with the expedition to north China, it would now ask £6,500,000.
All these figures bring up the grand total of the claims, calculated up to
the 1st of July, to about £62,500,000 sterling, or 450,000,000 taels.
The Russian and the French ministers then stated that it was of the utmost
importance to ascertain at once whether the governments would agree to a
joint guaranty of the loan, which seemed to be the only way for China to pay
off her indebtedness. They said they had formal instructions to urge such a
guaranty. The Japanese minister said that his Government believed that a
loan should be made by China, and he gave it as his personal opinion that
Japan would join in guaranteeing it.
The Austrian minister expressed himself as favorable to a guaranty, while the
Belgian, German, British, Italian, and Dutch ministers said they were
without instructions. I confined myself to saying that the Government of the
United States saw the greatest difficulties in the way of agreeing to such a
proposition, and in private conversation with my colleagues I have
repeatedly stated that it seemed to me highly improbable that we could
possibly entertain it.
The British and German ministers and myself having expressed the opinion that
it seemed incumbent upon us, in view of the terms of the Joint Note, that
China should be given an opportunity to state what amount of indemnity she
could pay, and how she proposed doing it, the ministers, after some
discussion, agreed to submit to the Chinese plenipotentiaries a statement,
and of which the following is a translation:
The total amount of the disbursements of the powers, as well for
military expenses as for the losses of societies and foreign
individuals and of Chinese who have suffered
[Page 156]
in their person and property through their
being in the employ of foreigners, down to the 1st of July, amounts
approximately to 450,000,000 taels, a figure which will be
considerably increased if the occupation is to be prolonged beyond
that date.
In conformity with article 6 of the Joint Note accepted by His
Majesty the Emperor of China, and according to which China will take
financial measures acceptable to the powers, so as to guarantee the
payment of the said indemnities, the foreign representatives ask the
Chinese plenipotentiaries for a formal assurance that they recognize
their liability for this sum, and they beg them to indicate the
financial measures which China expects to take to discharge herself
of this debt.
I agreed to the terms of the above note on the express and formal
understanding that it should in no wise be construed as making a claim of
China for the amount indicated in it or as requiring of China any promise to
pay, but that it was simply sent the plenipotentiaries so as to enable them
to give formal expression as to the limit of China’s ability to pay and the
means she proposed taking.
The Russian and British ministers accepted my reservations, in which they
entirely concurred, as did tacitly the rest of the diplomatic body.
I inclose a copy of a memorandum by the Russian minister advocating the joint
guarantee of the loan, abstract of which I sent you in my dispatch, No. 79,
of May 1, 1901.
An examination of the report of the committee on the payment of indemnities,
and the other documents I have sent you, as well as the remarks of my
colleagues in the meeting of to-day show that the only possible chance of
China being able to pay the enormous amount which the various claims now
reach would be by means of a joint guarantee by the powers. Without said
guarantee it seems even improbable that China would be able to pay the forty
millions of pounds which you have suggested as the limit beyond which the
powers’ demand should not go.
It appears premature as yet to attempt to indicate what will be the solution
of the question or the amount finally presented as a demand on China, but I
am daily being strengthened in my belief that very considerable reductions
will have to be made, even if an increase in the tariff of customs duties on
foreign imports to a 5 per cent effective is agreed upon.
I inclose herewith a translation of a communication sent me by the Viceroy at
Wu-chang, Chang Chih-tung, giving his views on the easiest way for China to
meet the indemnity demands of the powers; also a telegram from the Viceroy
at Nanking, and my reply thereto, bearing on the same subject.
I am, etc.,
[Inclosure 1 in dispatch No.
82.—Translation.]
Mr. de Giers to Mr.
Pichon.
Monsieur le Ministre et cher
Collègue:
In compliance with the wish expressed by my honorable colleagues, I have
to submit in writing to the financial committee under your excellency’s
presidency the statistical data and the conclusions they suggest to me,
which I mentioned in this morning’s meeting of the representatives of
the powers.
After consulting the market price of the various loans of powers whose
financial condition is brilliant and also of others in a less-favored
condition I find, for example, that the French rentes at 3 per cent, as
well as the Russian 4½ per cent
[Page 157]
and the Russo-Chinese loan at 4 per cent, are all actually above par,
particularly the first mentioned, which is at 101.37, the second at
100.5, and the third at 101.90.
This leads me to believe that with the common guaranty of the powers
China could readily make a loan of £70,000.000 at 4 or 4½ per cent. With
the guaranty of the powers the issuing banks would be satisfied with 7
per cent commission, which would leave at the disposal of China a sum of
£65,100,000, sufficient for the payment of the indemnities. If the loan
is made at 4 per cent the annual payments would be £2,800,000, or
18,200,000 Haikwan taels, counting the pound sterling at taels 6.50. In
case of a loan at 4½ per cent the annual payments would amount to
£3,150,000, or 20,475,000 taels, respectively.
If furthermore, the necessary loan is made by China itself without
guaranty of the powers, I agree entirely with the financial committee in
believing that not less than 23 per cent of commission would be exacted
for issuing this loan. Consequently, to have an available sum of
£65,000,000 a loan of £84,500,000 would have to be negotiated. I take
the liberty of doubting whether such a loan could be secured at 5 per
cent, as the financial committee thinks it could, and I believe that the
creditors would not be satisfied in this case with an interest less than
7 per cent, which for the total amount of £84,500,000 would require an
annual payment of £5,915,000, or 38,447,500 Haikwan taels.
Comparing this latter figure with that of 18,200,000 taels requisite as
annual payment on a guaranteed loan at 4 per cent, I reach the
conclusion that China would incur a clear annual gain of 20,247,500 (sic) Haikwan taels in case this guaranty of the
powers was refused and if she were abandoned to her own resources for
the loan which she needs.
Passing to an examination of the proposal of the Government of the United
States of America that the powers should be satisfied with a lump sum
payment of £40,000,000, it is necessary to state in the first place that
the sum total of the claims of the powers being estimated at
£65,000,000, this would entail on them a loss of 38.46 per cent of the
indemnities to which they are entitled. If to secure these £40,000,000
China should have to do without the guaranty of the powers, she would be
obliged under the above-mentioned conditions of 23 per cent commission
and 7 per cent interest to make a loan of £51,935,000, with annual
payments of £3,630,450, or 23,597,925 Haikwan taels.
On the other hand, with the guaranty of the powers, which would reduce
the commission to 7 per cent, China could secure £40,000,000 by making a
loan of £43,000,000, which at 4½ par cent would necessitate an annual
payment of £1,935,000, or 12,677,500 Haikwan taels, and at 4 per cent of
£1,720,000, or 11,180,000 Haikwan taels. In the latter case the
difference for China between the loan guaranteed by the powers and one
without such guaranty would be 12,417,925 Haikwan taels a year.
Independently of these considerations, I have been struck by the fact
that foreign banks, according to information which has reached me, held
that the annual service of the Chinese loans amounted to 21,000,000
taels, whereas the financial committee estimated it at 24,000,000 taels,
a figure which has also been confirmed to me by Sir Robert Hart.
Seeking to explain the reason of such a contradiction, on examining
carefully the printed list in a newspaper of the loans made by China and
of the annual service of its debt, the figures for which agreed with
those which had been given me by the inspector-general of customs, I
remarked that they had been calculated on the basis of 1 Haikwan tael
equaling 2 shillings 9 pence.
According to this list the service of the debt should be:
|
Taels. |
|
Taels. |
| 1901 |
24,564,900 |
1915 |
20,205,500 |
| 1902 |
24,408,200 |
1916 |
19,191,700 |
| 1903 |
24,408,700 |
1932 |
13,106,800 |
| 1904 |
23,935,300 |
1933 |
6,074,400 |
| 1914 |
22,843,800 |
|
|
Now, the real value of the Haikwan tael in English money has been as
follows during the last twelve years:
|
s. |
d. |
|
s. |
d. |
| 1890 |
5 |
2¼ |
1896 |
3 |
4 |
| 1891 |
4 |
11 |
1897 |
2 |
11¾ |
| 1892 |
4 |
4½ |
1898 |
2 |
10⅝ |
| 1893 |
3 |
11¼ |
1899 |
3 |
0⅛ |
| 1894 |
3 |
2⅜ |
1900 |
3 |
1¼ |
| 1895 |
3 |
3¼ |
|
|
|
That is to say, that it has always been superior to the value of 2s. 9d.
used as a basis in the above calculation.
[Page 158]
Taking as a basis the average value of the tael during the years 1896,
1897, and 1898, the data which have been used in the calculations of the
financial committee, and counting it consequently as equal to 3s.
.079d., we obtain the following results: If the annual service of the
debt is calculated at 24,500,000 Haikwan taels, with the tael equal to
2s. 9d., it would only be 21,976,000 Haikwan taels, if the value of the
tael is taken at the above-mentioned figure of 3s. .079d. Adding to this
last figure the yearly salaries of the personnel of the customs,
calculated at 14 per cent of the gross revenue, or according to
information supplied by Sir Robert Hart, 3,000,000 taels, we get the
figure of 24,976,080 Haikwan taels as the sum total of the indispensable
yearly expenditures to be furnished from the revenues of the maritime
customs. These revenues, as well as those from the likin, levied by the
customs administration, amounting, according to the calculations of the
financial committee, to 28,500,000 Haikwan taels, on an average, there
should therefore be a yearly balance from them of 3,519,920 taels;
balance ought to increase yearly as the sum assigned to the service of
the loans constantly decreases.
Among the resources indicated by the financial committee, taking even the
lowest figures calculated, the tax on native junks should furnish
3,000,000 taels: the raising of the customs tariff to an effective 5 per
cent ad valorem, 2,500,000 taels; and their raising to 10 per cent,
according to rough calulation, 10,000,000 taels besides the 2,500,000
above mentioned.
Adding the above-mentioned sources of revenue, which can be concentrated
in hands of the maritime customs administration, we reach a yearly total
of 19,023,920 taels, which a loan made at 4 per cent with the guaranty
of the powers would only require, as has been pointed out previously,
annual interest to the amount of 18.200,000 taels, which would still
leave to China a balance of 823,920 taels.
Should the revenue of the customs not increase quite a much as expected
after the raising of the tariff, this surplus could be used to make up
the difference, and to the same purpose could be assigned the revenues
for the customs taxes which it is proposed to impose on articles
imported until now free of all duty as being destined for the use of
foreigners.
Finally, the authorization of the new loan could, even in case of
necessity, only begin after some years, when the decrease in the sum
applicable to the service of the old loans shall have left to the
customs revenues a larger balance.
Please accept, etc.
[Translation.]
Chang Chih-tung,
Viceroy of the Liang Hu Provinces, to Mr. Wilcox, United States consul, Hankow.
Wu-Chang, April 30,
1901.
Sir: I beg to inform you that in the matter of
the question of indemnity the United States Government has been very
moderate and equitable (in its demands).
I have now received another telegram from Mr. Wu, Chinese minister at
Washington, stating that the honorable Secretary of State had repeatedly
telegraphed his excellency Commissioner Rockhill to get the best results
in all matter (discussed). For this I am exceedingly grateful.
I now learn that the foreign governments demand an indemnity of
450,000,000 taels. China could only place bonds on the market at 70, and
this would require a loan of 600,000,000 taels to meet the above amount.
A ready money payment (issued on bonds to mature) in thirty years,
paying annually—principal and interest—30,000,000 taels, would mean a
total of 900,000,000 taels. On hearing this I was amazed and worried.
The Chinese people are poor, and the debt of China enormous. The United
States Government is fully aware of China’s condition in this
respect.
Sometime ago I heard that the United States Government took the
iniatiative with a view to reducing the amount of indemnity, but,
although the other powers would not assent to the proposition made,
still China is profoundly grateful for the great favors and kindly
intention shown by the United States. The amount of 450,000,000 tales as
indemnity is very excessive, and to negotiate a loan on that basis would
mean that the bank doing the business, as well as the foreign
governments, would receive the same amount, which is certainly not in
accordance with the principle of equity.
By Article VI of the Joint Note “China shall adopt financial measures
acceptable to the powers, for the purpose of guaranteeing, etc.” This
evidently refers to an
[Page 159]
indemnity to be paid during a period of years. But if ready money is
paid, what is the use of guaranteeing payment, and what necessity is
there that China’s financial measures should be acceptable to the
powers?
I would suggest that the United States Government first get the amount of
indemnity reduced to the very lowest limit, and then persuade the powers
to agree to the amount, and payment in full to be made in ten years.
Further, that the payment of a ready-money indemnity be not
demanded.
As to the plan for providing the amount of indemnity, I may say that my
private views are that it will take a long time for China to meet its
liability, if the money is to be obtained in fragmentary amounts, as it
would be impossible by this process to get together a large amount at
any one time; small amounts would not suffice.
The Chinese husbandman is very poor, and it would not do to increase the
land and grain taxes he has to pay. There remains, then, the customs
revenue, the likin revenue, and the salt revenue that could be applied
to the payment of the indemnity. The duties should be increased double,
irrespective of goods, whether foreign or native, opium whether foreign
or native, or whether the duties are collected by the foreign or native
customs. But an increase of duties on foreign goods would exempt them
from the payment of likin. This would be a very simple, short, and
equitable way of dealing with the matter and an easy and clear way of
procedure.
If the amount of indemnity could be reduced to within 400,000,000 taels,
to be paid in ten years, then the amount received from the above three
sources would be ample. This plan is really a guarantee and should be
acceptable to the powers.
I have telegraphed the honorable Secretary of State, the British, German,
and Japanese Governments, asking that this proposition be considered,
and now express the hope that you will telegraph his excellency Mr.
Commissioner Rockhill, asking him to consider the question of a reduced
indemnity, to be paid in a period of years, and not demand a ready-money
payment. For this I shall feel grateful.
The above plan is merely my private views on the subject. I should be
glad to have you ascertain by telegraph without delay Mr. Rockhill’s
views on the subject, in order that I may present the question to my
Government and to the minister superintendent of southern trade for due
consideration.
Card of Chang Chih-tung, with compdments.
[Telegram.]
Rockhill, Peking:
Viceroy begs me to ask you urge all the powers to reduce indemnity and
accept installment plan.
[Telegram.]
Peking,
China, May 7,
1901.
American Consul, Nanking.
Tell viceroy, confidentially, foreign ministers are writing to Chinese
plenipotentiaries saying disbursements of powers calculated to July 1
and all claims amount to 450,000,000 taels. They ask China to state what
financial measure they propose taking to meet demand when made. This
affords China opportunity stating her ability to pay and financial
measure proposed.
Viceroy should urge his views through Chinese plenipotentiaries. United
States will do all it can to prevent lasting financial embarrassment to
China. We prefer administrative reform and increased privileges to
foreign trade to large cash indemnity.
(Same to United States consul at Hankow, May 9, 1901.)
