File No. 493.11/574.
Chargé MacMurray to
the Secretary of State
61
No. 705.]
American Legation,
Peking
,
July 26, 1915
.
Sir: I have the honor to recall that in
despatch No. 93 of January 30, 1914,17 the Legation submitted for the approval of the
Department an exchange of notes between the Dean of the Diplomatic Body
and the Wai Chiao Pu modifying the existing arrangement in regard to the
allocation of customs revenues for the service of loans and the payment
of the Boxer indemnities; and that this arrangement received the
approval of the Department in its instruction No. 51 of March 4,
1914.17 In order to
make clear the manner in which that arrangement was evolved by
modifications of the original arrangement of January 30, 1912, for the
establishment of a Commission of Bankers to receive the Customs revenues
for the service of the foreign debt charged thereon, I enclose herewith
a copy of that original arrangement [Inclosure 3] with notes indicating
the amendments subsequently adopted.
Under date of November 14, 1914, the Wai Chiao Pu, in view of its
apprehensions that the Customs revenues would prove insufficient to meet
the debts charged upon it (as reported in the Legation’s No. 352 of
September 3rd last)62,
addressed to the Dean of the Diplomatic Body a note of which the
translation is as follows:
With reference to the procedure for meeting the service of loan
and indemnity payments from Customs funds, your excellency will
remember that I had the honour on 15th January last to
communicate to you my assent to the alteration made by the
Inspector General of Customs in Clause 2 of the original
arrangement to meet the situation. Subsequently, owing to the
effect of the European War, a shortage arose in the Customs
receipts, and on August 18th I informed your excellency that it
was proposed to follow the procedure laid down in 1911, namely,
to meet payments as far as funds would allow and to temporarily
suspend payment in full.
In order to prove its good faith in the matter and to create
confidence, the Government of the Chinese Republic now proposes
that if at the end of [Page 209]
the year there is any sum either of the loan or of the indemnity
payments still outstanding such shall be paid out of the surplus
salt funds or out of the internal loan of the 3rd Year of the
Republic (1914). In order to avoid confusion and change, the
arrangement as revised on 15th January for meeting both the loan
and indemnity services shall continue in force.
The Shui Wu Ch’u are issuing orders accordingly to the Inspector
General, and I have the honour to inform your excellency of the
above facts and would request you to transmit the information to
the Ministers in Peking of the countries whom it may
concern.
A considerable correspondence ensued between the Diplomatic Body and the
Minister for Foreign Affairs, in consequence of the apprehension that
the Chinese proposal did not sufficiently safeguard the principles that:
(a) the service of loans contracted prior to 1900 has priority over that
of the Boxer indemnities, as a charge upon the Maritime Customs revenue;
and that (b) under the Protocol of 1901 the salt revenue is liable to
make monthly provision for the service of the indemnity.
This correspondence terminated with a note from the Wai Chiao Pu to the
Dean of the Diplomatic Body under date of June 9th, for translation of
which see the enclosed copy of Diplomatic Circular No. 57 of June 14th
[Inclosure 1], and the Dean’s reply under date of July 22nd, 1915, in
the terms of the draft proposed in Diplomatic Circular No. 66 of the 6th
July, of which a copy is enclosed [Inclosure 2]. It will be noted that
the result of this correspondence is to continue in effect the agreement
on this subject as reported to the Department in the despatch cited
above—subject, however, to the reservation that the assent of the
Diplomatic Body is “made subject to the reservation of the right of any
interested Power to insist that, in the event of any doubt arising as to
the sufficiency of the Maritime Customs revenues and the Salt revenues
to defray all charges secured thereon in respect to the Loan and
Indemnity services, the payments of the proceeds of the Maritime
Customs’ revenues to the Indemnity Banks shall be deferred until full
provision has been made for meeting the service of the loans contracted
prior to 1900.”
I have [etc.]
[Inclosure 1.]
Diplomatic Circular No. 57.
loan and indemnity payments.
With reference to Circular No. 37 of April 13th last, on the subject
of the procedure for meeting the service of loan and indemnity
payments from Customs Revenues, the Dean has the honour to circulate
translation of the reply which has been received from the Wai Chiao
Pu to the note addressed to them on the 5th ultimo, and he would be
glad to learn what action his honourable colleagues would wish to
take in the matter.
For his own part Sir John Jordan would be prepared to acquiesce in
the proposal of the Chinese Government, as he understands that
circumstances have now rendered it practical to revert to the
arrangement for concurrent monthly service that was in force during
the first half of the year 1914. It appears to Sir John Jordan that
this arrangement secures the two principles [Page 210] for which the Diplomatic Body have contended
during the present discussion, namely, on the one hand the
recognition of the priority of the service of the loans over that of
the indemnity in regard to the Maritime Customs Revenue, and on the
other hand the recognition of the liability of the Salt Revenue, in
terms of the Protocol of 1901, to make monthly provision for the
service of the indemnity.
comments.
I agree, on condition that the right of any interested Power
should be reserved to insist upon the payment of the indemnity
to be delayed until full provision for the service of the loans
prior to 1900 is made, in case of any doubt arising as to the
sufficiency of Maritime Customs and Salt Revenues to meet all
payments on both liabilities.
B. Kroupensky.
I accord with the note of the Honorable Dean.
[Subinclosure.]
The Wai Chiao Pu
to the Dean of the Diplomatic
Corps.
Sir: This Ministry having made inquiries
now learns from the Inspector General of Customs that the procedure
desired by the Diplomatic Body and laid down in the revised wording
of Article 2 has in fact been followed since January, 1915. The
Inspector General states that all loan and indemnity payments have
been fully paid to the end of April and that on the 30th of April
the balance of foreign revenue in the three custodian banks was
sufficient with estimated May and June revenue to more than cover
the loan payments to the end of June.
The Inspector General states that as exchange is now steady and
reliable estimates of revenue can now be made, it is desirable to
revert to the procedure in force before the war and to arrange with
the Salt Department a concurrent service for loans and
indemnity.
In these circumstances this Ministry considers that it is no longer
necessary to revise the wording of Article II which in its present
form permits a concurrent loan and indemnity service to be
conducted. If this view meets with the assent of the Diplomatic
Body, instructions will be issued to the Inspector General to
prepare a table for a concurrent loan and indemnity service for the
half year July to December showing the amounts required each month
from the Salt Department in aid of the indemnity fund.
I avail [etc.]
Seal of the
Wai Chiao Pu.
[Inclosure 2.]
Diplomatic Circular No. 66.
loan and indemnity payments.
The Dean has the honour to submit, herewith, for the approval of his
honourable colleagues a draft reply which he has prepared to the Wai
Chiao Pu note of the 9th ultimo relative to the procedure for
meeting the service of loan and indemnity payments from Customs
funds.
The draft reply contains the reservation suggested by his excellency
the Russian Minister and endorsed by his excellency the Italian
Minister in the observations they were good enough to offer on the
Décanat Circular No. 57 of June 14th.
[Subinclosure.]
The Dean of the Diplomatic
Corps to the Wai Chiao
Pu.
Sir: I have the honour to inform you that
the Diplomatic Body have had under consideration your excellency’s
note of the 9th of June, relative to the procedure for meeting the
service of loan and indemnity payments from Customs funds, and that
in view of the statements of the Inspector General [Page 211] of Maritime Customs contained therein,
they are prepared to concur in the view of the Chinese Government
that it is no longer necessary for them to press for the revision of
Article II of the revised arrangement for meeting the service of
loan and indemnity payments.
The assent of the Diplomatic Body to the course proposed in your
excellency’s note of the 9th ultimo is, however, made subject to the
reservation of the right of any interested Power to insist that, in
the event of any doubt arising as to the sufficiency of the maritime
customs revenues and the salt revenues to defray all charges secured
thereon in respect to the Loan and Indemnity services, the payments
of the proceeds of the maritime customs’ revenues to the Indemnity
Banks shall be deferred until full provision has been made for
meeting the service of the loans contracted prior to 1900.
[Inclosure 3.]
International arrangement for the establishment of
a Commission of Bankers to receive the Customs revenue for the
service of the Foreign Debt charged thereon.
1
Peking
,
January 30, 1912
.
Clause 1. The International Commission of Bankers shall consist of
the Managers of the Banks interested in the service of all
outstanding loans secured by the customs revenue contracted previous
to 1900 and/or the Indemnity payments. The said commission shall
decide all questions of priority of claim between foreign loan
payments and shall draw up a schedule of the various payments to be
made in this connection for the guidance of the Commissioner of
Customs at Shanghai.
Clause 2. The Banks chiefly interested, viz., the Hongkong &
Shanghai Banking Corporation, the Deutsch-Asiatische Bank, and the
Russo-Asiatic Bank shall be custodians of the customs funds at
Shanghai.2
Clause 3. The Inspector General of Customs shall account to the
commission appointed for the net customs revenue until such time as
the Chinese Government are in a position to resume payments of loans
and indemnity.
Clause 4. The Inspector General of Customs shall arrange for a weekly
remittance of net revenue from all collecting points to
Shanghai.
Clause 5. The Inspector General of Customs shall arrange that the net
revenue accumulated at Shanghai shall be divided weekly in as nearly
as possible equal amounts between the Hongkong & Shanghai
Banking Corporation, the Deutsch-Asiatische Bank, and the
Russo-Asiatic Bank for account of the loans concerned and indemnity
payments, and the Commissioner of Customs shall be authorized to
draw upon these accounts for loan payments as they fall due
according to the priority of such loans as determined by the
Commission of Bankers in terms of Clause No. 1.
Clause 6. If normal conditions are not restored by the end of 1912
then at that time an account shall be taken of the surplus available
for the Indemnity, and such account shall be sent to the Diplomatic
Body for their decision as to its disposal.3
Clause 7. The Commission shall furnish to the Diplomatic Body at
Peking, through the Consuls at Shanghai, a quarterly report showing
the appropriation of the revenue received.
Clause 8. The above arrangement is subject to future revision should
circumstances require it.
Note 1.—The terms of this arrangement were
proposed by the Wai Wu Pu in a note addressed to the Dean of the
Diplomatic Body on January 21, 1912, and were approved by a
communication which the Dean addressed to the Wai Wu Pu in behalf of
the Diplomatic Body on January 30th, 1912. (See Diplomatic Circular
No. 15, January 23, 1912, and No. 15, January 2.)
Note 2.—At the meeting of the Diplomatic
Body on April 7th, 1913. it was decided to amend Clause 2 by adding
the sentence: “But as soon as the service for the current year of
all loans contracted before 1900 is provided for by funds in these
Banks, then the surplus shall be divided pro rata till the end of
1913 amongst the Banks having charge of the Indemnity Service.”
At the meeting of the Diplomatic Body on December 24th, 1913, the
following sentence was substituted for the above: “At the end of
each month, beginning with January, 1914, the surplus, after all
payments due each month on account of loans secured on the Customs
Revenues and contracted previous to 1900 have been fully met, shall
be divided pro rata amongst the Banks having charge of the Indemnity
Service up to the amount of the instalments of the Indemnity
respectively due to them each month.” This arrangement was accepted
by the Wai Chiao Pu in a note to the Dean of the Diplomatic Body
dated January 15th, 1914. (See Diplomatic Circular No. 12, January
16th, 1914.)
Note 3.—At the meeting of the Diplomatic
Body on April 7th, 1913, it was decided to cancel Clause 6.
