893.51/4419: Telegram
The Minister in China (Schurman) to the Secretary of State
[Received 6 p.m.]
321. Republic of China, Generalissimo’s Headquarters, Department of Foreign Affairs, Canton, C. C. Wu, Secretary, presents to diplomatic body through note dated September 5, Jamieson,68 senior consul, “the claim of the Southwestern provinces for their share of the customs surplus.” Note continues:
“There is no doubt that there is an ample surplus remaining after the foreign obligations charged on the customs revenues are paid and that at present it goes to pay past debts contracted by Peking. It thus sets free other revenues which are employed by the Northern militarists to make war against the Southwest. These Provinces are then forced to raise funds to meet attacks funded by what rightly are their own moneys. They therefore suffer a double loss: loss of funds which should be used for constructive purposes and which turned over to Northern militarists are actually used to institute war against them and loss in that for every one of these dollars employed against them they have to raise one or more dollars in self-defense. Such a situation is not only impossible but also insufferable. It has been tolerated so long already it obviously cannot be endured any longer.”
In memorandum Wu shows this claim has already been recognized and six installments paid up to March 1920, and even when the Canton Government resumed its functions after the disruption in 1920 not only the inspector general of customs but all the members of the diplomatic body were ready to renew recognition of the claim when “at the last moment a despatch was received by the American Minister from the State Department which caused the funds to be paid over to the Peking Government.”69
The American position, memorandum continues, was in the interest of “the recognized Government of China” but there does not exist today and has not existed for years in Peking a Government of China. Lincheng proves that.70 So does the language of the arms embargo of 1919.71 The so-called government at Peking “has been and is at best one of the political factions of the country which by its accidental possession of the offices and archives of the former seat of the Central Government has been able to receive the diplomatic fiction of recognition. This faction has been and is making war upon the Government at Canton and the people of the Southwestern Provinces as witness the fighting and bloodshed still going on in the Provinces of Kwangtung and Szechuan. To have the customs revenues which have been collected in these Provinces and which can be used for constructive purposes locally turned over through a diplomatic fiction and technicality to their enemies to be used in killing their own sons and causing suffering and hardship on their people is nothing short of the intolerable.”
If it is objected that at present there is no surplus from the customs revenue, memorandum points out this is due to Peking administration having pledged it in March 1921, for the service of certain internal loans, which pledge, however, cannot be recognized as valid. If the Peking militarists “choose to use their portion of the surplus to meet their obligations contracted in the past that is their affair. But they cannot use Southwestern portion of the surplus for their purposes. The Southwest cannot be expected to bear a share of these Peking debts particularly as it is notorious that some of them represent loans proceeds of which at various times were used for political and warlike purposes against the Southwest. Moreover it is notorious that the bonds of some of these loans are held not by the people generally but by a few banks and individuals who by heavy discounts obtained them as speculative and profiteering transactions.”
[Page 554]However even after the deduction of the Southwestern portion of customs surplus ample funds remain for the aforesaid objections [obligations] if the original terms of Peking’s own order are observed, for the order of March 1921 assigned “in case customs surplus was insufficient two other sources of revenue, one, the surplus of salt revenue to the amount of 14 millions per annum and, two, wine and tobacco revenues to the amount of 10 millions per annum”. But these two quotas have been paid only 7 or 8 times and the entire burden otherwise thrown upon customs surplus.
Southwestern Provinces would use their share of these funds for constructive purposes to wit: municipal improvements, Canton, $2,000,000; provincial roads, $2,000,000; currency reform, $4,000,000; river conservancy, $1,000,000; sericulture and agriculture, [$]800,000; education, [$]2,100,000; suppression of piracy including purchase of armored motor launches $1,000,000; total [$]12,900,000.
Jamieson declares Generalissimo’s administration can speak only with authority for a section of Kwangtung albeit a very large section. Nor would contemplated appropriation of revenue be acceptable to Kwangsi, Yunnan, etc. If therefore the claim were favorably considered by diplomatic body Canton could only “receive a pro rata share of customs surplus receipts” based on contributions made to general revenue by the customhouses in territory, admittedly under control of the Generalissimo’s Headquarters.
Jamieson concludes as follows:
“In ordinary circumstances the question might well be discussed solely from the point of view of equity and political expediency but other considerations have been introduced which in the present temper of certain hot heads connected with Sun’s Government may have very far-reaching consequences. These individuals are determined that if they are not to receive the share of the surplus to which they say they are entitled Peking shall receive no cash of customs revenues of any kind from Canton or other ports within their sphere of operations. It is not, as it was at one time, intended to seize the customhouses and administer them by force. It is however proposed to declare these ports free ports i. e. to collect no dues or duty on goods entering the port but thereafter to levy on all merchandise in Chinese hands such taxes or exactions as they may see fit to impose up to any amount. That is simply carrying out to a logical conclusion the theory at present partially in practice that once foreign goods after payment of import duty are in the hands of Chinese they can be taxed ad libitum.
Due warning has of course been conveyed against the folly of thus antagonizing the powers but is being disregarded.
It will be remembered that it was the Military Government of the South which in spite of solemn diplomatic protests first laid hands on the entire revenue of the gabelle and then instituted the 20 percent wine and tobacco tax thus giving a [lead] which other provinces [Page 555] were only too ready to follow. Were they therefore to carry this threat of making Canton a free port into execution it is not unreasonable to assume that the example would be followed elsewhere with results to the customs administration which would lead to complete disintegration.”
On dean’s circular now circulating I have like my British colleague made the observation that I must refer this matter to my Government to reserve my comments for the proposed meeting of the diplomatic body.
This morning I have had conversation with Major Olivecrona, engineer in chief Kwangtung conservancy works and acting Swedish consul in Canton, who talked with C. C. Wu September 5th on this subject. He believes Canton Government, if their application is denied, will issue their threat of making Canton a free port and that even if Chinese customs service were backed by foreign gunboats it would not be possible to collect customs duties in the face of passive resistance, smuggling, etc. The issue involved seems to be the disintegration of the customs service which would appeal strongly to the cupidity of all provincial tuchuns.
Both the Peking and Canton Governments are weaker and less substantial and authoritative than in 1920 and the latter at least has a much more restricted jurisdiction.
[Paraphrase.] The best course perhaps would be for the diplomatic corps not to take any action at present on the application but to use it as the basis for making a solemn appeal to the Chinese people urging them to take steps to unite their distracted country, to put down militarism and banditry, and to set up national and provincial governments which will protect the life and property of both Chinese and foreigners. In a conversation which I had recently with Chang Tso-lin at Mukden, he volunteered the advice that the diplomatic corps should state to the Chinese people, forcibly but without threatening intervention, that the present chaotic conditions must cease as they are a menace to peace and to foreigners.
The possibility of using the Canton application to influence the Government at Peking in connection with the demands regarding the Lincheng affair would be another reason for delay. [End paraphrase.]
On the Canton side there is undoubtedly some risk in postponing a decision. But there is a possibility Chen Chiung-ming coming back to power as Sun has alienated the Cantonese by his arbitrary conduct, heavy and vexatious taxes and the use of Yunnan troops against them.
I have the honor to ask for instructions.
- James W. Jamieson, British consul general at Canton.↩
- Documents relating to the refusal by the diplomatic corps to recognize the claims of the Canton Government upon the accumulated customs surplus are printed in Foreign Relations, 1921, vol. i, pp. 491 ff.↩
- See pp. 631 ff.↩
- See note from the dean of the diplomatic corps to the Chinese Acting Minister of Foreign Affairs, May 5, 1919, Foreign Relations, 1919, vol. i, p. 670.↩