Mr. Conger to Mr.
Hay.
American Legation,
Peking, October 26,
1904.
No 1733.]
Sir: I have the honor to confirm my telegram of
the 23d instant and your reply of the 24th, concerning the payment by
the Chinese Government of the indemnity provided for in the protocol of
September 7, 1901.
The Chinese Government has sent a draft of a reply, translation herewith
inclosed, which it proposes to formally transmit to the ministers
signatory of the joint note of which I inclosed a copy in my dispatch No
1669, of July 26 last, if they will signify beforehand that its terms
will be accepted. As you will observe, the Chinese Government proposes
to pay the indemnity at gold rates, and promptly sign and deliver the
fractional bonds if the foreign powers will concede three things:
- First. That the rate of exchange at which payments are made
shall be determined by the average daily rate for the whole
month, and not the rate of the last day thereof, the date on
which payment is made.
- Second. That the interest on the arrearages which have
resulted from payments heretofore having been made at silver
instead of gold rates shall be written off or canceled.
- Third. Since interest is due semiannually and principal
annually, but is in fact paid over to the banks monthly,
interest at 4 per cent per annum shall be allowed the Chinese
Government on all sums thus paid before they are actually
due.
The Chinese Government prefer this arrangement to the Belgian proposal
because they dread the uncertainty of the latter. It appears to me to be
a very happy solution of a difficult and long-discussed question. The
representatives here are all pleased with it and believe their
Governments will instruct them to accept it.
As we have already agreed to accept payment in silver it can not affect
us much, unless there should be an unexpected and phenomenal rise in
silver. But the allowance of the interest on the advance payments is of
quite as much interest to us as to other powers. However when I accept,
I shall have it understood that in all payments we shall expect as
advantageous treatment as the other powers, which will of course mean
that if other governments are paid at gold rates, we must be, and that
the arrearages mentioned in proposition 2 shall be paid to us as well as
to others.
I have, etc.,
[Inclosure.—Translation.]
Memorandum.
A dispatch has been received from your excellencies saying that since
China pays the indemnity by monthly installments, orders should be
given to the bank to reckon according to the rate of gold exchange
fixed monthly instead of half yearly. This just proposal of your
excellencies is gratefully appreciated and may of course be
followed. But it is necessary to state clearly that in reckoning the
rate of gold exchange for any month it is not to be taken as that of
the day on which the installment is paid, but must be the average
rate of gold exchange for the whole month. For instance, the
installment to be paid on the 1st of January should be reckoned by
taking the rate of gold exchange for [Page 183] each of the thirty-one days of December and
calculating an average rate for the month.
- 2.
- From the commencement of the payment of the indemnity, owing
to a difference in the interpretation of the text of the
protocol, as made by yourselves on the one hand and us on the
other, there has been a discussion as to whether the indemnity
is payable in gold or silver, and no decision has been reached.
On this account China has simply made her monthly payments
according to the amounts in silver mentioned in the table of
amortization. Now, if the payment is to be reckoned in gold, the
installments already paid over will show a shortage when
compared with the amounts which ought to have been paid, but the
deficit is due to the fact that the point was under discussion
and undecided and not to any inexcusable delay, so that the
shortages in the payments heretofore made ought to be relieved
of interest charges to enable China the more easily to pay them
in full.
- 3.
- According to the protocol the interest on the indemnity is to
be paid every six months and the payments on the principal once
a year. Now China is taking the whole amount of the principal
and interest due for each year and dividing it into twelve
portions, one portion being handed over each month to the bank
for receipt and deposit. Thus it would be but just that the sums
paid in advance of due date upon principal and interest should
be reduced severally month by month by the amount of the
interest which would accrue upon them at 4 per cent per annum,
i. e., during the time for which each is paid in advance. For
instance, the, payment on the indemnity made on the 1st of
February is one-twelfth of the principal and interest due for
that year, but the portion reckoned as interest is not due until
the 1st of July, and as it is now paid in advance should
therefore be reduced by the amount of five months’ interest. The
portion reckoned as principal is not due until the 1st of
January of the following year and, being now paid in advance,
should be reduced by the amount of eleven months’ interest
thereon, and so on for each of the monthly payments.
- 4.
- If all the powers agree to the procedure set forth in the
three items given above, China will agree to pay up in full at
the end of the year 1904 whatever deficits may appear in the
payments made during the three years beginning with 1902,
reckoning them at the average monthly rate of gold exchange. And
she will further agree, beginning with the year 1905, to clear
off in full at the end of each year the amount of the indemnity
due for that year, paying in monthly installments at the average
monthly rate of gold exchange. Furthermore, after these items
have been agreed upon, the separate bonds for the indemnity may
be given and signed.
