The remarks of the Viceroy are sufficient explanation of the proposals
contained in the Chinese note, copy of which I inclosed you in my dispatch
No. 101, of the 30th ultimo.
[Inclosure.—Translation.]
Committee on the payment of indemnities.
His Excellency Li Hung-chang, assisted by Messrs. Hsu Shou-peng and Na
Tung, are present at the meeting.
Mr. von Mumm explained to His Excellency Li Hung-chang that the committee
has consented with pleasure to his desire to give it explanation on the
letter by which the Chinese plenipotentiaries have declared that the
Chinese Government accepted to pay interest at 4 per cent on the capital
of the indemnity. The committee is not acting at the present moment in
virtue of any instructions from the diplomatic corps, but in its
personal capacity. It has as its only object to secure information on
certain passages in the letter referred to, and which seemed to it
obscure. It would particulary like to know how the Chinese
plenipotentiaries understand the system of amortization which they
proposed.
His Excellency Li Hung-chang: We propose to pay in the first place the
capital in twenty years, then the interest in twenty years.
Mr. von Mumm: This system would cause a loss to the powers, since it does
not take into account compound interest; that is to say, interest on the
interests, the payment of which is deferred. For if we accept
provisionally the figure of 450,000,000 taels as the total of the
idemnities, the annual interest at 4 per cent would be 18,000,000. If
China only pays 15,000,000 for the first year, there remains 3,000,000,
the payment of which is deferred, and which consequently would also bear
4 per cent interest from the following year. At the beginning of the
second year China would owe, therefore, 453,000,000 taels as capital,
and so on and so on.
His Excellency Li Hung-chang: Could not a portion of the 15,000,000 be
devoted to the payment of the capital and the other to the payment of
the interests?
Mr. von Mumm: That is not possible, since the sum of 15,000,000 taels is
lower than the amount of the interests, which are 18,000,000 taels.
His Excellency Li Hung-chang: My proposal is therefore impossible to
apply, and some other system must necessarily be adopted to satisfy the
powers.
Mr. von Mumm: The committee, speaking always for itself, and without
instructions from the diplomatic corps, is of opinion that the system
already in force as regards the old loans should be applied to this new
one. In paying a sum slightly in excess of the interest, the
amortization could go on. Nevertheless, China experiencing difficulties
to supply new resources, we have worked out a combination which does not
impose new charges on the budget of the Empire in excess of a
supplementary sum equal in amount to the interests—that is to say,
18,000,000 taels. For the amortization we use the credit balance of the
revenues actually devoted to the old loans, and which will begin from
the year 1906, and will increase after that in 1916 and in 1932. China
supplying annually 18,000,000 taels more than what she is paying at the
present for the interest on her old loans, this sum would be devoted,
until 1905, to the payment of interest exclusively. In 1906 a balance
becomes available every year of the revenues actually controlled by the
customs and terms of the amortization to begin to operate. This balance
increases appreciably from the years 1916 and 1932, and at the same time
the amount of interests decrease through the gradual extinction of the
capital. Consequently the amortization can be carried out more and more
rapidly and be
[Page 188]
determined in
forty-five years. During that period the burdens of China remain
approximately the same, and only exceed by 18,000,000 taels as a maximum
the annuities paid at the present day.
His Excellency Li Hung-chang hands in a table of amortization drawn up
according to the system which he has explained, and observes that the
Government being in a difficult financial situation, proposes that the
powers shall take into account its poverty.
Mr. von Mumm remarks that this plan is different from that which was
adopted for the old loans, and expresses the opinion that it would be
preferable to make no innovations. On the demand of His Excellency Li
Hung-chang he promises to send him a table of amortization drawn up in
accordance with the systems which he has mentioned. He insists on the
fact that this communication has no official character, and is only
given as a simple information. The committee has not the power to
propose or accept anything.
Mr. von Mumm adds that the powers have taken into consideration the
financial embarrassment of the Chinese Government, since they do not
insist on a higher rate of interest than 4 per cent. This is a rate much
inferior to the one which China expected, or which she would have had to
pay to the bankers if she had been obliged to make a loan directly.
His Excellency Li Hung-chang: Mr. Jamieson, in conversations which he has
had with the Viceroys Chang Chih-tung and Liu Kun-yi, had promised them
that this rate would not exceed 3½ per cent. Sir Ernest Satow declared
that this is an invention of the viceroys. Mr. Jamieson promised
nothing. Chang Chih-tung made an inquiry of him.
His Excellency Li Hung-chang declares that the Chinese Government accepts
with pleasure to pay 4 per cent, asking only that the annuities shall be
proportionate to its resources. He has confidence in the representatives
of the powers to help him to get out of his troubles.
Sir Ernest Satow: The losses and expenses demanded by the Governments
have been calculated in gold, according to the currency of each
Government, but for the convenience of the Chinese plenipotentiaries the
sums have been transferred into taels. It is self-evident, nevertheless,
that later on when the Governments will officially present to China the
amount of the claims the latter will be calculated in gold and that the
interests will be in gold and not in taels.
His Excellency Li Hung-chang makes no objections. The present loans are
for the most part calculated in gold. The Maritime Customs will be
intrusted by China with the payment of the annuities to the powers, the
latter dividing them up among themselves.
Mr. von Mumm: The Chinese plenipotentiaries propose to us to organize a
committee of bankers charged with receiving the sums and dividing them
up.
Sir Ernest Satow: The Maritime Customs would pay each month to the
committee of bankers the fixed sum, and this latter would divide it up
among those entitled to it.
His Excellency Li Hung-chang: The Maritime Customs will be intrusted with
demanding the amount of the payments from the ministry of finance.
Sir Ernest Satow: Yes; and it would pay them into the committee of
financial representatives of the powers.
In reply to a question, Where would China take the 20,000,000 taels that
she proposes to pay annually, according to the plan of amortization
submitted by the Chinese plenipotentiaries, His Excellency declares that
besides the 15,000,000 taels which China has already offered she could
well dispose of 4,000,000 taels, the product of economies to be realized
on the tribute rice, in substituting the payment of an allowance in
money for a distribution of rice, and of 3,000,000 taels more on the
receipts of the chief likins; in all, 22,000,000 taels.
Mr. Komura having asked if in the case where the powers would accept an
increase of the import duties to 10 per cent China would agree to
abolish likin taxes on importations, His Excellency Li Hung-chang
replied that his Government could do away with a part of the likins.
The meeting came to an end at half past 11.
