Citation
China : Report on the state of trade at the treaty ports of China

Material Information

Title:
China : Report on the state of trade at the treaty ports of China
Series Title:
Diplomatic and consular reports
Creator:
Great Britain. Foreign Office.
Place of Publication:
London
Publisher:
Harrison & Sons
Publication Date:
Language:
English

Subjects

Subjects / Keywords:
亚洲 -- 中国
亞洲 -- 中國
Free ports and zones ( lcsh )
自由经济区
自由經濟區
Genre:
serial ( sobekcm )
Government Document
Spatial Coverage:
Asia -- China
Coordinates:
35 x 103

Notes

General Note:
"Presented to both Houses of Parliament by Command of His Majesty, May, 1897"
General Note:
Publisher's catalogue number: Cd. 8277-127

Record Information

Source Institution:
SOAS, University of London
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
291455 ( aleph )
CF 327.42 /23894 ( SOAS classmark )

Downloads

This item has the following downloads:


Full Text
FOREIGN OFFICE.

1897.

ANNUAL SERIES

Na 1909.

DIPLOMATIC AND CONSULAR REPORTS ON TRADE

AND FINANCE.

STATE OF TRADE AT THE TREATY PORTS

OP CHINA.

Presented to both Houses of Parliament by Command of Her Majesty,

LONDON:

PB7XTKD FOR ITER MAJESTY'S SIWTIOXKRY OFFICE,
BY HARBISON AND SONS, ST. MARTIN'S LANE,

And to bo purchased, either directly or through any Bookseller, from
EYRE &, SP0TT1SW00DE, East Harding Street, I't.eet Street, B.C., and
â– 32, Abingdon Street, Westminster, S.W.; or
J01IN MENZJES 90, West Nile Street, Glasgow;.or
llODGES, FIGGIS, & Co., Limited, 104, Grafton Street, Ddbl"~

REPORT ON THE

MAY, 1897

FillNTF.RS IN ORDINARY TO IIKit -MAJESTY.

[0. 8277—127.]

1897.

Price Fiiepence,


New Series of Reports.

Repouts of the Annual Series bave been issued from lier Majesty's
Diplomatic and Consular OTiccm at the following places, and may be
obtaiiiei fro i> the source* in lioated on the title-page: —

No. Pricc. 1 â– No. Price.
1787. Bangkok .. Id. | 1848. Copenhagen .. 2d.
1788. Odessa .. 2d. 1849. Havre.. .. 2-1.
1789. Naples . . 2d. i 1850. Id.
1790. Beyrout .. Id. j 1851. .Madrid .. 2d.
1791. Tunis.. .. 1J d. [ 1852. .. lid.
1792. lCiukiang .. 3d. 1853. Chicago .. 4,1.
1793. Bangkok .. Id. 1851.. .. Id.
1794. liio Grande do Sul .. .. M. 1855. Cherbourg 2 id.
1795. Valparaiso .. .. 4d. ; 1856. Beira .. Id.
1796. Biindisi .. 2.V-1. ! 1857. Charleston .. 2id.
179". Bushire '.. 2d! 1858. Saigon .. id.
1793. Cliristiania .. .. old. j 1859. Suakin - .. .. Id.
1799. Cadiz...... .. 2d. ! 1860. Rouen 2d.
1800. Meshed .. 2 id. i 1861. Patras .r lid.
1801. St. Petersburg .. 4 id. j 1S62. Barcelona .. 2d.
1802. Balonm .. 11. 1863. Amoy.. Trebizond .. 2 Vd.
1803. Peking .. 3d. 1864. .. Id.
1804. Samos .. id. 1865. Lisbon .. 24(1.
1805. Dantzig , 2d. 186S. Callao .. 2(1.
1806. Antwerp .. Hd. 1867. I'ernambuco .. 5d.
1807. -Ajaecio .. lid. 1863. .. lid.
1808. Stettin .. 3d. 1869. New Orleans.. .. 2id.
1809. Aleppo .. Id. 1870. Vera Cruz .. 2.1(1.
1810. Tangier .. 2 Jd. 1871. Madeira .. Id.
1811. Tokio...... .. 3 id. 1872. Jerusalem .. .. Id.
1812. Madeira .. id. 1873. Ning-po .. Id.
1813. "Vera Cruz ... .. Id. 1874. llio do Janeiro .. 2id.
1814. Oporto .. Id. 1875. Trieste ., Id.
1815. Hamburg .. 1 id. 1876. Cura$oa .. Id.
1816. New Orleans .. l.Vd. 1877. Goa .. .. Id.
1817. Bengazi .. Jd. 1S78. Cagliari â– . ... . . Id.
1818. Marmagao .. id. 1879. Guayaquil .. Id.
1819. Gothenburg . .. 2d. 1880. Havana ..lid.
1820. Dar-al-Baida .. .. 3(1. 1881. Reykjavik (Iceland) .. Id.
1821. Erzeroum ... id. 1SS2. Milan.. .. lid.
1822. Munich .. 2.1 d. 1S83. Baltimore .. Id.
1823. Samoa .. id. 1884. Cettinje .. a.
1824. Chinkiang .. .. Id. 1885. Bilbao .. 2jd.
1825. Jeddah .. Id. 1886, Florence .. lid.
1826. Sofia...... 1887. .. lid.
1827. Mexico .. 2d. 1S88. Marseilles .. lid.
1828. Teneriffe .. 3id 1889. Wuhu..... .. Id.
1829. Batoum 1890. Chinkiang .. 1(1.
1830. Cadiz...... .. Id. 1891. Malaga ... Id.
1831. Martinique .. .. Id. 1892. Antwerp .. id.
1832. Odessa .. Id. 1S93.
1833. Ghilan .. Id. 1894. Galveston ... 2(1.
1834. Old Calabar .. .. 6id. 1895. Piraeus .. 2Id.
1835. Tamsui 1896. Stettin
1836. Copenhagen .. .. id. 1897. Martinique .. lid.
1837. Salonica .. lid. 1898. Corunna .. 2(d.
1838. Honolulu .. id. 1899. Calais.. .. Id.
1839. Buenos Ayres .. 2d. 1900. Honolulu .. Id.
1840. Para .. .. Id. 1901. Riga .. 2d.
1841. Bolivia .. 2d. 1902. Tripoli .. Id.
1842. Washington .. ,, 3d. 1903. .. 2d.
1843. Berlin .. 2d. 1904. Lorenzo Marques .. 2d.
1844. Uganda .. Id. 1905. Batavia .. 2id.
1845. Belgrade .. Hd. 1906. .. lid.
1846. Dakar...... .. id. 1907. lid.
1847. Florence .. lid. | 1908. Montevideo .. .. 5Jd.


No. 1909.

Having now completed my enquiry into the state of Trade
at the Treaty Ports of China, I have the honour to enclose a
Report embodying the results of my investigations.

A copy of this Report has been sent to Her Majesty's
Minister at Peking.

I have &c.
(Signed) 'BYRON BRENAN.

CHINA.

Consul Brenan to the Marquess of Salisbury.

Report embodying the results of my investigations.

A copy of this Report has been sent to I
Minister at Peking.

I have, &c.

Report on the State of T-racle at the Treaty Ports of China.
Table of Contents.

Facie

Part I.—The Present Position.

Infractions of the treaty may lie committed without causing direct loss to

local British merchants .. .. .. .. .. • ■ .. G

Treaty privileges benefit Chinese as much as foreigners .. .. .. G

Foreign treaties indirectly protcct Chinese from extortion .. .. .. C

Foreign trade as at present conducted.. .. .. .. .. .. 0

Direct interest of British merchants in China trade decreasing .. ., 7

Our manufacturers more directly concerned .. .. .. ■. • • 7

Eighteen ports open to foreign trade .. .. .. .. .. • • 7

Distinction between treaty port and non-treaty port .. .. .. 7

Foreign customs establishment .. .. .. •. .. •• 7

Chinese and foreigners on an equal footing at treaty ports.. .. .. 8

Import duty does not free goods even within limits of treaty porta .. 8

Likin tax imposed at the port .. .. .. .. .. • • • • 8

Likin tax at Canton .. .. .. .. .. .. . • ■ • 8

Chinese traders afraid to dispute legality of taxes .. .. .. •• 8

Foreign firms excluded from Canton city..........9

Direct importation from foreign countries limited to Hong-Kong and

Shanghai .. .. .. .. .. .. • • • • • • 9

Southern ports obtain stocks from IIong-Kong ,. .. .. • ■ 9

jNioi'the™ ports obtain stocks from Shanghai.. .. .. .. ■• 9

.Few British merchnnts at the outports .. .. .. •• ,9

(2297) a 2


4 china.

Table of Contents—continued.

PAGfi

Import business at outportu done entirely by Chinese .. .. .. 0

Advantages possessed by Chinese dealers .. .. .. . .. 9

Britisli import merchants only found at Hong-Kong and Shanghai .. 10

British merchants are not distributors .. .. .. .. .. 10

Import business at Shanghai .. .. .. .. .. .. .. 10

Chinese beginning to import on their own account .. .. .. -. 10

Indent business increasing .. .. .. .. .. .. 10

One half of cotton goods arrive on Chinese account.. .. .. 10

Three-fourths of miscellaneous merchandise arrive on Chinese account .. 11

Chinese dealers are the first to feel infractions of treaty .. .. .. 11

Injurious results of trade parsing into Chinese hands .. .. .. 11
At first sight the foreign merchant appears to have advantages over the

native in distributing goods .. .. .. .. .. ..12

Reasons why this is not so .. .. .. .. .. ..13

Question of official support to British merchants ., ,. .. ..13

Discouragement causes him to withdraw .. ,. .. .. ..13

Small number of British firms at out-ports .. .. .. .. 13

Imports cannot increase unless exports increase .. .. .. 11

Cheap silver has developed export trade .. .. .. .. 14

Export trade remains in foreign hands .. .. .. .. 14

Export trade now largely a commission business .. .. .. .. 14

A commission agent less impatient of treaty infractions than a merchant.. 14

Part II.—Inland Transit Trade.

Hostility of native officials to transit pass system .. .. .. .. 15
Opposite views regarding commercial clauses of treaty .. .. .. 15
The Chinese view—the profit of the individual .. .. .. .. 15
The British view—expansion of trade.. .. .. .. .. ..15
In Chinese opinion British goods once sold to Chinese are without pro-
tection .. .. >. .. .. .. .. .. .. 15
How to nullify the commercial clauses of 1 lie treaty.. .. .. .. 16
Chinese officials inclined to get round the treaty .. .. .. .. 16
Conflict between provincial and Imperial interests .. .. .. .. 16
Provincial dislike of treaty commercial clauses .. .. .. .. 16
Early failure of transit pass system ., .. .. .. .. 16
Success of forcible measures .. .. '.. ,. .. .. 16
Improvement in transit trade .. .. .. .. .. .. 17
Urgent need of funds during Taiping rebellion caused transit passes to be

ignored .. .. .. .. .. .. .. .. 17

Chinese dealers unable to fight transit pass questions .. .. .. 17

Transit pass system disturbs provincial finances .. .. .. .. 17

Central Government generous at provinces expense.. .. .. .. 17

Provinces reduce their tariffs in order to compelc with Central Government 17

Transit pass goods have certain disadvantages .. .. ., 17

Necessity of declaring destination of goods is a drawback .. .. .. 18

Chinese guilds make their own bargain with, provincial governments . . IS

Guilds farm the taxes .. .. .. ,. .. .. .. 18

And obtain a monopoly of trade .. .. .. .. .. ..18

A nemesis overtakes transit pass goods .. .. .. .. .. 18

Destination or terminal tax .. .. .. .. ,. .. ..18

Transit pass should protect from I erminal tax .. .. .. ..10

How the transit pass system works at the different port= ,. ., .. 19

Not necessary at Newchwang and Chefoo .. .. .. .. .. 19

Works well at Tientsin .. .. .. .. .. .. .. ..19

They are a failure at Chungking .. ., .. .. .. .. 19

Far reaching effects of this failure .. .. .. .. .. .. 19

Not much used at Ichang .. .. .. .. .. .. 20

Works well at Hankow, Kiukiang, Wuliu and Chinkiang .. .. .. 20

Part of Kwangtung province supplied wilh goods under passes from

Kiukiang ..................20

Obstructions at Shanghai .. .. .. .. .. .. 21


china. 3

Table of Contents—continued.

Page

Nob much used at Ningpo, Wenckow, Foocliow, an:l Amoy .. .. 21

Not used at Sw.itow .. .. .. .. ,, .. ..21

A dead letter at Canton.. .. .. ., ., .. .,21

Temporary success at Canton ill 1891.. .. .. .. ., .. 21

Renewed opposition at Canton .. .. .. .. .. .. .. 22

So-called collusion between Chinese and foreign merchants at Canton .. 22

Yarn trade at Canton in hands of a privileged association .. .. ,. 23

Intimidation of traders .. ,, .. .. ,, ., ,, .. 23

Success of the intimidation .. .. ., ,. .. ..23

Rival transit pass system .. .. .. .. ,. .. ,. 23

Heavy taxes on way to Ivueiehow and Yunnan provinces .. .. .. 24

Tlie best part of likin revenue is misappropriated .. .. .. ..24

Likin officials pay for their appointment .. .. .. .. 24

Mode of robbing the revenue .. .. .. .. .. ,. ..24

How the Canton Government defeat the transit pass system .. .. 24

A test case ; transit pass goods penalised at end of journey .. .. 25

Organised opposition against a British merchant using transit passes .. 25

Transit passes for goods outwards .. .. .. .. .. 26

Illegal fees at Chinkiang .. .. .. .. .. .. â– . 26

Tea and silk taxed before foreigners can purchase tliem .. .. .. 26

Grower's tax on cocoons .. .. .. .. .. .. 26

„ tea................27

Canton outward passes rendered useless .. .. .. .. 27

Likiu collected from Chinese seller after goods have boon exported .. 27

Transit passes only lead to tax being put on earlier .. .. .. 27

Want of uniformity in mode of issuing passes .. .. ., ,. 28

I'art III.—The Suggestions and Complaints of Merchants.

Few complaints or suggestions on parL of British merchants
Hong-Kong Chamber of Commerce's suggestions
Inland transit trade in Canton province

Preferential tariff enjoyed by junks........

Opening of West river

Navigation of West river .. .. • • • •
West river trado diverted to Tongking by excessive taxation
Amoy suggestions ; tea trade .. .. .. ••
Foocho w suggestions ; tea trade and likin on imports
Shanghai suggestions .. :. • • • • • • • •
Appointment of a superintendent of British trade
Separation of office of Consul-General and Chief Judge ..
Residence in the interior

Native agencies in the interior

Freedom of steam navigation on inland waters

National currency

Canton and Wuchang mints ..

Reform in the system of inland taxation

How native tax stations fleece the trader

Reform of judicial system .. .. • • • ■ •

Free exportation of grain .. .. • • • • • •

Importation of salt .. .. ■• •• ••

Registration of trade marks .. ' .. •.

Liability of Chinese. shareholders for unpaid capital

Delay, in issue of drawbacks and re-export certificates

Woosung Bar and extension of foreign settlement

Chungking suggestions; transit trade..

Chinkiang suggestions ..

Revision of Yangtze trade regulations

Detention of steamers at Chinkiang

Prepayment, at Shanghai of duties on Yangtze valley imports

(2297)

28
28
28

29

30
30
30
30

30

31

32
37
39
39
39

39

40
40

40

41

42
44
44

44

45

45
4G

46
46
46
46


4

china.

Table of Contents—continued.

Tace

Part IV.—Consequence of the War with Japan.

Effect of war on trade .. .. .. .. .. .. • • . ■. 4-7

How far British interests are affected by Sliimonoseki Treaty .. .. 47

Cession of Formosa .. .. .. .. • • ■ • • • .. 47

Formosa tea trade .. .. .. •. .. .. • • 47

War indemnity .. .. ■. .. .. • • • • • • .. 48

Trade will have to pay tlie indemnity.. .. .. .. .. ..48

Other forms of taxation not capable of expansion .. .. .. 43

Wasteful system of likin taxation .. .. .. .. .. 48

Commercial convention makes no important changes .. .. .. 49

Opening of four new ports - .. .. .. .. .. •• 49

Port of Chungking ................49

Steamers may now proceed to Chungking .. .. .. .. ..49

Chungking so far disappointing .. .. .. .. .. ..49

Export trade of Ssuehuan must be developed by foreigners .. .. 50

System of chartered junks between Ichang and Chungking.. .. .. 50
Native customs at ICuci-Fu competc with foreign customs-house for cargoes 50

An opening for steam launches at Chungking .. .. .. .. 51

Port of Shnshih..................51

An important place for transhipment.. .. .. .. â– â–  ..51

Sliashih not a large market for foreign goods .. .. .. ..52

Native goods using steamers pay extra duties .. .. .. .. 52

City of Soochow.. .. ,. .. .. .. .. .. 52

City of Hangehow .. .. .. .. .. .. .. ..52

Opening of these will make little difference to import trade .. .. 53

Shanghai as good a distributing centre as Soochow .. .. .. 53

Hangchow may become a distributing centre .. .. .. .. 53

Hangchow not a seaport .. .. .. .. .. .. 53

Hangchow and (he tea trade .. .. .. .. .. .. ..53

Soochow and the silk trade .. .. .. .. .. .. 54

Silk filatures..................54

Chinese benefit more than foreigners by the opening of new ports.. 54

Opening of new ports are an advantage to domestic trade .. .. .. 54

Permission to foreigners to hire warehouses in the interior.. .. 55

A greater boon to Japanese than to foreigners .. .. .. .. 55

Importation of machinery and erection of factories..' .. .. .. 55

Former prohibition intended to further private ends .. .. .. 55

Erection of foreign owned cotton mills .. .. .. .. .. 55
"Everything in their favour, but interested parties may prevent success .. 55

Question of excise on output of factories not settled.. .. .. .. 56

Japanese mills may undersell Chinese mills... .. .. .. 56

Number of mills and spindles in China .. .. .. .. 56
No trustworthy information regarding the working of Chinese factories .. 56

Proportion of hands and wages .. .. .. .. .. 57

Mill hand's efficiency .. .. .. .. .. .. .. 57

Effectof low-priced silver on Chinese manufactures .. >. .. 57

Silver not the only money of the Chinese .. .. .. .. ..57

The price of copper an important factor .. .. .. .. 57

Part V.— What may be done to Promote Trade.

China's own resources must be developed ., .. .. .. ., 57

China at present a very poor country.. .. .. .. .. 58

Official class opposes all development.. .. ,. .. .. 58

Peking connives at provincial shortcomings .. .. ,. .. 58

Futility of sending complaints to Peking .. .. .. .. ..58

One instance of provincial contumacy.. .. .. .. .. ..59

Chinese Foreign Office has no authority over provinces .. .. .. 59

Hopes based on China's financial straits .. .. .. .. .. 59

New drain on China's revenue .. .. .. .. .. ... ... 59

The foreign customs offer simplest way of increasing revenue .. .. 59

Use China's necessity as a lever for exacting reform .. .. .. 60


china.

5

Table of Contents—continued.

Page

How much an increase of tariff would produce .. .. .. ,.60

Foreign and Chinese interests identical .. .. .. .. .. 00
How domestic trade is strangled .. .. .. .. .. 60

Pscudo transit passes at Chinkiang .. .. .. ., ., ..61
Native merchandise pays 15 per cent, inland dues .. .. ,, 61
Inter-provincial exchange of commodities restricted by excessive taxation 61

â–  A plan to regulate inland taxation .. .. .. .. ..61
No plan to reorganise inland taxation will succeed if left to nativo

executive .. .. ,. .. .. ,. .. 62

Consuls too much occupied to devote attention to commercial matters â– . 62

Suggested appointment of commercial secretary .. .... â– . 63

The scope of his duties .. .. .. .. ,. .. .. ..63

AY hat merchants and manufacturers can do to help themselves .. 65

Further development of trade depends on foreign enterprise .. .. 65

No inducement for foreign merchants in China to exploit new ground .. 66

Homo manufacturers must initiate research into China's needs and re-
sources .. .. .. .. .. .. .. .. 6S
Little is known of inland markets .. .. .. ,. .. 66

Nothing to hope from enterprise of Chinese merchants .. .. .. 66

Show-rooms at Shanghai .. .. .. .. .. .. ,.67

Pushing the sale of sewing cotton .. .. â– .. .. .. ..67

European imitations of Chinese articles .. .. .. .. .. 67

Required, a co-operative association of manufacturers .. .. .. 67
China should be systematically exploited ., .. .. .. 68

Enlist the assistance of inland missionaries .. .. .. .. ,. 68

Continental manufacturers more accommodating than British .. .. 68

A knowledge of Chinese language necessary .. .. .. .. ,. 6S
Some suggestions by a practical merchant .. .. .. .. 69

Sketch map of China showing the position of places mentioned in this
report.

Glossary.

Foreigners.— The subjects and citizens of Powers having treaties with China.

Foreign Custom-house—Foreign Customs— The establishment that controls
foreign shipping at l-lie treaty ports, and collects duties on the merchandise carried
in foreign ships, or in Chinese-owned ships of foreign typo. It is composed
entirely of foreigners.

Native Customs.—These collect duties on merchandise carried by junks.

Likin.—A tax imposed by the provincial governments on goods moving from one
part of the country to another, or on goods arriving at their destination.

Treaty ports or open ports.—The ports open to foreign Lrade, which foreign
vessels may frequent, and where foreign merchants may settle.

Outports.—The less important ports, practically all the treaty ports, except
Shanghai.

Ficul.—A Chinese weight = 133J lbs. avoirdupois.

A tael of silver— a weight of silver; it varies in different trades and localities.
It is about 580 grains troy. The equivalent in English money depends on the
price of silver. For a rough calculation the tael may be taken at from
3.?. to 3.9. 4d.


6

china.

Part I.—The Present Position.

Infractions of
the treaty
may be
committed
without
causing
direct loss to
local British
merchants.

Treaty
privileges
benefit
Chinese us
well as
foreigners.

Foreign

treaties

indirectly

protect

Chinese from

extortion.

foreign trade
as at present
conducted.

If the complaints which our merchants in China have reason
to make in respect of their own operations, either in their gravity
or their frequency, are to be taken as a measure by which the
present position of British trade may be judged, then we must
come to the conclusion that matters are not in an unsatis-
factory state, for, as I shall show later on when I do them
the justice of recapitulating their views, the mercantile communi-
ties at the ports cannot as a rule point to any difficulties or
obstructions which hamper them in the pursuit of their lawful
avocations. A closer inquiry into the subject, however, reveals
the fact that complaints are few because our merchants are but
little engaged in pursuits out of which complaints may arise; and
that, being denied the opportunity of doiug what they fain would,
in creating the conditions out of which a prosperous international
trade springs, the scope of their operations is so limited that there
is now scarce room for the appearance of any question that has
not already been fully debated and finally settled.

The impression which a visit to nearly all the treaty ports of
China leaves upon the mind is that the Chinese people are mono-
polising in an increasing degree the commercial advantages
obtained under the several treaties which foreign Governments
have concluded with China. Foreign Powers having prepared the
ground for their nationals, the Chinaman is gradually elbowing
them out and occupying the position for himself.

This of itself need not be deemed an unsatisfactory result of
our wars and diplomacy. The development of trade is the first
consideration, and if the measures we have adopted to this end
have had the indirect effect of freeing the native trader from the
fetters which heretofore trammeled him, and of placing liim—much
against the will, doubtless, of his own officials—in as favourable a
position as the foreigner, the natural advantages which he enjoys
as a native of the country have, as might have been expected,
enabled him gradually to supplant his foreign competitor. But
so long as this result is obtained, not by curtailing the treaty rights
of our merchants, but rather by extending these rights or their
equivalent to the native of the country, we must rest content to
let the business pass into the hands of those who can do it the
most successfully.

That some of the rights we have been at great pains to
secure are not exercised by our own merchants is no reason for
undervaluing them; they serve the good purpose of keeping the
measure of oppression and extortion below a certain level,
and this of itself is a service to British trade. As soon as trade in
Chinese hands is too severely harassed it finds its way into
foreign hands, and the self-seeking mandarin in his own interest
has to reduce the pressure. It is the very fact of our treaty
rights being ready to hand in case of necessity, that in many
instances makes recourse to them unnecessary.

Before entering into the question of the future improvement


china.

-7

of our trade, it is well that the conditions of trade as it at present
exists should be understood ; not that I have anything new under
this head to impart to the British merchant in China. He is in
a position to know everything which affects his interests, and if
the amount of information which he deems sufficient for his pur-
pose may frequently strike an observer as very limited, it is prob-
ably because experience has taught him or his predecessors
before him that research further afield than he now adventures
has no money in it.

The British merchant in China appears to be disappearing, but Direct interest
the interests of our manufacturers remain, and as a rii£ix-keb moi^lianiB in
capable of immense extension, China may well claim more atten- China trade
tion than she at present receives. We should look beyond the den-casing.
China as it is, and think of the China as it might be, if a portion h,1,^"^â„¢10"
of the restless energy we display in new lands could be diverted dircciV
to hasten the development of the unexploitecl if not undiscovered concerned,
resources of this ancient country. It is the British capitalist,
manufacturer, and artisan who have to gain by hastening the
process, and -what I now write may not be so well known to
these as to my fellow residents in China.

To judge from the letters from business men in England which
the post frequently brings to ine and my brother Consuls in
China, the conditions under which trade is carried on, and the
opportunities of extending it, are but imperfectly understood by
them. It is apparently assumed that trade in China proceeds
much on the same lines as in the United States, France, or
Germany. My desire to enlighten those who are interested in
the subject must be my excuse for venturing to give what to
those on the spot must appear as very elementary information.

At present British subjects are at liberty to carry on their Eightejn
mercantile operations at 18 ports in China. These are, taking fo^nlrale
them in the order adopted by the Chinese custom-house: New-
chwang, Tientsin, Chefoo, on the northern coast; Chungking,
Icliang, Hankow, Kiukiang, Wuhu, Chinkiang, and Shanghai, 011
the Yangtze river; Ningpo, Wenchow, Foocliow, Amoy, Swatow,
Canton, Hoihow (Kiungchow), and Paklioi, on the coast south
of the Yangtze. To these will now have to be added Shashih,
011 the Yangtze, between Ichang and Hankow; and Hang-
chow and Soochow, two inland cities in the neighbourhood
of Shanghai.

The advantages which a treaty port possesses over a non-treaty
port is that foreign subjects may own property and reside there ; treotyport
foreign vessels may load and discharge there; merchandise, both and non-
foreign and native, may be imported and exported under a fixed tl,(,(lt7 F01'1-
tariff of duties,; and from these points foreign merchandise may
be sent into the interior, and native produce may be brought
down from the interior for shipment abroad on certain definite
conditions. At these points the collection of duties is under the F iirn
control of the Imperial Maritime Customs, the personnel of which custom^
• is entirely European, and being directed from Peking is quite establish-
independent of the provincial government. This service exer- ment-


-8

china.

cises supervision over the trade carried on in steamers and in
vessels of foreign type, irrespective of nationality, even if such
craft are under the Chinese flag. All merchandise carried by
these, quite regardless of the nationality of the owner, comes
Chinese and under the control of this administration—the so-called " foreign
foreigners on customs "—as it enters the port. In this way, Chinese importers
nn equal anci exporters find themselves on the same footing as the foreign
tr°atySports merchant as regards the payment of duties.

Import duty ^ these treaty ports our British imports should pass into
does not free consumption locally after payment of the tariff import duty, but
goods even they are not let off thus lightly. At Shanghai, true enough,
withinliimts wjthin the area of the foreign settlement, where most of the

ot treaty port. . . o ■,-,.. , •

Chinese retail business is clone, 110 additional tax is levied, but at
Likin tux nearly every other port a tax called likin is levied as soon as the
imposed at goods pass into the shops. This tax varies with each article, but
t e pmt. amounts to about 2 per cent, ad valorem. This means that even
at the port British goods cannot be retailed before a tax of 7 per
cent., instead of the treaty 5 per cent., has been paid on them.
Likin tax at At Canton where the retail trade is larger than at any other
Canton. p0r(; jn China, the import duty is merely a first instalment of what
British merchandise has to pay. Canton obtains its supplies
from the British free port of Hong-Kong; and thither resort all
Chinese dealers from different parts of the mainland. The goods
purchased in Hong-Kong are conveyed to the Canton province
either by junk or by steamer. Steamers from Hong-Kong may
only proceed to the ports open by treaty; junks may go any-
where ; but the treaty stipulations regarding tariff duties and
inland dues only apply to goods imported in foreign craft at the
treaty ports. We have nothing to do with the treatment accorded
to junk-borne goods.

Goods imported at Canton by steamer pay on landing the
import duty stipulated in the treaty; this is paid to the Imperial
Government through the foreign custom-house. Immediately
afterwards the goods have to pay a provincial tax called likin,
and at the same time another provincial tax called defence tax,
that is a tax instituted of recent years to provide funds for the
defence of the province. After these three imposts have been
paid the goods may enter Canton and pass into consumption
within a restricted area, beyond which more taxing stations are
encountered.

Clearly the intention of the treaty was that British goods after
paying the import duty should be free in the city of Canton; but
in practice the import duty is only a first payment to the Central
Government, the needs of the provincial Government have next
to be satisfied.

Chinese As in nearly every instance the importers are Chinese, they

traders afraid are at the mercy of their own authorities and pay whatever is
1° alitTof demanded without demur. Individual rights are not recognised
tales1.3'0 in China, and any Chinese merchant bold enough to raise a
question would be so dealt with that his case would serve as an
example for years to come' It may be thought that under these


china.

-9

circumstances a British merchant would have a great advantage
over the Chinese dealer, and that he could import his merchandise
on payment only of the treaty tariff duty. So he may, but a
British merchant imports goods not for his own use but in order
to sell them to Chinese. If he kept a shop and sold by retail his
Chinese customers might escape detection, but as a merchant lie
can only sell wholesale, and if the Chinese purchaser before taking
delivery of his goods failed to go to the proper office and pay the
Canton tax, he would certainly be arrested and made an example
of by being made to pay the tax several times over.

If foreign merchants were able to obtain business premises Foreign firms
anywhere they chose within the Canton city limits it might be canton tit™™
difficult for the tax office to keep a check on all transactions;
but although the treaty states clearly enough that " British
subjects shall be allowed to reside for the purpose of carrying on
their mercantile pursuits without molestation or restraint at the
cities and towns of Canton, &c.," our merchants are practically
confined to a small settlement, and the officials would make it
extremely unpleasant for the Chinese landlord who by leasing
premises to a foreigner in the city enabled him to open a business
establishment. The small settlement where foreigners live is
closely watched b}r spies, and any Chinese caught in the act of
removing goods that have not paid the provincial taxes is treated
as a smuggler.

As an importer for local consumption then the foreigner has
110 advantage, over the Chinese merchant, so the import trade
remains in the latter's handstand he has to submit to whatever
exactions the provincial authorities may impose.

Although eighteen ports are open to the commerce of the Direct im-
world. the importation of goods into China from Europe, the j?01^1â„¢^
United States, and India, almost entirely takes place through the countries'6"
British colony of Hong-Kong in the south, and through the treaty limited to
port of Shanghai. From these two great entrepots of the China Hong-Kong
trade all the other ports are supplied. Hong-Kong supplies Southern6101
Foochow, Amoy, Swatow, Canton, Hoihow, and Pakhoi; while ports supplied
Shanghai satisfies the wants of the six Yangtze ports, and the l1'0111
three northern ports. It is at Hong-Kong and Shanghai that are Norton""'
established the British firms that supply the China market. ports from

At the other ports, or the " outports " as they are known in the Shanghai.
China trade, the British merchant, and the foreign merchant grants ui
generally, is ceasing to exist. At only twelve out of the eighteen the outporis.
ports are there found British subjects engaged in any sort of trade,
and at only three or four are there auy British subjects interested
in the import trade. As already explained, the Chinese trader Xmport
finds himself in the enjoyment of all the commercial privileges business at
conferred on foreigners by the treaties. According as he lives in Por.ts clo"e
the north or in the south he can proceed to Shanghai or Hong- Chinese 7
Kong to lay in his supplies. He prefers the larger choice which A he finds in these places; he has all the financial facilities which possessed by
the well organised Chinese banking system affords .him ; he can Chinese
travel more cheaply than his foreign rival, and his establishment dealers-


-12

china.

British import
merchants
only found at
Hong-Kong
and Shanghai.

British mer-
chants are not
distributors.

Import
business at
Shanghai.

Chinese be-
ginning io
import on
their own
accou't.

lTdent

business

increasing.

One-half of
cot.I on goods
arrive on
Chinese
account.

at the treaty port costs him much less to keep up. He can thus
lay down his stocks at any of the outports on cheaper terms than
the foreigner, and can easily undersell him. But the native has
still further advantages in disposing of his goods at the treaty
ports. He is in touch witli the up-country dealers, and knows the
standing of the people lie is dealing with; he is able to obtain
information about markets which the foreigner cannot; and the
power of combination in matters of trade in which Chinese are so
strong enables them to control the market and to render the
business of their foreign competitors unprofitable. It may there-
fore be stated that, with a few insignificant exceptions, the busi-
ness of the British import merchant is confined to Hong-Kong and
Shanghai, and that from these entrepots the further distribution
of merchandise throughout China is entirely in the hands of
Chinese. Once the goods have left his warehouse in Hong-Kong
or Shanghai the British importer has no longer a direct interest in
their fate. He doubtless wishes them well, because the greater
the consumption the better for his business, but such remote
interests do not incite liim to spend mucli time or money in
clearing the way for British manufactures which have ceased to
be his property. And yet this is a service to our British
industries which he alone can render. Chinese traders are power-
less to remove obstructions which the rapacity of their rulers may
put in their way. To lodge a complaint against his own officials
is fraught with so much danger that recourse to such a step is
never attempted; and to bring a case of extortion to the notice of
a British official on the ground that the goods concerned are of
British origin would mean the ruin of the ill-advised Chinaman.

The import business at Shanghai is also undergoing a change,
not exactly in the same direction as that which has taken place at
all the other treaty ports. At these, as already explained, the
Chinese dealers have displaced the foreign merchant; and
dispensing with the services of any foreign go-between they
obtain their stocks at Shanghai or Hong-Kong. In Shanghai

c o o , o

the tendency is also for Chinese to import 011 their own account,
but the business is still done through the agency of foreign
merchants residing at the port, who in their Shanghai offices
make contracts with Chinese for goods that are still lying in
Manchester or other European centres of trade. The local foreign
merchants are more and more ceasing to be merchants in the
true sense of the word; and rather than take their chance of the
market in China prefer to settle their terms before the merchandise
leaves Europe.

Of the textiles imported from England and America as much
as one-half is specially indented for under instructions from
Chinese dealers; and the foreign firm through whom the order
has been sent abroad has no interest in them on arrival, except
as security for the payment by the Chinese principal. The
Chinaman gives Jus order in Shanghai, takes his risk of the
exchange and of the market, and awaits the arrival of his goods.
It vvas customary, not long ago, to settle the exchange with the


china.

-11

banks as soon as the order was booked, but of late, since the
fluctuations in exchange have ceased to be so great, Chinese have
shown a disposition to take their chance of the exchange as part
of the risk which a merchant has to run. The gambling element
in this has some attraction for the Chinaman, but it has also
been found that the silver price of the goods follows any marked
rise or fall in exchange, so that the risk is more apparent than real.

Of Lancashire goods imported into Shanghai one-half arrive
in this way already contracted for to the Chinese, and one-half
are received by three or four large importing firms for their own
risk;'but in other goods the proportion coming entirely for the
account of the Chinese is much larger. Cotton and woollen goods Tliree-fourtlis
apart, about 75 per cent, of Shanghai foreign imports arrive wholly
on Chinese account. _ merchandise

It thus happens that the Chinese in a greater degree than the arrives on
British merchant i'eels the immediate effect of any infraction of Chinese
the commercial clauses of the British treaty; but the Chinese Chinese' are
merchant's voice cannot make itself heard to the same effect as first to feel
that of the more independent foreigner, and treaty infractions are infractions of
thus allowed to endure without attracting much attention, or at tlc!,ty-
any rate without any serious effort being made to set matters
right. That a certain amount of apathy follows, resulting in British
stagnation, is natural, for the desire to find new markets and to push 9

sales which would animate the holders of large stocks of unsold interest in
goods is not to be looked for in men who have already secured g°° a purchaser. The profitable disposal of his own merchandise is solc1'
to any man a more powerful incentive than the general increase
of a trade in which he may not after all become a participator;
so the merchant with a warehouse full of unsold goods is more
likely to bestir himself and find an outlet for his wares, and to
make himself heard if he meets with obstruction, than the man
who is already assured of his profit or his commission, and has no
stake in the ultimate disposal of the merchandise that has been
contracted for through him.

Trade, of course, must be conducted on the lines that best Injurious
suit those engaged in it, but the change in the methods of ^J,'3 °sfsil]n.
business that is taking place does not bode well for the expansion intoCMn'esiT
of trade, which in China can only be looked for from the activity hands,
and energy of foreign merchants, supported and stimulated by
their own Governments. From the agitation of the Chinese dealer
nothing is to be expected, for the simple reason that he dare not
agitate. It is even a difficult matter to ascertain from him the
amount levied on goods between a port and an inland market;
he fears, and with good reason, that his officials will vent their
displeasure on him if he supplies information which may jeopardise
their private gains; and he is also unwilling to take any step
wh'ich however sure to result in an extension of trade, mny at the
same time diminish his own share of it.

In taking a broad view of commerce it may at first sight
seem immaterial whether the distribution of our manufactures
throughout China is in the hands of Chinese or of our own


-12

china.

merchants; but under existing circumstances it is to be regretted
that our merchants have not found it profitable to be themselves
the distributors, and thus retain an interest in the goods until
they have reached the consumer in the interior. The Chinese
distributor has to submit without hope of redress to the extortions
of all the tax offices he may encounter on his journey, whereas
the foreign distributor might occasionally obtain redress, and our
manufactures in his hands would be allowed to circulate more
freely. But, as explained already, the outport is 110 place for the
foreign import merchant, and he cannot profitably take part in
the work of distribution. Were it otherwise then the advantages
to us would be far reaching, for the British merchant would become
acquainted with the difficulties that beset our goods, he would
resist illegal taxation and vexatious detention, and he would be
keen to discover new markets and to introduce new goods. As
things now are, this is all left to the unenterprising Chinaman,
who, astute merchant as he is in well worn grooves, never thinks
of striking out in a new direction.

At the treaty ports where the native and the foreigner are
011 the same footing it can be understood that the native can
more than hold his own, but when it comes to sending goods
to inland markets it might be supposed that the question of
ownership would tell in favour of the foreigner; for beyond the
treaty ports the functions of the honestly managed foreign customs
cease, and trade finds itself at the mercy of the rapacious and
corrupt native official.
At first sight. Under our treaties a British merchant may lay down his
the foreigner merchandise at the door of any consumer in the Empire on
hnveadvan- payment of certain duties. The payment of an import
inges over the duty of 5 per cent., and an inland duty of 2£ per cent., or
native in dis- 71. per cent, in all, should lay down our goods anywhere. It
f oods'11" i-s> however, certain that, except in some favoured localities where
° " the taxgatherer finds it unprofitable to establish himself, the law
abiding Chinese trader never succeeds in putting his goods on
the market on these favourable terms. The difference, then,
between the amount of duties the Chinaman has actually to pay,
and of the duties which the foreigner ought by treaty to pay,
should be the margin of profit in favour of the latter, and one
sufficiently handsome to encourage foreign merchants to become
distributors. It is true that the treaty clauses bearing upon the
inland trade in British goods also confer the same privileges 011
the Chinese as on our own countrymen, and that the right of
commutation of inland taxes appertains to the merchandise
irrespective of ownership. In principle indeed the Chinese
Government has conceded this, but there is a vast difference in
China between a right conceded to a Chinese and a right conceded
to a foreigner. The native is diffident about claiming rights
conferred 011 him by foreign treaties when the exercise of these
rights is displeasing to the Chinese officials with whom he comes
in Contact. The foreigner has no such fears; he at any rate feels
secure in person and property; and if his goods are illegally


_ CHINA.

>13

detained or surcharged liis loss can be appraised in money, and
the intervention of his Consul should lead to reparation.

How then is it that the wants of the distant Chinese consumers Reason why
are not supplied by foreign merchants ? There are three reasons : tllis i3 not B0-
One that the trade would combine against the foreigner, and that

O O '

men of small capital could not carry on the fight; another, a

lack of that feeling of enterprise which it is necessary to possess

and exercise before the connections in the interior can be formed ;

and still another, the misgivings which fill the minds of British Question of

merchants lest they should not receive adequate support and official support

protection from their own authorities when they are in difficulties, merchants

an apprehension that they will be left to shift for themselves,

and that the British authorities will allow them to suffer unjust

losses. It is this sense of insecurity that has discouraged our Discourage-

pioneers at the treaty ports, and caused the British merchant to

keep clear of any ventures except such as from his own experience a raw.

or that of others he knows to be not only legitimate, but also safe.

A merchant is not a missionary: the latter persists in his
efforts in spite of every obstruction and disappointment. If in
his quality of British subject he suffers wrong, he seeks redress,
but his failure to obtain it does not deter him from continuing
in his self-imposed task. A merchant as a man of business has to
look to practical results. He derives little satisfaction from being
assured that his complaint is well founded, and that he is
entitled to reparation; he looks at his chances of obtaining
reparation, and if, as frequently happens, he sees that these are
remote, and that his officials can do no more for him than
address futile remonstrances to the Chinese authorities, he retires
from the unprofitable business, and instead of spending his time
and money in upholding treaty rights, he devotes these to other
purposes where the prospects are more encouraging.

It will probably cause surprise to leo.rn how few British Small
merchants now exist in China. In Shanghai there are 80 British "U™.b®r-°E

„ i t • p 11 .British lirms

firms, large and small; at the outports the list is as follows :— at 0utpoHs.

Outporls. Number of
Firms.
Newehwang 3
Tientsin .. 0
Chefoo .. .. .. .. *>
Chungking 1
Ichang .. .. ..
Hankow ., .. ,. .. .. 12
Kiukiang 2
Wulm ,.
Chinliiang ,. 4

Wciiehow .. .. .. ..
G
Amoy (i
2
Canton ,. .. .. »• 0
Hoiliow .. ,, .. ..
••


-14

china.

And of these not a few are merely commission agents. If the
firms which are solely interested in tea are excluded, then the
number is indeed insignificant, and yet it is on these that we
carmot8 have mainly to rely for the extension of our trade. China as a
increase unless customer of ours cannot buy unless she has something to pay
exports with. It has often been pointed out by those who study trade
increase. statistics that. China buys as much as she can afford. In the long
run an increase of exports means an increase of imports, but it
has to be remembered that the Chinese producer does not seek a
market for his goods in foreign countries ; he stays at home
till a purchaser comes to him, and it is doubtful whether a single
article has ever found its Avay to a foreign market through the
enterprise of the Chinese merchant. If the interchange of com-
modities between the East and the West is to grow, it is the western
merchant who must discover what more the Chinaman has to give
us in exchange for our manufactures. The initiative must come
from our side, and until we can take more from China, she must
not be expected to take more from us.
Cheap silver The increased purchasing power of gold in silver-using coun-
lias developed tries now makes profitable the exportation of many articles of
export trade. Chinese produce which were neglected before. The customs
returns for the year 1880 give a list of 50 articles exported to
foreign countries, of a value of 76,339,000 taels, and sum up the
rest as sundries, valued at l,54i,000 taels. In 1895 these same
50 articles represented 129,355,000 taels, and the sundries then
had mounted up to 13,938,000 taels. While the principal staples
had increased 70 per cent., the sundries had increased 800 per
cent. Once an article becomes a constituent of the export trade,
the Chinaman may be trusted to bring it to a market; but it is
for the foreigner to discover what kind of produce is suitable, and
then introduce it into the trade.
Export trade The export trade from China to Europe and America, unlike
remains m inlp0rt trade, has shown no tendency to pass out of foreign

torei^n iinnds

° ' hands. Occasionally, but so rarely as not to be of any import-
ance, the Chinese dealer will be persuaded by the foreign mer-
chant to retain an interest in produce consigned to a foreign
market ; but the results are usually discouraging, and the Chinese
are too distrustful to leave the sale of their merchandise in foreign
Export trade markets to a foreigner whose proceedings they have no means of
now largely a checking. But although the export trade remains in foreign
commission hands, a change of another kind is noticeable. Where years ago
business. a few jarge fjrms with large capital bought China's products and
sent them to Europe on their own account, there are now many
small firms who receive orders from Europe by telegraph, and who
fulfil these for a small commission at no risk to themselves. The
telegraph and- banking facilities have made it unnecessary to
possess capita], and the business of the export merchant in China
A. nommission 'ias a great measure changed into that of the commission
agent less a^ent. One of the consequences of this is that the commission agent
impatient, of w]10 js buying on a limit, and who receives a commission on the
tionl'thanT" am0111lt °f the. invoice, buys on the best terms he can at the treaty

merchant.


china.

-15

port, but has no personal interest in the previous treatment which
the merchandise has experienced at the hands of the tax-collector,
and does not fael disposed to engage in the interminable disputes
which an attempt to profit by the treaty stipulations affecting the
inland transit of merchandise would land him in. Were lie
dealing with his own money, and was every dollar saved in
taxes a dollar in his own pocket, he probably would try to
bring this taxation down to the legal minimum; but in filling an
order he now takes what the local market offers, and makes no
research into the past.

Part II.—Inland Transit Trade.

The stipulations regarding inland transit trade, which are con- Hostility of
tained in certain articles in our treaties of 1842 and 1858, have native officials
from the outset been but reluctantly observed by those Chinese j^g^8 agB
officials whose pockets were touched by the change which the new System.Pa3B
system involved.

The chief cause of our disputes with China which arise out of Opposite

commercial matters is that the officials of the two countries do yiews regard-

not take the same view of the object which the treaties and regu-lng
. ,. . .,.,•> . . . & mercial clauses

lations governing commercial intercourse were designed to attain. 0f treaty.

In the estimation of the Chinese Government, the treaties were The Chinese
framed with a view to securing for British merchants resorting view:
to China certain facilities and immunities. So long as the legiti- thoimUvkiif il
mate demands of these are granted, or their well-founded griev- '' '

ances are redressed, China has acquitted herself of her obligations,
and any action on the part of a foreign Governnment to obtain
more than this is an attempt to interfere with China's independ-
ence, which she must oppose by covert means or passive resistance.

To the mind of the British official this view is too limited. The British
The purpose which we wish to make the treaty subserve is the ;
general development of commerce between the two countries, and trade"5'0" °
the removal of every unnecessary impediment to trade; and our
representations are always directed to that end, no matter whether
the person immediately affected by the obstruction is a British
subject or a native of the country.

Our desire is that our manufactures should reach their ulti-
mate destination, and that the produce of China should be pro-
curable from the place of origin on the cheapest possible terms.
The Chinese official, on the other hand, will not admit that we
may in any way concern ourselves as to what may happen to
the Chinese possessor of British goods after the British importer
has been paid for them, or to the Chinese producer who has sold
his native goods to a foreigner.

What may happen to Chinese-owned goods in Chinese hands In Chinese
has nothing to do with either the foreign merchant or the foreign J^1";'^1 00iU
Consul. This is a Chinese official maxim,and indicatingthe attitude once sold u>
of the Chinese official mind towards the treaty provisions which were Chinese are
intended by us to put some limitation on the taxation to which â„¢ibout
(2297) b rroleell°n.


16

china.

How to
nullify the
commercial
clauses of the
treaty.

Chin ese
officials
inclined to get
round the
treaty.

Conflict
between
provincial and
Imperial
interests.

Provincial
dislike of
treaty
commercial
clauses.

Early failure
of transit pass
system.

Success of

foroible

measures.

the constituents of foreign trade might be exposed. Once the
soundness of the Chinese contention is admitted, then the import
and export tariff ceases to have any meaning. British goods can
sooner or later be traced into Chinese hands, and the produce of
the country which we may purchase in the interior for exporta-
tion must originally have been Chinese owned. If in the one
case taxes may be imposed retrospectively, and in the other in
anticipation, the treaty tariff can be robbed of any value. â– 

There is a tendency now noticeable on the part of! Chinese
officials to attain their ends in this round-about way ; .and under
the pressure of the financial straits in which China is about to
find herself, the temptation will be strong to levy at the one end
or other of the line the taxes which by the . treaties they have been
debarred from levying on the journey. This is a growing danger,
and one which for want of information, or absence of direct or
personal interest we may have great difficulty in overcoming.

The complaints we hear of are always in connection with
articles that enter into foreign trade, and they are usually due to
the action of some provincial officials rather than of the agents of
the Central Government; but it is notfor this reason to be assumed
that the provincial authorities wish to press more heavily on
foreign merchandise than on native goods.

They are quite willing, that they should be put on the same
footing; and indeed it is when, from their provincial point of
view, that they attempt to subject both to equal treatment that we
have cause of complaint; for in effect we demand that the pro-
vincial officials shall put our goods on a favoured footing, and
exempt them from all provincial taxation whatsoever; whereas
Chinese products are liable to such local taxation .as. the
officials think fit to impose. The one transit duty which our
goods have the option of paying in commutation of all, inland
dues are paid to the account of the Central Government,
and although a portion of this is allowed to remain in the. pro-
vince, it is assigned to some particular service, and does not go to
swell the general provincial revenue, out of which all provincial
expenses have to be met, and ill-gotten gains provided.

The system of franking British goods throughout the empire
by one payment after entry at the treaty port was deemed one of
the most valuable concessions obtained under our treaties, and its
failure from the beginning to work satisfactorily caused general
disappointment. As long as foreign merchants were personally
interested in the distribution of British goods in China, any
infractions of the treaty regulations were rapidly brought to the
notice of the British authorities, and remonstrances and reclama-
tions addressed to the local authorities or Central Government
immediately followed. It must be admitted that these were un-
successful more often, than not; and mere paper warfare would
probably not have advanced matters very much ; but the occasion
presented itself once or twice of tacking the inland trade question
on to matters which were demanding more drastic treatment; and
in this way obstructions were removed, which otherwise might
have remained as a barrier to trade down to the present day.


china.

-17

That an improvement in this inland trade has. taken- place improvement
since the provinces first set their face against the—to them— in transit
obnoxious innovation cannot be denied ; but that our goods are yettrai:le-
far from enjoying all the advantages they are entitled to is
equally true.

Both the Nanking Treaty of 1842, and the Tientsin Treaty of
1858, make it plain that after payment of one transit duty,
British goods may reach any market in the interior, free of all
further inland charges whatsoever; yet it is certain that few goods
ever do reach their destination on such favourable terms.

In the early years following the Treaty of 1858, when British
firms were established at all the open ports, a serious effort was
made to take advantage of the transit pass system. Circum-
stances at that time were against the successful issue of the
attempt, for many of the provinces were engaged in a life and Urgent need
death struggle with the Taiping and Mohamedan rebellions, and ^^g113
the provincial governments were hard pressed for funds; money Taiping
had to be obtained somehow, even at the price, not a very serious rebellion
consideration to the Chinese provincial Governor, of throwing the ^seg

British Treaty overboard, and for many years in the disturbed ia"91 passe9'
provinces the transit pass regulations were a dead letter.
Gradually order was restored, but meantime the conditions of
trade had changed, and by degrees the import trade at most
of the out-ports (under which designation may be included all
treaty ports except Shanghai) had been passing into Chinese
hands. In this wise the persons directly interested in seeing the
transit pass system work smoothly were Chinese, and they are so Chinese
utterly helpless against their officials that none would venture to dealers
insist on his foreign goods being accorded the privileges nominally Jjght tamsit
conceded by treaty. pa3S

In estimating the provincial opposition to the scheme, it must questions,
be borne in mind that the effect of the transit pass system is not Tâ„¢nsit Pas3

svfiuocl

only to reduce and regulate the inland dues, but it is also to disturbs
transfer so much revenue from the provincial to the Imperial Ex- provincial
chequer,and between these departments there is a perpetual struggle, finances.

In agreeing that all the inland charges might be commuted by Central
one payment, the Central Government made a bargain profitable Government

generous lit

to itself, and left the execution of it to those at whose expense it £xpenSi;'0f
had been made. provinces.

In some parts of the empire the local officials resisted the Provinces
innovation very resolutely, and in others the main effect was to ^duee their
make the provincial government reduce its inland charges to a
level that would induce traders to cease using the transit pass, central
And it may well happen that a Chinese trader will consent to Government,
pay successive inland charges which, in the aggregate, amount to
a good deal more than the treaty transit duty, for merchandise
unaccompanied by a transit pass enjoys certain advantages worth
paying for. Merchandise going inland under transit pass must Transit pass
be in the original packages; the name of the ship by which it goods have
was imported must be given, and the inland destination must be "^Xges.
declared.

f2297) B 2


-18

china.

goods is a
drawback.

Chinese
guilds make
their own
bargains with
provincial
governments.

Necessity of This latter requirement is a serious disadvantage, and detracts
declaring fr0m the value of the transit pass. A good market might be
mods i^a" °f f°imc' afc some place short of the original destination, but if the
goods are sold there they are liable to confiscation : or again, on
arrival at the declared destination the market may be bad, and
the goods may have to be sent elsewhere, but in this case the
transit pass has done its duty and is cancelled, and the merchandise
is liable to further charges en route, charges which uncertificated
goods may escape, owing to the fact that they have already paid
their full quota to the particular province. There is naturally a
disposition on the part of the provincial offices to treat more
leniently goods that have loyally contributed to the necessities of
the province, and to be harder on those that by means of one
payment to the Central Government have shirked their local
obligations.

There is also another reason why it is found difficult to bring
our British products to the consumer burdened with no heavier
duty than the regulation per cent. In China almost all
persons engaged in trade form themselves into guilds or associa-
tions, and the constitution of these is recognised and upheld by
the authorities. It is practically impossible for any person to
engage in business in defiance of the rules of the guilds, for its
decrees are enforced with great severity, and no outsider can
resist them. When a provincial government is hard pressed for
money, as every provincial government always is, or professes to
be, it may happen that a particular trade will consent to pay an
annual amount into the provincial treasury, and in return it will
obtain permission to levy a certain tax on the merchandise in
which that guild deals, in fact the guild farms the taxes, and the
profits of the farm are distributed at the end of the year amongst
the several members of the guild in proportion to the business
done by each firm, that is, a pro rata return is made to all con-
tributors. When the trade is in a few hands, and the guild is
given authority to tax outsiders, this farming of the taxes is a
method that commends itself both to the provincial government
and to the merchants, for it virtually gives to the members of the
guild a monopoly of the particular business, and for this advan-
tage they are willing to pay a heavier tax than by treaty the goods
should bear. They prefer to pay 5 per cent, and keep the trade
to themselves, than see the transit tax reduced to per cent.,
and the trade thrown open to all and sundry.

Of recent years the officials of some of the provinces have
had recourse to a plan intended to counteract the, to them,
injurious effects of the transit pass system. They respect the
transit certificates, true enough, and allow the goods to pass freely,
but on arrival at their destination, they trace out the purchaser
and make him pay what is called a " destination " or " terminal "
tax, usually a tax of 3 per cent, ad valorem. This recoups the
Destination or province for what it has been robbed of by the transit passes, and
terminal tax. a]s0 teaches the dealers the lesson that they had better leave
these passes alone.

Guilds farm
the taxes:

and obtain a
monopoly of
the trade.

A nemesis
overtakes
transit pass
goods.


china.

-19

Much argument has been used to show that this terminal tax
is not covered by the transit pass, and that this document has
done its duty once it has protected the goods up to the outskirts
of the place for which they were declared; but this terminal tax is
one specially devised to catcli transit pass goods, and is not
collected from merchandise that has paid its way at the different
stations passed en route. It is in the nature of a payment of Transit pass
arrears, and it is a differential tax from which ordinary merchan-ellould P1-°-
dise is exempt. If the transit pass system is to be any protection terminal tax
to our manufactures, the document must be held to cover the
goods until they reach their destination, by destination being
meant the warehouse of the inland dealer who is going to break
up the parcel and sell it retail; and this inland dealer must not
be called upon to pay anything more than others in the same
trade. But commutation once for all is not the meaning which
the provincial authorities are willing to admit should be put on
the transit pass regulations, they doubtless know that is the right
construction to put on the treaty clause, but they will not admit
it, for this would be cutting the ground from under their feet. It
is the Chinese official method to resist making reparation until
they have had to confess themselves convinced, and by refusing to
be convinced they can put off reparation indefinitely. Even a
criminal is not put to death until he has confessed, but then the
confession is obtained by torture.

Taking the ports from north to south the transit pass system How tho
works as follows:—At Newchwang and Chefoo, the inland taxes transit pass
are so light that it is not profitable to use them. At Tientsin they j^â„¢ worl"
are used chiefly for Hong-Kong sugar and English piece-goods, but different
as the passes are issued by the native and not the foreign custom- ports,
house, no returns are available. In Chungking they are not ^T1e^ulred
applied for because their use is discountenanced by the pro- ehwang and
vincial authorities. An attempt was made in 1893 to send goods Chefoo.
up country under transit pass, but with ill success. A quantity ^^
of cotton yarn was cleared for an inland market, and obtained the ^ faiiure at
necessary documents on payment of the legal transit dues. On Chungking,
reaching the first tax office en route the boats were detained.
After a delay of some days, some of the boats rather than lose
more time, paid the likin tax and went on their way. The other
boats were released after 12 days' detention, but the goods were
followed up and the consignee at destination was made to pay a
terminal tax, invented for the special occasion, of 3 per cent, ad
valorem. After this occurrence the head likin office at the pro-
vincial capital, in order to circumvent the new school of traders;
issued a notice that all transit passes must be surrendered at the
last tax office passed by the goods, and that on arrival at their
final destination the goods must pay a terminal tax of 3 per cent.
This terminal tax is payable only on goods that have attempted to
benefit by the transit pass system; ordinary goods that pay the
provincial dues are exempt.

The mischief caused by a case of this kind cannot be measured Far reaching
by the loss suffered in the particular transaction. So soon as the f^J,0* thls


-20

china.

trade learns that transit passes expose goods to delay it takes
alarm, and reverts to the old plan of paying provincial taxation.
The tardy reimbursement of the illegal clues that may be subse-
quently obtained does not repair the mischief. Left to themselves
Chinese traders are afraid to renew the experiment. In the case
above described the injurious effects were felt even in the neigh-
bouring province of Kueichow. Her Majesty's Consul at Chung-
king reported that some Kueichow merchants were in Chungking
at the time making enquiries about the possibility of taking back
merchandise under transit pass. They took the lesson to heart
and said no more about transit passes.

It was not until 1896 that Chinese merchants at Chungking
could again be persuaded to buy goods covered by transit pass. A
British firm sold cotton-yarn to a Chinese dealer, paid the inland
transit duty, and procured the necessary documents. On their
way the goods were detained at the first tax station met with, and
the pass was ignored. Another lot of yarn was allowed to pass,
but on arrival at destination the yarn was made to pay the
terminal tax of three per cent. At the same time the Chinese
firm in Chungking, through whom the goods had been sold, was
intimidated by tire officials, and with this unpleasant experience
it is unlikely that any further attempt to use transit passes in
that region will be made, especially as the saving to be effected is
not great.

Not much At Ichang it now scarcely pays to use transit passes, as the

used at officials of the chief tax office on the main line of traffic have, in

IciifLii ?

their competition against the Central Government,-made such
large reductions in their tariff that on most articles it is now
cheaper to pay to the provincial than to the Central Government.
Works well at At Hankow, Kiukiang, Wuliu, and Chinkiang on the Yangtze
River, the system seems to work well. At these four ports the
proportion which the value of the foreign goods sent inland under
transit pass bears to the net total of foreign imports is respectively
41, 40, 26, and 70, but at all these places, notably at Hankow, the
complaint still is that the transit pass is efficacious only within
the limits of the particular province. Beyond the limits of the
province it ceases to protect the goods. For example, at Si-an-fu,
in the province of Sliensi, which is the great distributing centre for
all north-west China, piece-goods have to pay over and above the
commuted transit duty, which, of course, ought to clear them to
destination, additional taxes aggregating to three times the amount
of the stipulated transit duty.

At Kiukiang it is noteworthy that of the whole amount of
cotton-yarn imported 98 per cent, goes away to the interior under
transit pass, and about half of this is cleared for a city on the
extreme south of the province, on the border of the Kwangtung
province. The explanation can only be that from this city it is
carried over the Meiling Pass into the North River districts of the
Kwangtung province, which, but for the excessive taxation
along the Canton waterways, would obtain their supplies direct
from Hong-Kong.

Hankow,
Kiukiang,
Wuliu, and
Chinkiang.

Part of

Kwangtung

province

supplied

through

Kiukiang.


china.

-21

At Shanghai less than five per cent, of the foreign imports go Obstructions
to the interior under transit pass. Here the reason is not that the at Shanghai,
transit pass is not respected, but that there is a difficulty in pro-
curing it. At most of the treaty ports it is the Imperial Maritime
Customs (the so-called "foreign customs") who issue transit
passes; at Shanghai it is not so. They have to be applied 'for,
through the foreign custom-house, to a Chinese department which
is interested in discouraging their use. The Chinese official in
charge of this department, for a consideration, issues passes of his
own which protect goods throughout the province, but his price is
dearer than that of the treaty transit pass. On the other hand
there is no delay in obtaining these passes which bring him in
. money. Applicants for what may be called the regulation pass
have to wait for days. A delay of even one or two days is a
serious matter, because it is not until the trader has completed his
purchase and is ready to start 011 his journey that he can supply
the particulars required at the custom-house, and being ready, to
start he prefers to pay a little more to the rival establishment' so
as to get away at once.

At Shanghai also the inland duties on piece-goods are farmed
by the Piece-goods Guild, and the opposition of that powerful
body is enough to deter any outside merchant from striking out a
line of his own. So far as can be ascertained foreign goods can be
laid down in any part of the province, of which Shanghai is the
commercial metropolis, not more heavily burdened than with a
tax of five per cent., but the delays and petty exactions in
the shape of fees at the numerous barriers are a source of much
irritation.

At Ningpo, Wen chow, foochow, and Amoy the proportion of Not much
transit pass goods to the net foreign imports is respectively 14, 7, used at
9, and 8 per cent., but the provincial taxation is not veiy heavy, ^efdiow
and there is no great saving effected by commuting the transit Foochow, 'and
duties. Amoy.

At Swatow no passes are applied for, there would be some Not used at
saving in using them, but the authorities set their faces against Swfttow-
them.

It is at Canton that the treaty stipulations regarding inland A dead letter
transit trade is a dead letter; and it is in this province of allnt Canton,
others that trade would improve if our goods could be laid down
in the province, or be allowed to pass through the province on their
way to more distant markets on the terms prescribed by our
treaty. But from the beginning the Canton Government resolved
not to allow its revenues to. be interfered with by the operation of
any treaty clauses, and for many years applicants for transit
passes met with a flat refusal. After much discussion and nego-
tiation the Canton Government was made to yield, in form at
least, but not in substance. Transit passes were no longer
refused, but indirect means were adopted to discourage merchants
from using them.

In 1891 an effort more concerted and more energetic _ than ^Po^'T
usual on the part of the foreign Consuls, coupled with the simul- Canton "in

1891.


-22

china.

Renewed
opposition at
Canton.

So-called
collusion
between
Chinese and
foreign, mer-
chants at
Canton.

taneous presence of a Viceroy more disposed to carry out the
treaty than his predecessors, did result for a time in giving transit
passes fair play. In 1891 as many as 1,950 passes, covering
goods of the value of 1,760,000 taels (400,000Z.), were not only
issued, but the goods covered by them enjoyed the immunity
guaranteed by treaty. This meant that 1,760,000 taels worth of
foreign merchandise paid a commuted duty to the Central Govern-
ment, and paid nothing at all to the Canton government. This
was so seriously felt by the provincial government that it took
alarm and directed the likin tax department to ascertain why the
likin receipts were falling off and to suggest what steps could be
taken to remedy the evil.

To deputy "Wang was entrusted the task of retrieving the
position and safeguarding the likin revenue. In pursuance of
this object he arrested several dealers guilty

of using transit
Thenceforth

pass began to

passes, and instilled wholesome fear in the trade,
the custom of conveying goods under transit
diminish.

In the.reports submitted to the Viceroy of the province there is
frequent allusion to collusion with foreigners, which may beexplained
as follows : A Chinaman in Canton will not apply personally for
a transit pass; if he did he would be persecuted, and the pass
being in a Chinaman's name would be treated as waste-paper
by the officials at the tax stations, who would feel confident that
the trader's complaint would not be listened to. So his only way
is to have it made out in a foreigner's name, and he either buys
his goods from the foreigner with the stipulation that the transit
duties shall be prepaid and a covering pass attached, or he pays a
foreigner a fee to put the business through the custom-house for
him.

This is called selling transit passes to Chinese, and it has been
denounced as dishonest and fraudulent. It is difficult to see why
this is more reprehensible than the action of a foreign commission
agent who has sent an order to England for a Chinese merchant at
Shanghai. The goods are the property of the Chinaman, but on
arrival at Shanghai the foreign commission agent may go to the
custom-house to make the usual declaration and pay the duties,
and there is no talk about fraudulent collusion. When a China-
man obtains his pass through a foreigner his object is to have a
foreign name associated with the goods, and as it is the foreign
origin of the goods and not of the owner that entitles them to be
franked through the country, it cannot be said that there is any
fraud on the revenue in this way of doing business. As reason-
ably might it be said that in escorting a timid woman through a
dark alley the policeman is defrauding the footpad.

In discussing the matter with foreign Consuls, the Canton
likin officials protest that they have no objection to the
use of transit passes, and are overflowing with phrases about
all revenue being for the benefit of the State, and its being
immaterial by what agency it is collected, but the fact remains
that in the Canton province transit passes are of no use. The


china.

native merchant dare not apply for them, and if a foreigner uses
them the goods are followed up to their destination, and the final
purchaser is made to suffer for dealing in tabooed goods.

"When it was found that the extensive use of transit passes, for Yarn trade at
cotton yarn especially, was cutting into the provincial revenue Canton >u
the method employed to make trade flow back into its legitimate "•■

channel—as the channel is called which brings revenue to the association,
provincial treasury—was to give to a certain commercial association
a special reduction of 50 per cent, in the likin tax. The association
has to pay a certain tax to frank their yarn throughout the
province, and all others have to pay a.double tax ; but even then
the reduced rate is twice as high as the treaty transit rate. By
this means the association practically obtained a monopoly on
the yarn trade, for it is impossible for others paying a double tax
to compete.

The means emploj'ed by this semi-official, semi-commercial Intimidation
association to deter traders from importing goods except in the of ,rttders-
" legitimate" way is to accuse them of being smugglers and to
proceed against them as such. As an instance:—In February,
1892, a proclamation was issued offering a reward of 50 dol. for
the arrest of the compradore (a sort of native manager) of
a British firm who had sent goods under transit pass into the
interior. Her Majesty's Consul addressed a remonstrance to the
Viceroy, but failed to obtain redress.

In March, 1892, the daily steamer, a British vessel, arrived
from Hong-Kong, having as part of her cargo 310 bales of cotton
yarn consigned to a British firm. The firm sent a native servant
in a cargo boat to take delivery of the yarn. The servant found
forty soldiers from the likin tax office standing on the wharf, of
whom ten boarded the steamer. They warned the servant not to
take away any of the bales, as otherwise they would seize both
him and the yarn. As soon as the affair was reported to Her
Majesty's Consul he sent an officer to look into the matter, but
when he arrived the soldiers had left, and the cargo was allowed
to be removed to the British firm's premises. But another threaten-
ing proclamation was issued to intimidate Chinese dealers from
having anything to do with goods imported through foreigners.

The Consul in reporting the matter to Her Majesty's Minister su(;ccss 0f tlie
in Peking, remarked :—" The terror which the above and certain intimidation,
other proceedings of a like character have caused amongst the
Chinese traders is very great; the transit trade seems to be
extinguished; Chinese merchants in the interior are afraid to

O '

have foreign goods sent up to them under transit pass, and the
dealers in inland markets are frightened against buying goods
which are known to have come up under transit pass."

The privileged association above referred to issues a sort of Kivol transit
transit pass of its own. According to the treaty a bale of yarn pass system,
should be cleared to any destination on payment of a transit duty
of 1-gL- taels. This private association clears cotton yarn through-
out the province of Kwangtung for a payment of 2/^ taels, and
throughout the adjoining province of Kwangsi on a further payment


-24

china.

Heavy taxes
on way to
Kueichow
and Yunnan
provinces.

The best part
of likin is
misappro-
priated.

Likin officials
pay for their'
appointment.

Mode of
robbing the

How the
Canton

Of 2/jc taels. Beyond these two provinces the association's passes
do not run. To reach the provinces of Yunnan or Kueichow via the
West River, which is the natural route, it costs 8 taels in imposts of
various kinds to lay down a bale of yarn weighing 400 lbs. On
piece-goods the tax is much heavier; on the cheaper kinds it
amounts to as much as 40 per cent, on the value. Other goods
are equally burdened with taxation, and are indeed in a worse
position than cotton yarn, for owing to the magnitude of the yarn
trade, the likin collectorate by adopting a system of commutation
has in a way regulated taxation, and dealers can accurately calcu-
late their expenses. In other goods all the delay and oppression
inseparable from likin stations impede the trade as much as the
burden of taxation imposed upon it.

If the necessities of the State was the excuse for imposing
these burdens, the infraction of the treaty could be viewed with
more indulgence, but of the amount taken out of the trader's
pocket not 30 per cent, reaches the Treasury.

The modus operandi is this:—Every tax station in the
province—and these remarks apply to all parts of China—is
appraised to yield a certain amount, not a fixed amount, but a
rough average of previous years' receipts is taken as a basis. If
the office fails to produce this sum the incumbent is denounced by
the likin superintendent to the governor of the provinces as
incompetent, and he is set aside. If his returns show a con-
siderable excess over the estimated sum, the incumbent can have
his name mentioned for special commendation, which helps towards
promotion; but as a rule the Chinese official prefers to conceal
and keep the surplus, and forego the approbation, which is only of
use to him if he has some particular post in view.

Before obtaining his appointment to a tax station, the official
has to spend a good deal of money—about a year's emoluments of
the coveted post is the Canton average—and after he is safely
installed lie has to spend more money to retain his place. All this
without drawing a regular salary, so that the receipts of the
station must of necessity provide the funds.

The way in which the revenue is defrauded is simple. A
boatowner on arrival at the station with a cargo of merchandise,
with the connivance of the likin official and his staff makes a
false declaration of quantities; 100 pieces may be passed as 70.
A receipt for the 70 is given, and the tax on the remaining 30 is
divided between the merchant and the official. Towards the
middle or end of the month, when the receipts have reached
about one-twelfth of the annual amount expected from the office,
this month is closed, and subsequent receipts during this month
are either not entered at all, or are entered to-the credit of the
following month.

It must not be supposed that these subordinate likin officers
grow very rich. The competition for these posts is too great ; and
it is those higher up in the provincial hierarchy who finally pocket
what should have gone into the provincial treasury.-

When in 1893 the Canton likin administration decided to


china.

-25

crush the transit trade as carried on under treaty regulations, government
there was a good deal of friction betwen the foreign Consuls and transit^aw
the local authorities. The outcome of the campaign against system,
transit passes was that the Canton Government laid it down as
law:—(1) that Chinese may take out passes for their own foreign
goods; (2) that foreigners may take out passes for their own
foreign goods; and (3) that foreigners may not take out passes to
cover goods which they have already sold to Chinese. '

How valueless is the first rule may be judged when it is stated
that Chinese never dare apply for transit passes, although the
treaty transit dues would be far less than what they actually
have to pay. The second rule is equally valueless, because even
if a British subject were willing to contract to deliver goods in
the interior he could scarcely fincl a purchaser, experience having
shown that goods sent up country on foreign account really cost
the purchaser more in the end. The experiment has actually A teafc .
been made by a British merchant. He started from Canton transit pass'
for Kueilin, the capital of the neighbouring province of Kwangsi, goods
with two cases of thread; one was covered by a transit pass and ^cTofat
the other was not. The uncertificated case paid at the various journey,
barriers on the way taxes amounting to 4 dol. 18 c. The
certificated case was allowed to pass free on the journey, but
on arrival at a barrier about a mile below the city of Kueilin
this case-and not the other was called upon to pay a terminal tax
of 3 dol. 33 c. As the transit pass had cost 1 dol. 3 c. the total
amount paid on this case was 4 dol. 36 c. against 4 dol. 18 c. paid
on the other. And this was under the most favourable conditions,
for a foreigner was in charge. A Chinaman would have been
harassed and delayed at every barrier en Toute.

Under such discouraging circumstances it is difficult to find

O O

either Chinese or foreigners willing to make experiments, for
they only result in showing- that the provincial government may
infringe the treaty with impunity.

The latest venture in the transit pass business has been as Organised
unsuccessful as the rest, but as showing the methods of the likin opposition
officials the particulars are worth detailing; British &

Mr. Andrew, a British merchant, left Canton in January of merchant
this year with a quantity of foreign merchandise, chiefly piece- "sing transit
goods and yarn; his destination was the city of Wuchow on the Passee-
West River in the province of Kwangsi. All the goods were
covered by transit passes. On arrival at Wuchow he found that
a steam launch had preceded him, and cautioned the local dealers
against having any dealings with him. In China the system of
official terrorism is as complete as in any secret political society.
The effect was immediate; the local dealer who had contracted
to receive the goods threw up the bargain, and no other purchaser
would come forward. Mr. Andrew even found it difficult to
obtain food. In view of this organised opposition Her Britannic
Majesty's Consul at Canton urged the Viceroy to direct the
Wuchow officials to reassure merchants by publicly announcing
that they were at liberty to trade with the foreigner. It seems


-26

china.

strange that such an announcement should be necessary 38 years
after the conclusion of our treaty of commerce, and stranger still
that the Viceroy should refuse this very innocent request. After
2 months' delay the official interference was so far withdrawn that
Mr. Andrew was able to dispose of his goods at a considerable loss.

It is true that after a protracted discussion with the Central
Government the Canton authorities had to indemnify Mr. Andrew
for the losses actually sustained, but trade cannot stand such
shocks, and it is probable that this incident has clone more to
discourage the transit pass trade than the reverse. The 1,000
or 2,000 dol. which such affairs cost the likin officials in the way
of indemnity are nothing to them as compared to the revenue and
private gains they would lose if the transit trade were to revive.
Transit passes So far only the movement of foreign goods towards an inland
for goods market has been spoken of. In the conveyance of native produce

out WErCl 9 -i «

to a port for shipment difficulties and obstructions of a similar
kind are encountered, but even when the validity of the transit
pass is admitted in principle, in practice the local officials find
Illegal fees at it difficult to forego their own private perquisites. At the port
Chmkiang. Q£ chinkiang, where a large quantity of inland produce is brought
to the port under transit pass, I was supplied with the following
statement which shows how much is extorted over and above the
regulation amount.

On a parcel of lily flowers worth 550 dol. the legal transit
duty is 20 dol. Over and above this the irregular charges are:—

That is, the irregular fees amount to more than the legal transit
duty. This is probably a fair specimen of what goes on in all the
provinces.

Tea and silk In the tea and silk districts, the authorities finding that they
taxed before could not touch the produce after it had passed into foreign hands,
n'reha«eS ™ 'lflve ^ upon the device of putting on the tax at an earlier period
them. before it has passed out of Chinese possession. In the silk districts

Growers' tax of the Kiangsu province, for example, cocoons pay a tax of 10 dol.
on cocoons. pei, picui (133^ lbs.) before a foreigner can get hold of them; and
if he did succeed in securing the cocoons before, still the origiual
seller would be called upon to pay all the same. Even after this,
the foreigner finds it profitable to bring his cocoons to the port
under transit pass in order to escape further taxation en route,
and for this he pays a further dol. per picul. As it takes
4 piculs of cocoons to make 1 picul of reeled silk this tax on
cocoons is equivalent to a tax of 46 dol. on a picul of raw silk, the
export duty on which is only 1G dol.

Irregular Charges. Amount.
Dollars.
Fee to local official for prompt issue of transit pass 1
Fee paid to local official at place of purchase 5
Fees paid at various stations en route (about i do], each) 15
Fees paid at last barrier to prevent delay.. ., 2 •
Total.......... 23


china.

-27

In the tea districts the same simple way of getting behind the (jrowcrs> ^
treaty has suggested itself. Formerly the foreign merchant would on tea.â„¢
commute the inland dues by payment of 1] taels per picul, and
thereby escaped a considerable likin tax en route. To meet this,
the provincial authorities imposed what they called a growers'
tax so as to catch the tea before it became foreign property, and
now no saving is effected by using transit passes. In miscellaneous
articles, where the trade is not so centralised, it is more difficult
for the Chinese officials to be beforehand with the foreign
purchaser; and thus general merchandise escapes more easily
than tea and silk; and it is also true that in many producing
districts the inland taxation is so moderate that transit passes are
unnecessary.

The Canton province in the matter of exports as of imports Canton
is firm in refusing to allow its revenue to be diverted to the outward
Imperial treasury, and any attempt on the part of the foreign
merchant to buy at the fountain head before the native produce useless,
has been burdened with taxes is unfailingly frustrated by occult
methods. Repeated failure to carry through a transaction success-
fully has caused the foreign merchant to retire from the contest.

In exports our merchants at Canton have had to adapt them-
selves to the exigencies of the situation, and there trade follows
the line of least resistance, which is found by letting the Chinese
dealers make their own terms with their officials until the goods
reach the foreigner's premises, after which no further difficulty is
encountered. Whatever illegal taxes may be imposed are paid by
the Chinaman and put 011 to the price of the goods, so that the
foreign buyer has no pretext for making a complaint. Tea and
silk are the chief exports, and while the former is let off fairly
easily, silk on being exported has to pay a Canton likin tax as
heavy as the export duty. The Chinese seller is held responsible, Likin col-
and the modus operandi is for the likin office to take count of the lectedfrom
silk that is passed for export at the custom-house, and then if the
seller has not paid already, to seek him out and collect the likin b°°ns
tax. It is often only after the silk has passed into the possession exported,
of the foreign merchant, and has actually left the port that the
illegal tax is demanded of the Chinese seller. The cynical official
when the injustice of this is pointed out by the British merchant,
merely answers that it does not concern the foreigner as the tax
comes out of the Chinaman's pocket, and at the same moment he
tells the Chinese dealer that he has 110 ground of complaint as he
can add the amount of the tax on to the price of the silk. All
that can be done in the way of argument and remonstrance has
been tried at Peking and Canton, but the Canton official continues
to have his way.

The last time that an application was made for a transit Transit pusses
pass to cover native produce was early in this year. A new only lead to
tax on cocoons having been instituted in the city of Canton,
a British merchant was minded to purchase the cocoons curlier.'
in the producing districts, and to bring them to the port under
transit pass. He was sent about from one office to another before
he could get his application for a pass attended to, and before it


-28

china.

was granted he was required to give the name of the locality
where he had bought or intended to buy the cocoons, in order
that the officials might satisfy themselves that the seller had paid
all the taxes previously due. Under these circumstances the
wisest, thing for the merchant to do was to cancel his application.
Want of In the manner of issuing both the inward and outward passes

uniformity in there is a diversity of practice at the different ports. At some
ports they are issued through the foreign custom-house, at others
p through the native authorities, and the conditions inscribed on
the passes also differ at the several ports. The inconvenience of
this was felt from the beginning, and in 1876 a clause was inserted
in the Chcfoo Convention pledging the Chinese Government to
arrange that transit passes should be framed under one rule at all
the ports, " no difference being made in the conditions set forth
therein." The Chinese Government has failed to give effect to
this stipulation, and local authorities are consequently left to
introduce changes which tend to nullify the advantages of the
transit pass system.

mode of
issuing
transit passes

Few com-
plaints on
part of
British
merchants.

Hong-Kong
Chamber of
Commerce
suggestions.

Inland transit
trade in
Canton

Part III.— The Suggestions ancl Complaints of Merchants.

As I have already stated at the beginning of my report, our mer-
chants in China are on the whole satisfied that within the limits pre-
scribed by treaty they are free to pursue their avocations without
let or hindrance, and my invitation to make suggestions for the
promotion of British trade did not evoke such a response as at
the outset I had been looking for. Even the casual observer must
be impressed with the'idea that there is room for a vast expansion
of commerce in China, and, when speaking in general terms, none
is more emphatic than the British merchant on this subject, but
when asked to define more particularly what share he would wish
to take in this development, it becomes evident that the chief
ground of his discontent is that the Chinese Government is
unprogressive, and bent on restraining the people of the country
from developing its resources. In sum, all are convinced that
things are not as good as they might be, but few can indicate,
except in general terms, the means by which their own particular
business can be improved. A long and painful experience of
thwarted efforts has had such a discouraging effect on foreigners
in China that a condition of stagnation has come to be accepted
as in the nature of things. I shall proceed to set forth the
subjects brought to my notice by the mercantile communities at
the places I have visited.

The matters of importance from a commercial point of view
to which the Committee of the Hong-Kong General Chamber of
Commerce desired to call my attention were the unsatisfactory
state of the inland transit trade in the Kwangtung ancl Kwangsi
provinces, the preferential duties which place junks at an advan-
tage vis-d-vis steamers, and the opening of the West River to steam
traffic and to foreign trade.

The first matter I have already treated of while on the subject
of inland transit trade. The difficulty in dealing with such cases


china.

-29

is. that the merchant is not obstructed while in the act of
exercising the right secured to him by treaty. It is that previous
intimidation makes him forego the right, or subsequent punishment
makes him regret having taken advantage of it. The transit pass
privilege may be compared to a right of way across a common at
the exit of which a savage dog is on guard. The public are
allowed to walk through, and are told not to mind the clog. One
more daring than the rest occasionally takes the short cut with
the usual consequences, and liis only solatium is the price of a
new pair ot' trousers, if he gets as much. The metaphor also
suggests the only effectual remedy.

... The preferential tariff enjoyed by junks has its origin in the Preferential
dual system of collecting customs duties on the Canton River. tal'iff enjoyed
Foreign vessels pay duties to the foreign custom-house, and the b'y 3imliS-
full amount is honestly accounted for to the Central Govern-
ment. Native junks pay duties to the native custom-house. As
the superintendent of this establishment remits a fixed sum and
keeps the rest, he does what he can to divert trade from steamers
to junks; and the surest way is by giving junks preferential rates.
The foreign customs tariff is fixed by treaty and immutable ; the
native customs tariff is also fixed on paper; in practice it is what
the Chinese superintendent chooses to make it, and on some of
the most important articles he underbids the foreign customs by
an amount sufficient to cause shippers to prefer junks to steamers.

. In order to silence the remonstrances of the steamer company
the Chinese superintendent professes to adopt the same tariff as
the foreign custom-house; but by allowing 100 chests to pass as
50, or by privately returning a bonus to contributors he can
attain his object without detection. If it is difficult to produce
proof that Chinese officials impose heavier duties than the tariff
allows, when, of course, the merchant is a sufferer, how much
more difficult is it to convict him of accepting less than the-
tariff, when the merchant is a gainer and an accomplice. The
Central Government informs the foreign ministers at Peking that
stringent instructions have been sent to discontinue such pre-
ferential treatment, and the Canton superintendent assures the
foreign Consuls that his tariff is identical with the treaty tariff.
And yet in the face of such assurances this is what happens.
Canton teas are sent clown either by steamer or by junk to
Hong-Kong for transhipment to a London bound steamer. By the
custom of the trade the Chinese dealer contracts to deliver the
tea duty paid either on board the river steamer at Canton, or on
board the ocean steamer at Hong-Kong. If. allowed to follow the
latter, ccurse the Chinese dealer will make a reduction of 2s.
per cwt._. and, of course, have to pay the junk freight to Hong-
Kong in addition. It is the preferential duty by junk that enables
him to. do this.

In this particular matter the British merchant gains and the
British steamer company loses; the Chinese revenue with the
connivance of the'Peking officials is defrauded, and we are, it can
hardly be said hoodwinked, but at any rate trifled with, and the


-30

china.

Opening
of the
West River.

Navigation of
West River.

West River
trade

diverted to
Tonglting by
excessive
taxation.

Amoy and
Fooehow
suggestions—
Tea trade.

Foochow
likin tux on
"foreign goods

lesson is useful as showing the danger of making any compact
with China when there is left any loophole for evasion.

If the Chinese Government were really desirous of putting a
stop to this preferential treatment of junks the obvious course
would be to place junks and steamers under the control of the
foreign customs. It is only where these junks and steamers come
into competition that the preferential tariff concerns us, and it is
an open question whether the favoured treatment accorded to
junks is injurious to trade in general.

The opening of the West Eiver to foreign trade would give
us access to the provinces of Kwangsi, Kuei-chow, and the eastern
portion of Yunnan—all poor provinces that have not yet recovered
from the ravages of the rebellions of 40 years ago; but their
recovery would be hastened with the assistance of steam navigation.
Wucliow, just within the borders of the Kwangsi province, is the
.most important distributing centre along the course of the West
Eiver, and once it is open to foreign steamers we shall be able to
overcome the obstructions to foreign trade which so beset the
Canton waters. The Kwangsi officials doubtless also know how to
place hindrances in the way of trade, but it would be a great gain
if we could get face to face with these without having previously
to run the gauntlet of the Kwangtung obstacles.

It is doubtful whether steamers can proceed all the year round
further than Wuchow; during some months of the year Nanning,
another considerable distributing centre, could be reached by
steamer, but beyond that it is doubtful whether anything but
light draught native craft could proceed with safety. These can
ascend the river as far as Pos^ in Yunnan, and if the system of
chartered junks such as , I have mentioned as being in vogue*
between Ichang and Chungking could be introduced between
Wuchow and Pose our trade would thereby be greatly protected
from the interference of provincial officials.

Hong-Kong is the emporium whence these southern provinces
are supplied, but the heavy taxation along the West Eiver route
forces goods intended for Kwangsi to go round by the seaport of
Pakhoi. From Pakhoi merchandise is carried partly by porters
and partly by boat to the upper waters of the West Eiver, a
journey of 8 days, although the distance is only 80 miles.
Merchandise for Yunnan goes up the Iiecl River through French
Tongking, and enters China at the frontier custom station of
Mengtzu.

At Amoy and Foochow the chief complaint is that the tea
trade—and this is about all that foreign iirms are interested in—
is being ruined by excessive likin taxation and heavy export
duty. On the average price of tea the export duty is about 25
per cent, and the likin tax amounts to another 25 per cent.

In Foochow the import trade is wholly in the hands of
Chinese, but as a matter affecting the prosperity of the port, the
British mercantile community complains, that although under the

* See page 50.


china.

treaty of 1842 it is the city of Foochow that id open to foreign
trade, the Chinese officials, for purposes of taxation, treat Foochow
as outside the limits of the port. All merchandise after paying-
import duties at the custom-house is further taxed 011 its way
to the city or suburbs.

It is at the important port of Shanghai, with its large foreign Shanghai
population, its growing industries, and its foreign trade amounting suggestions,
to 140,000,000 taels that one may look for an exposition of the
wishes and aspirations of the British mercantile community, ancl
an array of their legitimate complaints against the central and
provincial governments. The Shanghai Committee of the China
association, a body of gentlemen thoroughly representative of
British interests in Clrna, communicated to me their views on the
present situation of affairs, and made suggestions for reforms which
if adopted, would, in their opinion, tend greatly to promote trade.
Their suggestions may be summarised as under:—

I. The appointment of Her Majesty's Consul-General at
Shanghai to be superintendent of British trade in China, and the
association with him of a Chinese Commissioner; these two to
form a Board of Control to safeguard commercial privileges and
rights secured under the provisions of our treaties.

In addition to this the appointment of British consular officers
under the superintendent of trade to reside at each provincial
capital for the purpose of watching the interests of British
commerce.

II. As the new duties imposed on the Consul-General at
Shanghai would be incompatible with the exercise of judicial
functions, the separation of the office of Consul-General and Chief
Judge would become necessary.

III. The right to reside ancl to trade in any part of the Empire,
under such regulations as may be found necessary.

IV. The freedom of navigation in all navigable rivers and
waterways in China by foreign steamers.

Y. The establishment of a national currency.

YI. Beform in the system of inland taxation with a view to
placing it on a fixed and improved basis, and the re-organisation
and extension of the transit pass system.

VII. The establishment of a court of competent jurisdiction
to hear and determine all suits where British subjects are plaintiff's
and Chinese subjects defendants; ancl the making of the foreign
settlement at Shanghai into a separate jurisdiction.

VIII. The removal of all restrictions on the transport ancl
export of grain.

IX. The importation of salt to be permitted.

X. The registration and protection of British trade marks.

XI. The liability of Chinese subjects for the unpaid capital in
shares held by them in English registered companies should be
declared and defined.

XII. Prompt issue of drawback ancl re-export certificates.

XIII. Extension of the powers of the foreign municipalities
within the limits of the foreign settlements, especially in the

(2297) c


china.

Appointment
of 11 superin-
tendent of
liritisk trade

British
in teres I s
depend upon
the adoption
by China of
reforms
beneficial to
the empire at
large.
Existing
system of
communicat-
ing with the
Government
on tradal
natters
defective.

Causes of
di-lec-l.

matter of sanitary measures, and extension of municipal control
to the harbours and approaches within certain limits.

XIV. The improvements of the approaches to Shanghai,
especially the deepening of the Woosung Bar.

The point on which the Shanghai Committee laid the most
stress is the one I have placed at the head of the list. Their view,
to put it briefly, is that under the present decentralised system of
government material reform in the provinces is not to be looked
for unless we can directly treat with each semi-independent pro-
vincial government, and that while the British minister at Peking
is accredited to the Chinese Government, we should have an agent
apart who, while subordinate to Her Majesty's minister at Peking,
should be accredited to the provincial governors. The views of
the Committee are fully set forth in a letter from which I make
a long extract:—

"When framing their letter of April 10, 1895, the Shanghai
Committee were of opinion that British interests could only be
suitably benefited by the adoption by China of measures calculated
to increase the prosperity of the empire as a whole. This principle
animated, and continues to animate the Shanghai Committee in
all recommendations they have hitherto made and may still have
to make. The Committee hold the belief derived from long
experience and some knowledge of the evil influences of the
decentralised system of government which prevails in China, that
representations dealing with commercial matters made directly-to
the Tsung-li Yamen, or the Board of Foreign Affairs, in Peking
by the minister resident there have so far virtually failed in their
object; and there is little reason to anticipate improvement in
this respect unless the method of making these communications is
materially changed. All past experience has made it clear that
the Imperial Government of China, or that part of it entrusted
with the administration of foreign commercial affairs, cannot be
relied upon to deal effectively with matters which primarily relate
to and affect the viceregal or provincial governments. When a
communication is made by Her Majesty's minister, on the earnest
representation of merchants in the treaty ports, to the Tsung-li
Yamen, the minister is invariably informed that before the matter-
can be decided upon the Viceroy or Governor of such a province
will be consulted. The Committee are aware that the Consuls in
Tientsin, Foochow, Canton, and perhaps iu some other places have
better opportunities to communicate with the Viceroys; but the
most important trade centre of Shanghai is precluded by distance
from free or ready intercourse with the Viceroy of the Liang-
kiang resident in Nanking. It will be urged that there is nothing

o o , o ~

to prevent perfect freedom of communication between the Consul-
General in Shanghai and the Viceroy at Nanking. Theoretically
this is correct, but the Shanghai Committee have reason for
stating that although official communications on matters of impor-
tance are occasionally addressed to the Viceroy, his reply is
invariably made through the Taotai of Shanghai, which is tanta-
mount' to an allegation that no direct intercourse is possible ; nor


china.

-33

can it be until the Viceroy is brought to understand that
dispatches of the character implied in consular communications
are entitled to suitable respect r.nd consideration. If the Viceroy
feels justified in disregarding, or treating disdainfully, the only
method.of communication available to British subjects, it follows
that a necessity arises for the appointment of a British official of
rank sufficient to command the respcct and attention of the
Viceroys throughout the empire. Such consular representations
as have been made have related chiefly to local affairs; there has
been no concerted action in tlie matter of British interests through-
out China; and what may be done at one place is not made
known at another. In those cases, therefore, where no previous
communication has been made "to the Viceroy or Governor
concerning an application to the Tsung-li Yamen, the official
whose interests are affected invariably opposes every proposition
made, with the result that the Tsung-li Yamen, being unwilling to
act in opposition, the question at issue is never adequately
answered and the minister obtains 110 satisfaction. The fact must changes
be recognised that many of the changes desirable may, and many affecting
of them undoubtedly do, affect the revenues of the provincial provincial
governments, thereby creating opposition fatal to their adoption.^®™™™13
It is not a sufficient answer to this objection to say that the adop- approved by
tion of the suggested change or reform, although it may diminish the viecro."
the income of a particular province, will more than compensate by ^°™etll0'y
a larger addition to the revenue of the Imperial Customs. The adopted,
system may be bad, but to refuse to recognise it would be to
display unpardonable fatuity; while to admit its existence and
persevere in ignoring it is to confirm a policy which cannot
succeed; which must perpetuate the reign of obstruction of which
the Shanghai Committee, the Chambers of Commerce in China,
and other commercial bodies and associations, have so justly
complained.

'" Acting upon this principle the Shanghai Committee have 110 principles,
intention of alluding at this time to the details, or to what may not detail,
appropriately be termed remedial evils, such as, for example, arc^lealt with
breaches of the treaty and commercial conventions; illegal snan^iini
exactions or evasions of rules and regulations. Although in these Comniiiice.
matters redress is frequently difficult to obtain, yet the existing
official machinery is able to deal with them more or less
adequately."

. " The aim of the'Shanghai Committee was and is to obtain the Appoim mfnt
appointment of a special commissioner or commercial agent wlio of special
shall have definite rank; accredited to the Board of Foreign con!â„¢^ij"l,1<>1.
Affairs, yet subordinate to Her Majesty's minister in Peking,again mglt'
through whom all communications with the Imperial Government
of China would then, as now,' be made. Such an appointment
would be no new departure in the diplomatic, service inasmuch as
Sir J. A. Crowe, K.O.M.G., C.B., holds a similar position under
Her Majesty's Ambassador in Paris; while in St. Petersburg and
Constantinople commerce is specially represented. The functions Hi* functions,
of this commissioner would be principally exercisable among the
(2297j c 2


u

china.

The reforms
to be

advocated.

Possible
objection on
ground of
expense; but
nevertheless
the only
eft'eclive
course open.

Present
insignificance
of Chinese
trade: less
than one-third
per capita of
that in British
Jndia.
ICxtension
dependent
upon opening
of entire
country.
Imperative
need of
railway s.. â– 

The British
merchant is
now entitled

Viceroys and Governors of the provinces, with whom, as well as
with his nationals at all the treaty ports, he should be in
continuous communication. It is by the adoption of measures
such as these that the great national reforms which have been
advocated, such as the extension of internal communication by
means of roads, railways, rivers and canals; the establishment of
a coinage system, and equalisation of provincial taxation (these
two latter being indispensable adjuncts to the creation of a railway
system); the opening of rivers to steam transport; the systemati-
sation of ihe tax known as likin, and of transit passes; the
administration of justice in cases in which foreigners are parties ;
and the opening of mines and development of the great national
resources of this vast nation in territory and population, can
alone be brought about. Spasmodic efforts in the direction of
reform are of little value. Success can only be achieved by the
exercise of sustained perseverence on the part of a commissioner
of sufficient experience in China, having considerable knowledge
of the language, and holding recognised rank. Whatever objec-
tions, and there are no doubt many, Her Majesty's government
may entertain to the creation of another salaried official in China,
it must be made clear to them that the desired ends can be
attained in 110 other way. Reforms can only be perfected when
the Imperial Government are advised that the concurrence and
co-operation of the provincial authorities have been first obtained.
The task of securing the co-operation of the provincial authorities
must necessarily be entrusted entirely 10 the commissioner; and
there is every reason to believe that the commissioner's report to
Her Majesty's minister, and the minister's representations to the
Imperial Government, made simultaneously witli the reception by
the latter of tlie formal report from the provincial authorities,
would ensure the execution of the proposed reform.

"The commerce of China, although it has expanded very much
in its value expressed in silver, is still utterly insignificant, being
3s. per capita of the population in the year 1895 ; and its extension
is dependent entirely upon a policy which shall open the entire
country to the advantages of unrestricted commercial intercourse.
While it is vitally important to the interests of British subjects
that they should be adequately represented by a commissioner
whose motives should be beyond all suspicion—for example, one
of the first measures that should be urged upon the governing
power of China is the creation of a railway system—and although
it appears to the Committee that the construction of railroads,
the opening of mines, the establishment of a national mint, or
adjustment or equalisation of internal taxation are not matters
with which Her Majesty's Government have hitherto successfully
concerned themselves, it must nevertheless be remembered that
other governments or their agents neglect no opportunity of
securing for their people privileges and concessions whenever
obtainable. I11 other words, the time has arrived when the
British merchant in China should receive from Her Majesty's
Government a more effective support in a country the Government


china.

of which will recognise nothing but direct and weighty in-to active „

fl-nce. grr.nlt10

I he Committee are impressed with the belief that in former Commercial
years, when British influence in China was potent, the affairs of^aivs c°"'
commerce had much more consideration at Her Majesty's Legation no "than
than they receive at present; and that the tendency of the time formerly,
is to make British commercial interests in China entirely sub-
servient to the exigencies of the diplomatic situation in Europe.

" The Shanghai Committee are unshaken in their opinion that VnIuu °f.a
the advocacy of domestic improvement which experience has "ncial
proved beyond all doubt beneficial to every other nation adopting British"
them, is amongst the legitimate functions of a British commercial interests,
commissioner in China; nor is there any reason whatever to
conceal the desire that part at least of the important public works,
that must sooner or later be carried out if China desires to emerge
from her state of stagnation, should be entrusted to British
enterprise and be carried out by means of British capital. At
present the etiquette which governs British diplomatic representa- Etiquette
tion abroad appears to preclude the exercise of any official influence fetish"3
for the promotion of British interests except in the general sense diplomacy,
of promoting trade; nevertheless it is notorious that the diplomatic Laxity of
representatives of several European nations have been most °.t,1fr .
energetic in the advocacy of the tradal schemes of their nationals. agenis in this
While it is desirable that the British system of non-interference regard,
by diplomatic representatives in the commercial transactions of Tlie remct!y
their countrymen in China should be continued, there seems no P10P0se
reason why a commercial commissioner specially appointed to
further Britisli trade should hesitate to advocate the personal
interests of the British merchant in China.

" Of the indemnity of 200,000,000 Haikwan taels.. or approxi- jF]*®"^cial

mately 33,000,000/. sterling, exacted by Japan, a large part has china.

been arranged for by means of foreign loans. The remainder, with

some 20,000,000 taels of interest, still remains to be paid, and it

is perfectly certain that without extraneous aid China will be

unable to cover this liability, the national means being inadequate

to meet domestic requirements. The only available security is

the customs revenue, and that is now almost entirely hypothecated.

The financial system of the Imperial Government is so defective Financial

that it may truthfully be said no man in China has any adequate of

knowledge of the income or expenditure or of the potential system.

resources of the empire. It would be within the province of Possibility of

a British commissioner to endeavour to persuade the provincial

authorities to adopt a system of finance which, if established, methodic

would consolidate the credit of the nation and provide means sjstem.

wherewith to defray liabilities, The great trouble of China at

the present time is the ignorance of the governing classes of the

principles of financial administration. Such a thing as a budget Possible

or estimate for the future of income and expenditure is unknown, ®^™aete*°df

and will remain so until an effort is made to enlighten the rulers

and to assist in a complete reform of the system in a manner The nation

similar to that sq successfully employed in Egypt. The nation leading in

* fhesp rcforjns


-36

china.

will confer an which contributes to this great reform will confer an everlasting
iienemll'if beiieiit upon China; and the one nation whose action.would
China! be most free from suspicion or misconstruction is Great
Britain.

Oonclusior. "From these notes it maybe seen that the object the Shanghai
Committee had in view when pressing for the appointment of a
commercial commissioner was not limited to the petty details
of official obstruction to trade, but comprehended a system of
reform calculated to raise and strengthen the Chinese empire,
ancl simultaneously promote the welfare of British commerce and
British interests."

While fully agreeing with the Shanghai Committee that
nothing could be more unsatisfactory than the way in which the
settlement of every question is shirked by the Central Govern-
ment, 011 the plea that the" provincial government concerned must
be consulted, ancl that an interminable time is wasted in making
references backwards ancl forwards between Peking and the
provinces. I am not sanguine enough to believe that the remedy
suggested by the Committee would improve matters. As the
committee point out H.M.'s Consuls at Canton, Foochow,
Hankow, ancl Tientsin are in a position to have direct relations
with the viceroys ruling over the provinces in which these ports
are respectively situated, but it is doubtful whether they have
succeeded in persuading these viceroj's even to take into serious
consideration, much less adopt any project of reform, however
trivial. The difficulty is not that the governors or viceroys are
insufficiently informed, it is that they are unwilling to make any
move in the right direction, and this unwillingness will endure,
whether our representative is a consul or an official of higher
rank. True, our consuls at ports where there are governors or
viceroys find some difficulty in holding communications- with
these high officials unless they have some special business to
discuss, ancl possibly a superintendent of trade could have more
easy: access, but he could not more than a consul command
attention for any particular matter in which the viceroy did not see
some profit to his province, ancl more particularly to himself.

Ancl herein lies the difficulty in our dealings with provincial
governments, that a reciprocal bargain is out of the question;
The concession obtained at the expense of the province is paid
for by something which brings profit to the Central Government.
Every new port opened causes a pecuniary loss to the province,
and, therefore, to the personnel of the provincial government. A
national currency would be a source of gain to the Central
Government, ancl of loss to provincial officials, who make money
out of the existing confusion in weights ancl "fineness " of silver ;
factories bring nothing to the viceroy who may permit their
establishment, for if an excise is imposed it will be collected by
the agents of the Central Government. The working of mines
with machinery by foreigners would probably mean that a royalty
would be exacted for the benefit of the Imperial Government.

The Shanghai Committee's arguments are chiefly based , on


china.

-37

tlie assumption that provincial rulers have the welfare of the
country, and particularly of their province at heart, and that
domestic improvements which experience has proved to be
beneficial to every other nation adopting them have for this reason
a chance of being adopted in China if properly pressed by a duly
accredited superintendent of trade or commercial commissioner.
Similarly the Committee seem hopeful that a British commissioner
might persuade the provincial authorities to reform their financial
system, and thereby consolidate the credit of the nation. I fear
the Committee are giving provincial rulers credit for virtues they
clo not possess. Nothing is further from their mind than a
wish to reform their financial system. The Chinese official of
to-day thrives by defrauding the State, and the more confused is
the financial system the greater is his opportunity.

The other matters to which my attention was directed by the
Shanghai Committee as a rule speak for themselves, but where it
seems necessary I shall make a few observations.

II. The necessity of separating the offices of consul-general Separation of
and chief judge seems very obvious. Under the present regime "^^j0*
at the very time that the assistance and advice of the consul-genel.nl „nd
general would be of most value he feels compelled to keep in the chief judge,
background lest his intervention might be suspected of impairing
lus judicial impartiality at a later stage of the proceedings. I
can scarcely imagine any important case where, iu his capacity
of. consul-general, the officer in the port can now espouse the
cause of his countrymen with that energy and show of determina-
tion that are necessary when fighting our people's battles, and
without which any intervention is unavailing. Whatever may
be the question in dispute between a British subject and a native
merchant, or, perhaps, a Chinese official, the attempt to obtain
redress is futile if we merely leave our countryman to his own
resources. He has not access except through his consul to the
Chinese courts of justice and he can look for no measure of
justice unless the Chinese judge knows that the consul is backing
up his national. From the very nature of the case a consul must
show some partisanship, and proceed in a way which would be
unbecoming in an officer holding high judicial office. When it
conies not to supporting a countryman in a particular, dispute,
but to pushing British interests in order that we may not be
outstripped by more zealous and aggressive consuls of other
Towers, we are still in a worse position. Our chief judge cannot
allow himself to be involved in his capacity of consul-general in
any affair that may have to be unravelled before him sitting as
chief judge, and where there is a prospect of such a case arising
the officer sinks the consul-general in order to keep himself
uncompromised and ready to perform in his other role. Our
interests in China require far too much pushing and bolstering to
admit of indulging in such refinement of feeling, and the consul-
general should be free to back up British interests to his utmost,
without being troubled with any thought about judicial
impartiality, To all intents and purposes the senior officer or


-38

china.

consul-general now perforins the functions of chief judge, and
his next junior, the consul, those of consul-general. It would
add to the usefulness of both offices if a separation which has to
be made de, facto was also recognised dejure.

The Shanghai Committee supplies an instructive instance of
the inconvenience of the amalgamation of the two offices. The
case cited by the Committee is the following:—

" Objections to the combination of the dissimilar offices of Consul-
General and Chief Justice.

"The objections from a legal point of view of the combina-
tion of the offices of chief justice and consul-general were well
illustrated in the case of ' Major v. Jardine, Matheson, and
Company,' which came before the Supreme Court in 1893.

" Some considerable time before the amalgamation of the
offices, and before the institution of the suit which was brought
to determine the rights of rival claimants to certain foreshore, the
assistance of the consul-general at the time was invoked by one of
the parties to obtain from the Chinese authorities the recognition
of the applicants' claim as riparian owners to pre-empt the fore-
shore in question.

"The application was supported by a statement which, if
correct, fully justified the consular authorities in pressing it upon
the Chinese authorities ; this was accordingly done, and the nego-
tiations with the Chinese!£authorities continued after the amal-
gamation of the offices was effected. At length a suit was insti-
tuted in Her Britannic Majesty's Supreme Court, in which the
title of the claimants, whose cause had been espoused by the
consul-general (in whose name all representations from the Con-
sulate-General to the Chinese authorities are deemed to be
made), came in question. The rights of the parties to the suit
depended upon the accuracy of the' views which hacl up till
then been persistently urged by or in the name of the chief justice
in his capacity as consul-general.. The position was further
aggravated by the desire of both sides to secure the assistance of
the same chief justice and consul-general in obtaining evidence
from the Chinese authorities in support of their respective
cases.

" It is not to be wondered at that this state of affairs gave rise
to great dissatisfaction and adverse comment. The inconvenience
is obvious of an authority, who lias been called upon, bond Jicle,
and as a duty, in one capacity, to vigorously support a contention,
to be called upon, in another capacity, to sit judicially to decide
whether such contention is right.

" The recurrence of such a difficulty is not only possible but
probable, ancl can only be avoided by the holder of the combined
offices conscientiously abstaining in many cases from exercising
the functions of consul-general."

Jn the ordinary course of the consul-general's duties cases


china.

39

similar to this caunot but occur. That they do not occur more
frequently is due to the tact shown by the incumbent of the
post, but this tact has to be exercised at the expense of our general
British interests.

III. The right of residence in the interior for purposes of Residence in
trade is one which pa3t experience does not lead one to suppose t,hc iniei'io1'-
would be largely availed of. Even to some of the ports already

open to us, and where consuls are established, it is found that
foreigners do not resort, and under the passport system trading in
the interior, to a certain extent, is now within the reach of British
subjects.

But something further in this direction might be clone if we ob- Native
tained permission for our merchants to have agencies in the interior agencies in'
under the management of natives of China, for then the question tl]e mtcrior-
of jurisdiction over the person would not arise. At present the
Chinese Government does not admit that foreigners have the right
to open agencies in the interior, even under native management,
although our treaty of 1858 contains 110 explicit prohibition.
The chief advantage that this extension of our privileges would
confer is that British merchants could send goods for sale in the
interior, and escape the terminal tax that I have already
described; but the business to be successful must be a retail
trade, for merchandise in bulk could, as now, be watched until it
passed into Chinese possession, and then made to pay. Still, by
these means, the distribution of goods might be facilitated, and
the fact that a foreign firm's name was on the signboard would
certainly ensure for the business an immunity it could not other-
wise obtain.

IV. The freedom of steam navigation in all waterways suggests Freedom or
some difficulties in the case of foreign-owned steamers: for
instance, the question of jurisdiction in disputes, arising out of col-
lisions, claims for missing or damaged cargo, &c., but where one

end of the voyage, as it probably would be, was a treaty port with
a resident consul, the difficulty would be 110 more insurmountable
than it is now, when collisions occur, between any two treaty
ports.

The suggestion that foreign-owned craft may ply elsewhere
than between treaty ports will be stubbornly opposed by the pro-
vincial governments, who will see their likin revenue threatened;
but there could not be the same objection to the presence of
steamers or tugboats under the Chinese flag. On the Canton
waters steam tugboats are common enough, but the regulations
are fitful and vexatious—they may only tow, and may not carry
cargo or passengers. Quite recently permission has at last been
granted to a Chinese company to put tug-boats on the Poyang
lake ; and an extension of the permission to Chinese-owned boats
in all directions would be almost as great a boon to trade as if the
foreign flag was included in the concession.

The establishment of a national mint is a reform obviously National
desirable, and against which there can be no honest opposition, currency,
For large affairs silver by weight is the raedinm of settlement,


-40

china.

and for smaller transactions copper cash. The silver unit is the
taelj but there are sixty different taels, the difference being in the
weight and purity of the metal. Each place has its own tael, and
even in the same place two or more sorts of taels may be used in
dill'erent trades. The copper cash are equally puzzling, and
unequal in value. There is no fixed ratio between copper cash
and silver; the exchange between the two depends on the
quantity of cash in circulation, and this again depends on the
provincial governments who cause them to be coined in'a'hap-
hazard sort of way when they seem to be getting scaice. To add
to the confusion a great many spurious cash are in circulation,
and the best cash in a string are picked out and melted, for at the
present price of copper these are worth more as metal than as
coin of the realm.

Canion and It is true there is a provincial mint at Canton, and another
Wucliang at Wuchang the capital-of Hupeh, but in silver they only coin
mints. dollars and fractional currency which are not legal tender, and

are only current in such parts of -'China as have already become
acquainted with the Mexican dollar. As the dollars which these
mints turn out are only worth their intrinsic value, there is no
profit in coining them, and for this reason, at Canton certainly,
iliey are 110 longer produced. The Canton mint, which lias the
largest plant in the world, is almost idle, and now only turns out
a small quantity of copper cash and small silver coins, which on
account of their convenience pass for more than their .metallic
value, and thus show a profit in the coining. Neither the Canton
nor the Wuchang dollar is really a Chinese coin; it is not
accepted as a legal tender, so that it is difficult to see why the
mints were established; they do not supply a want, for in course
of time every dollar minted returns to the crucible.
Reform in VI. The suggestion contained under the sixth head needs 110

tho system of amplification, but as an instance of what goes on all over China
1 shall mention a case which came under my observation at
Kiukiang. It will serve to expose the confused state of Chinese
money, and the way in which officials turn this confusion to their
own profit.

A British firm was bringing tea from the tea-producing
districts to the port of Kiukiang. The tea was not protected by a
transit pass, and was consequently liable to pay all taxes en
route. At a certain station a tull of 22 619 taels of silver,
Government standard, was demanded, and the native official,
by a process of his own, calculated that these 22-619 taels were
equivalent to 30'390 taels of local currency. He next demanded
that these 30'390 taels should be paid, not in silver, but in
copper cash. The market rate between silver and cash'at
that time was 1,315 cash to 1 tael; but the official quoted
a rate of his own, and made it 1,450 cash to the tael. Upon
Her Majesty's Consul lodging a complaint with this official's
superior, the latter gave the following explanation, which is
neither very clear nor satisfactory. The native customs collect
their duties in treasury or' government, taels, -and whenjeceivcd

inland
taxation.

TIow r r 11 ive
tax stations
ileeee the
trader.


china.

41

iii local currency 29 per cent, is added to cover "waste and
miscellaneous expenses;" moreover, as the revenue has to be
remitted to Peking, a further 12 per cent, is added to make good
the difference of "touch" or "fineness" of the silver so as to
bring it up to the Peking standard. Being further pressed to
explain the addition of 29 per cent., the official replied that
this covered the miscellaneous expenses of collection, the: cost of
remitting to Peking, and " other office expenses too numerous to
mention." (It may here be stated that 100 treasury taels are
equal to 104 Kiukiang commercial taels.) Now if China had
a national currency, a merchant who had to pay 22 taels of duty
would pay 22 taels, and there would be an end of the matter.
But this would be to deprive 'an army of officials of their
emoluments.

VII. Here the Shanghai Committee point to one of the many Beform of
reforms necessary in the judicial administration of China. At all judicial
the ports the complaint is the same, that it is almost impossible 8Jsten>i
for a foreign plaintiff to get satisfaction out of a Chinese defen-
dant. From the outset the Chinese official, who amongst liir,
multifarious duties also performs the function of judge, acts as
counsel for the defendant, and finally, either by giving an unjust
decision, or by failing to put his judgment into execution, leaves
the foreign plaintiff without a remedy. At Shanghai, where suits
between foreigners and Chinese are much more numerous than
elsewhere, there exists a " Mixed " Court where the proceedings are
more regular, and which gives general satisfaction in minor cases ;
but its jurisdiction is limited, and in important cases it is power-
less to act. I here give the suggestion of the Shanghai Committee
in their own words :—

"The establishment of a court of competent jurisdiction to
hear and determine, and to enforce its judgments in all suits in
which British subjects are'plaintiffs and Chinese subjects de-
fendants. The institution now known as the Mixed Court is
inadequate for the administration of justice, for the following
reasons.among others. The rank of the officials who have hitherto
been appointed to act as judges of-the Mixed Court is so low as to be
in many cases beneath the rank of defendants appearing before the
court; and the magistrate is unable .to enforce his judgments.
The power of this court in criminal matters is limited to dealing
with very trivial cases, all grave charges having to bs sent to
some other court; in consequence of which natives in foreign
employ, such, for example, as municipal police, subjected to
serious charges arising out of the execution of their duty, arc
transferred to other places for examination, are frequently .lost
sight of by their employers, and occasionally remain for a long-
time in prison without trial. The appeal 'from the Mixed Court
of Shanghai in criminal cases appears to be to Soochow; in civil
cases it is doubtful to what court, if any, an appeal legally lies.
The court should be reconstructed. Officials of much higher rank
should be appointed with all the powers of a district magistrate,
in order that the presiding judge may give at least a first instance


-42

china.

Free

exportation
of grain.

Coast trade
in grain.

judgment in every case. The foreign settlements should be made
a separate jurisdiction of the Shanghai Hsien; the appeal should
be to the Taotai and Chief Justice of Her Majesty's Supreme
Court in China; thence to a court in Peking of which Her
Majesty's Minister should be a member. The magistrate of first
instance ought to be bound to hear in open court oil cases
formally brought before him; rules of procedure should be drawn
up, and such other measures adopted as will ensure the satis-
factory administration of justice without unnecessary delay, and
irrespective of the rank of the parties."

VIII. This is a subject that must be dealt with in two parts. The
exportation of grain from China is forbidden by treaty ; and until
their views on economical questions undergo a radical change, it
is useless to hope that the Chinese Government will consent to
remove the prohibition.

The transport of grain by foreign steamer from one part of
China to another is permitted by treaty ; but the provincial
governments occasionally take it upon themselves to forbid the
exportation on the plea, usually, that the province cannot afford
to part with any portion of its food supply. This power, which
the provincial governments arrogate to themselves, is not infre-
quently used to further private ends, as the following extract from
the Shanghai Committee's Memorandum shows:—

" Notes 011 the Shipment of liiee anil Grain, &c.

"According to the Chinese Customs Tariff Eules (Kule 5,
Clauses 3 and 2), forming part of the Treaty of 1858, rice and
other grains cannot be exported to foreign ports, but may be ex-
ported from one of the open ports to another under bond and on
payment of the duty specified in the tariff, after permission has
been obtained from the native authorities. In practice, however,
it has been the custom for many years for the officials at the ports
of the great rice and grain-producing districts to issue periodi-
cally, on dates decided upon by the various superintendents of
trade, huchaos permitting grain to be shipped to other ports where
scarcity exists or is anticipated. Sometimes these huchaos simply
provide for shipments to he made on the ordinary conditions, i.e.,
on payment of tariff duty, and sometimes they authorise the
imperial maritime customs to pass the grain for shipment without
payment of duty.

" As rice and other grain constitute three-fourths of the
cargoes carried by steamers all over the coast of China, and as
fully two-thirds of this coast steamer trade is in the hands of
British subjects and carried in British bottoms, it will be seen how
important it is that nothing should be clone to interfere with or
prevent the transportation of rice and grain.

" The permissive system above referred to has worked smoothly
on th« whole, but on two occasions recently incidents have
occurred which sIjqw that some more clearly defined aiid decided


china.

43

arrangement is needed. In the autumn of 1892 the Taotai of
Shanghai began issuing huchccos for the export of rice and wheat
amongst native merchants generally as usual, authorising ship-
ment to Tientsin, but on each of these huchaos a clause was
stamped to the effect that:—'By order of Viceroy Li all such
rice and wheat could be exported duty-free if shipment were
made by China Merchants' Company's steamers only.'

" The attention of Her Britannic Majesty's Consul was at once
drawn to this infraction of treaty rights (Article 14 of the French
Treaty of 1858, and more especially Article 3 of the United States
Commercial Treaty of 1880), and eventually the objectionable
restriction svas removed, but not until after Tientsin was closed by
ice in December, ancl in the meantime, of course, British ship-
owners suffered heavy loss. It is noteworthy that the above action
was co-incident with the appointment of Sheng Taotai to the post
of Superintendent of Customs at Tientsin, ancl as he is the
Managing Director of the China Merchants' S.N. Co., the reason
for the restrictive clause in grain liuchaos needs no further
explanation.

" Again, in the autumn of 1894, while the war with Japan was
going on, the issue of hnchaos was suspended, notwithstanding that
Shanghai shippers and Tientsin importers were clamouring for
permission to provide their usual winter supplies for the northern
districts, until a few weeks prior to the closing of the Tientsin
River. The reason given officially for this refusal to issue huchaos
was that if the shipment of rice was permitted, it might and pro-
bably would be shipped to Japan ! But it was currently reported
and universally believed that the Chinese officials at Tientsin were
interested in a ' corner' in rice; ancl their action was taken to
bolster up prices !

" It is probably too much to expect that the Chinese Govern-
ment would agree to the exportation of rice and grain, &c., to other
countries at once, but in view of the need for increased customs
revenue to meet the interest on loans,. &c., for which it has been
and is now being pledged as security, the time may not be inoppor-
tune to urge that the question of permitting exportation to foreign
countries might now be reconsidered.

" There can be no reason, however, why rice and grain, &c.,
should not be placed on the same footing as other produce—as
regards allowing shipment from one treaty port to another—simply
on giving bond without requiring huchaos. The ordinary laws of
supply and demand, as applied by such keen traders as the Chinese,
would be a more reliable guide as to the needs of certain districts,
and the ability of others to supply those needs, than the delibera-
tions of official superintendents of trade."

Another way in which the power is abused is as follows:—
When the crops fail in any province—say Kwangtung—the price
of rice at once goes up, and large shipments from the other rice-
producing provinces take place—from the An-liui province, for
example. The An-hui Government takes alarm, lest the price
of rice should go up, and puts an embargo on the exportation. It


u

china a.

Importation
of salt.

Registration
of trade
mirSs.

liability of

Chinese

shareholders

next-allows a few favoured individuals to export, on the pretext
that assistance to the afflicted Kwangtung province must not he
wholly denied. These favoured few, being able to buy cheap in
the overstocked An-liui market, and to sell dear in the Kwangtung
market, realise handsome profits.

Another use to which this power of embargo is put is to enable
the province to heap up taxes on rice. Foreign steamers at times
will be refused permission to load rice at Wiihu, but they may do
so at Chinkiang, 100 miles further down river. Between AVuliu
and Chinkiang the rice must be carried in native junks, and of
course pay taxes at the stations en route. A steamer would
escape these payments. Here it is not the fear of scarcity that
suggests the prohibition, for the prohibition only applies to vessels
that are exempt from provincial taxation.

If absolute freedom in the carrying trade of rice cannot be
secured,-at least the arbitrary action of provincial governors should
be brought under control; ancl the movement of grain, if it must
be a matter of official interference, should at least be regulated by
the Central Government in an impartial manner.

IX. Under the treaty the importation of salt is forbidden.
The trade in salt is a Government monopoly. For purposes of the
salt administration the empire is divided into seven circuits; and
the salt produced in one circuit may only be sold within its own
limits. The revenue derived from the monopoly is obtained in
three ways;—Firstly, from the sale of licenses authorising mer-
chants to deal in salt; secondly, from the profits on the sale of
salt out of the Government depots ; and thirdly, from thelikintax
on all salt sold by the licensees to the public. Right through
there is peculation on a grand scale. It has been estimated by
competent persons that if the importation of foreign salt was per-
mitted on payment of an import duty of 100 per cent, ad valorem,
the salt revenue would be doubled, and the consumer would get
his salt for about half the present price.

X. It is evident to anyone who looks into Chinese shops where
foreign wares are sold, that many articles of inferior make are
marked with the names and devices of well-known firms of
established reputation ; but the falsification in many instances has
been done out of China. â–  !Now that China is becoming a manu-
facturing country, it is very desirable that our British manufactures
should be protected, for advantage will surely be taken of the
favourable'footing which some marks have secured for themselves.
When cases of counterfeiting have been brought to the notice of
Chinese officials, they have been ready enough to promise that if
the offence coulcl be brought home to a Chinese subject, lis would
receive punishment. Protection of trademarks by registration is
a measure which the Chinese Government will probably be found
quite ready to adopt; but the detection of the offence must
always remain a matter of great difficulty in a country like
this."

â–  XT. This matter might have been included in No. VII.,. for
the question here raised is one .of judicial, administration.' I ain


china.

â– ir.

Hot aware 'that the liability of Chinese shareholders for the unpaid f(U. „npsU
balance of their shares lias ever been disputed or called in question capital,
until a recent case of some importance occurred. A number of
Chinese had hought shares in a local joint-stock bank, on which
]/. os. was paid up, and 81. 15s. still due. The concern did not
prosper; and some Chinese shareholders, when applied to, refused
to pay up the call, and preferred to forfeit their shares.

The magistrate of the Chinese court at Shanghai refused to

O O

allow a ca.se to be brought into court. Without going into the merits
of the case, lie ruled that'the shareholders were justified in getting
out of the concern. It was a question of contract, and should have
been gone into like any oLlier, whatever the judgment eventually
might have been. But the remedy seems in the'hands of com-
pany directors who can refuse to let Chinese buy shares which
are not fully paid-up. The improbability that defaulting China-
men will be brought to account suggests that care should

Co

be exercised with regard to the "reserve liability of share-
holders."

XII. When foreign merchandise is re-exported to a foreign Delay in
country it may claim to have refunded the full import duty issuing
originally paid on arrival; and when native produce is brought
from another port to Shanghai for exportation abroad, this also certificates,
is entitled to have refunded the coast trade duty previously paid
on arrival nt Shanghai. The duty is refunded by means of a
"drawback" which may either be cashed or used in payment
of duties. These drawbacks are issued by the Chinese custom-
house at Shanghai, and they delay issuing them as long as they
can in order that they may retain the use of the money. There
is no valid reason why the drawback should not be issued within
24 hours, but as a rule there is a delay of 6 months, and sometimes
it is as much as 2 years.

1'e-export certificates are required under the following
circumstances. Native produce exported from the Yangtze
ports via Shanghai pays siinultaneoasly at the original port of
shipment the full export duty and the coast trade duty. When
it has been re-exported to a foreign country from Shanghai, a
re-export certificate lias to be obtained, on presentation of which
at the original port of shipment the coast trade duty is refunded.

Here, again, the Shanghai officials delay unreasonably in
issuing the re-export certificate. As the coast trade duty was
paid at a Yangtze port it is difficult to see what motive the
Shanghai official has for thus delaying. It may be in order to
force the merchants to pay a fee in order to expedite matters;
or it may be with the object of playing into the hand's of his
colleague at the original port of shipment who thus retains the
use of the money for some months longer. Whatever the reason
may be, a period Of 8 months usually elapses before the re-export
certificate can be obtained. One British firm alone informed me
that they had some 40,000 taels out in this way.

XIII and XIV. These arj local questions of great importance,
and have for some time been engaging the attention of the proper 0f foreign"

settlement.


46

china.

Chungking
suggestions :
transit trade.

Chungking

suggestions.
Revision of
Yangtze trade
regulations.

Detention of
steamers at
Chinkiang.

Re-payment
at Shanghai
of duties on
Yangtze
Valley
imports.

authorities, and I do not think it falls within my province to
discuss them.

Alter Shanghai the next port at which the local merchants
had reason to call my attention to hindrances to trade was
Chungking, where, purely local matters apart, the principal
complaint was that the treaty provisions regarding transit trade
were ignored; but on this subject I have already dilated at length
under the head of inland transit trade.

At the port of Chinkiang the Chamber of Commerce repre-
sented that the regulations for trade on the Yangtze framed in
1SG2 required revision. These regulations were drawn up at a
time when the Yangtze Valley was in the hands of the Taiping
rebels, and were chiefly designed to prevent arms and other
supplies from finding their way into the rebel camp. The
necessity for such precautions has long ago passed away, and
now the only vigilance required is for the protection of the
revenue. In the opinion of the Chinkiang mercantile community
two of the regulations now in force might be relaxed without in

O O

any way exposing the revenue to loss.

One is the rule which requires steamers proceeding beyond
Chinkiang to stop there on the way up and clown to report at the
consulate and the custom-house. The inconvenience of this rule
is felt chiefly by steamers bound for Wuhu to load rice. This
is a large and increasing trade, and if the rule is strictly
interpreted it may cause considerable delay to steamers; for
under the most unfavourable circumstances a steamer might
have to wait from 4 p.m. one day to 10 a.m. the next, merely
to perforin an act of pure formality. It is true that the foreign
customs at Chinkiang, as a rule, do what they can to reduce
the rvteamer's detention to a minimum, but these facilities are
given as a favour which may be refused at any time, and for any
reason, good or bad, at the caprice of the customs authorities;
and there are also occasions when the failure to send timely
notice of a steamer's intended arrival makes detention and delay
unavoidable. Wuhu is only 100 miles beyond Chinkiang, and there
appears no good reason why steamers should not be allowed to
proceed there direct.

The other rule which the Chinkiang merchants would have
amended is that under which import cargo destined for a Yangtze
port must pay all duties at Shanghai before it is transhipped to
a Yangtze river steamer. The effect of this rule is that all cargo
coming out on a through bill of lading must be examined at
Shanghai, and that the steamer's agent must pay the duties in
advance, and recover them from the consignee at destination.

As the Yangtze Valley is chiefly supplied from the great
emporium of Shanghai, where all merchandise has already paid
import duty, I cannot believe that this rule can cause serious
inconvenience; of all the Yangtze ports Chinkiang is the only one
where reference was made to the matter.


china.

-47

Part IV.—Consequences of the War with Japan.

The war with Japan had scarcely any effect on the trade of Effect of war
China. Except at the port of Newchwang, which was seized by 011 tmcle-
the Japanese and occupied by them until the close of 1895, trade
went on much as before, and the cutosm-house returns for
1894 and 1895 show that quantities and values were not
affected.

The treaty which brought the war to a termination, satisfac-
tory as its terms may have been to victorious Japan, was a disap-
pointment to those who had been cherishing the hope that it
would mark a new departure in foreign relations with China,
and that at last the long deferred opening up of the country was
about to take place. Neither from the terms which Japan has
exacted, nor from the severe lesson administered to China, are
changes likely to follow which will materially affect our com-
mercial interests in these parts. Indications are already abundant
that it is vain, to look for any spontaneous effort on the
part of China to rouse herself from her lamentable state of
torpor.

The extent to which our commercial interests in China are How British
affected by the treaty of Shimonoseki I shall now attempt to set interests mv
forth affected by

Article II. of the treaty cedes the island of Formosa to Japan. 1

Whatever portion of our manufactures was formerly taken by the Cession c f
island will henceforth pay duties according to the Japanese tariff. Formos.i.
For the most important articles of our British products the future
scale of duties has been fixed, and has been calculated on a 10 per
cent, ad valorem basis. This is higher than the tariff of import
duties ruling in Formosa before the war, but this difference will
be more than made up for by the free circulation of British goods
throughout the island.

The annual importation of foreign goods into Formosa is on an
average 4,000,000 taels a year. This amount will now be lost to
the China trade, but Formosa under Japanese rule is likely to be
a better customer of ours, and the cession from a commercial point
of view will be a gain.

The chief export from Formosa is tea. Under Chinese rule Formosan lea, ;
all this tea was sent abroad, chiefly to the United States, through tradc- :
the port of Amoy, where the principal tea firms are situated, and !

where the tea is manipulated and repacked. The tea having paid
its export duty in Formosa was allowed to enter and leave Amoy
again without further payment. Now that Formosa has passed
into other hands it remains to be seen whether China will continue
to treat a foreign country's produce with the same liberality. Any
attempt to impose a duty at Amoy would certainly drive the tea
business away from the port, and the Chinese Government will
probably under the present enlightened foreign customs adminis-
tration not commit such a blunder. But it is also probable,
independently of anything the Chinese may do, that through the
(2297; ' »


china,

action of the Japanese Government Formosan tea may desert Amoy,
and find its way to America, through one of the. Japanese ports.
There being no safe anchorage for large steamers in Formosa the
tea has been sent to Amoy for transhipment to larger vessels,-but
with a line of Japanese steamers connecting Formosa with Kobe
or Yokohama it may be found more simple to send the tea to one
o£ these ports for transhipment there. This would be a serious
loss to the mercantile community at Amoy, but to commerce as a
whole the change would be immaterial.
War Article IY. provides for the payment of a war indemnity of

indemnity. 200,000,000 taels, and by a subsequent arrangement the territory
of Liao-tung was restored to China for a further sum of
30,000,000.taels. China has thus to find 230,000,000 taels. It is
in this extra drain on the country that there is a serious menace
to our commerce. In order to pay off the indemnity China has
already pledged the foreign customs revenue for two loans
amounting to 200,000,000 taels ; this means that for some years to
come China will have to provide something like 15,000,000 taels
to meet the interest and sinking fund, and it is chiefly out of trade
that the money must come. The foreign customs revenue, which
is the mainstay of the Central Government, will in future go into
the pockets of the foreign bondholder; but Peking will not consent
to go without money. Having no national budget it is certain
that the provincial governments will now be called upon to send
to Peking larger contributions than before, and this at a time
when they will be deprived of the share of the foreign customs
revenue which was allotted to them for provincial requirements.
It is always on trade that extra taxation falls.
Other sourcea The other sources of revenue at present existing are not capable
of revenue not of expansion. The land tax, which is the chief item of each
provincial budget, is immutably fixed by law, and any attempt to
increase it would lead to a rebellion. The salt tax has probably
reached the point at which a heavier impost would mean a
diminished revenue. â–  The unfortunate trader seems to be the only
source from which money can be drawn. The government has
before now, during the suppression of the several rebellions, been
able to extract such enormous sums from the people, and this too
at a time when the disturbed state of the country and consequent
stagnation of trade made the task doubly difficult, that-the money
will doubtless be forthcoming, but it lias to be remembered" that
iikin taxation, under the corrupt provincial administration only about 30 per
cent, of the amount exacted on trade is accounted for to: the
government, and that whatever be the number of millions hence-
forth required to repay foreign loans, something like three times
that burden will be imposed on trade.. It may be taken as certain
that the constituents of foreign trade will have to pay their- share,
and that the means now employed to elude treaty restrictions will
be used to a still more injurious extent. The necessities of-the
situation will incite the provincial authorities to follow with
greater boldness a course which they have learnt from experience
they may adopt with every prospect of impunity.

oapaoie or
expansion.

Wasteful

tv(;l pin nf


china.

-49

.. The Commercial Treaty "referred to in Article VI. was. signed in Commercial
Peking in July last, but it has not yet been published to the convention
world. It is known, however, that it does not introduce any F"11"58 no
changes of importance, and that it does little more than place ihifngts."1
Japan on the same footing as other Powers in China. Under the
old treaty, annulled by the late war, Japan did not enjoy all the
advantages which the other foreign treaties confer upon Europeans.
The principal disability under which the Japanese laboured in
China was that their merchants could only sell their goods at
certain ports of entry ; they were not allowed to seek markets
in the interior nor to accompany goods inland; neither could
they commute inland duties by one single payment. Similarly
with respect to Chinese produce, Japanese subjects could only
buy at the ports; they might not go into the interior to
collect native merchandise.

By the new Commercial Treaty they are placed in as good
a position as other foreigners, and the permission to trade in the
interior will probably be more extensively used by Japanese than
it has been by our own merchants.

Article VI. also opens four new ports to foreign commerce. Opening of
They are: Chungking in the province of Ssu-chuan ; Shashih, in four new
Hupeh; Soochow, in Kiangsu; and Hangchow, in Chekiang. Ports-
Chungking was already open to us in a way. British subjects Port of
were allowed to establish themselves there, and to import and Chungking,
export merchandise on the same tariff of duties as at other ports;
but the right of British vessels to visit the port was not con-
ceded, the carrying trade being restricted to native junks. By
the Japanese treaty, steam navigation is now permitted as far as Steamers may

Chungking, and under the most favoured nation clause the right now proceed

° , ° ° to Chungking,

accrues to us. 5 5

Neither the Japanese nor any other foreigners have yet
attempted to replace native junks with steamers ; and the dangers
of navigation between Ichang and Chungking may well cause
shipowners to carefully count the cost. And yet when, in 1891,
an agreement was signed by the British Minister which opened,
the city of Chungking to foreign trade, but at the same time
waived for the time the right to use steamers beyond Ichang,
the article was severely criticised by the British mercantile com-
munity in China. It was denounced as surrendering a valuable
privilege. It is, therefore, somewhat disappointing now that the
right is established beyond dispute that no forward movement is
being made.

Until communication by steam is established, the trade of
Chungking cannot be expected to expand. The province of
Ssuchuan, rich as it is, has the disadvantage of being almost cut
off from the rest of the world; for merchandise can now only
reach it during certain months of the year, and after a perilous
voyage which may take 6 weeks, but more frequently 3 months.
Chungking has now been opened to us 5 years, but so far only Chungking
one British merchant has been tempted to settle there, and his so ±ar
success has not been marked. As elsewhere, the import trade is lsaPPointu16
(2297) D 2


-50

china.

Export trade
must be
developed by
foreigners.

System of
chartered
junks between
Ichang and
Chungking.

Native

custom-house
at Kuei-Fu
competes with
foreign
customs for
cargoes.

entirely in Chinese hands, and at Chungking, more than in other
places, the foreigner finds it difficult to get a share of the trade.
The system of long credit which prevails there places the
foreigner at a great disadvantage, for not only must he be for
months out of his money, but at the end of the allotted period
he runs much greater risk than the native of being defrauded.
In the export trade the custom, at any rate where foreigners are
concerned, is to pay cash, and as there are no foreign banks, nor,
in the absence of insurable foreign vessels, any means of obtaining
advances on shipments, the capital required for dealing in
exports must necessarily be considerable. The development of
the export trade must depend largely on the enterprise of
foreigners, and without, a large export trade there cannot be a
return current of imports ; but the present isolation of the pro-
vince does not invite the presence of foreign pioneers coming to
seek out new articles which may be profitably exported. Pio-
neers are usually poor men, and under the present conditions
an exporter must have means.

The trade on that dangerous section of the Yangtze which
lies between Chungking and Ichang is now carried on in native
junks. Foreigners have the right to charter junks for the voyage,
or to run their own junks. As a matter of fact none are foreign
owned. Chartered junks are in all respects treated as foreign
vessels: they pay import and export duties according to the
treaty tariff at the foreign custom-house, they may only trade
between the two treaty ports, and they are exempt from interfer-
ence at the hands of the native customs or likin stations. Foreign
goods, having already paid import duty on arrival in China, have
nothing more to pay at Chungking, and native articles, if intended
for a foreign market, escape with payment of an export duty if
shipped by chartered junks from Chungking. If either import or
export cargo is shipped by unchartered junk it is liable to local
imposts. Under the circumstances all foreign imports reach
Chungking by chartered junk. Wlien it is a question of trans-
porting native produce between Chungking and Ichang, or vice
versa, chartered junks pay the usual coast trade duty amounting
to 7-?r per cent.; and these are, therefore, only employed when the
7| per cent, duty comes to less than the taxes levied at the native
custom-houses. In order to attract the trade, and to compete suc-
cessfully with the foreign custom-house, the important native
custom-house at Kuei-Fu, on the border between Ssu-chuan and
Hupeh, recently made an all-round reduction in its tariff of 50
percent., so that now chartered junks have no advantage in the
mere interport trade. It need not be supposed that this is a ques-
tion of Chinese versus foreign interests. The goods are nearly all
Chinese owned, and as for the junks they are not really chartered
or freighted by foreigners. The interests are purely Chinese, but
when it happens that a saving of duties can be effected by
reporting to the foreign rather than to the native customs-house,
an ordinary junk can be converted into a chartered junk by the
payment of a small fee.


china.

-51

While the problem of steam navigation above Ichang is wait- 0peuincr for
ing to be solved, it would not alone be a great convenience, but a steam °
valuable step forward if steam launches could ply within the launcl,(,f>at
limits of the port of Chungking. There the current is extremely Chu,,eking-
strong, especially in summer, and it may then take an hour to
progress one mile in a native boat. The services of a launch
merely to tow cargo boats would be most useful, and it is certain
that once the Upper Yangtze people had seen what a steam launch
could do, there would be a general desire to employ them.

The Ssu-chuan authorities and the Central Government are
showing signs of an intention to open Chungking in a very
niggardly spirit, and it is unlikely that any Chinese subject or
official will be allowed to use a steam launch, lest it might precipi-
tate the general introduction of steam craft; but Chungking being
an open port " under the same conditions and with the same
privileges and facilities as now esist at the present open cities,
towns, and ports of China"—so declares the Shimonoseki treaty
—a British subject would be within his right in using a steam
launch in the harbour, although those now interested in the ques-
tion have been told that any attempt to run such a craft would
-lead to confiscation. The introduction of steam on the upper
waters of the Yangtze is of such importance to trade that any
person willing to make even a small beginning would be a
public benefactor.

The port of Shashih between Ichang and Hankow is a very Port of
busy place. At all times 1 or 2 miles of native craft may be Sliashih.
seen along the river front, but it is principally a port of tran-
shipment. It is situated at the intersection of two very important An important
trade routes of central China, and is thus in communication with traneliip-
important markets north, south, east, and west. It is at this mcnt. .
point that vessels from Ssu-chuan meet those from Hankow, from
the Han River districts in the north-east, and from the ports in
Hunan in the south. It is a great place of transhipment for
cargo from Yangtze junks into junks better adapted for the
navigation of the canals and shallow rivers that connect Shashih
with the Han River to the north-east and the Tungting Lake and
the rivers flowing into it in the south. The produce of Ssu-chuan
and Yunnan almost all passes it on its way to other provinces.
The Taiping Canal, which connects the Yangtze with the Tungting
Lake, has its northern entrance opposite to Shashih, and being
navigable for 8 months in the vear, it offers a safer and shorter

O * '

route for the transport of merchandise between Ssu-chuan and the
provinces of Hunan and Kwangtung.

By another canal whose terminus is at Shashih the upper waters
,of the Han River are reached. By this route the Ssuchuan produce
destined for the provinces of Honfm and Shantung, and for the
districts supplied from thegreatcentres of Fanchengand Lao-ho-kow
is sent, instead of being taken down the Yangtze as far as Hankow,
and thence sent up the Han River. As there are no locks at either
end connecting the canal with the Han and Yangtze Rivers,
merchandise has to be transhipped, and it is due to this that


-52

china.

such a vast array of shipping is seen at Shashih. There is also
another canal called the Pien Ho starting from Shashih, which
joins the Yangtze 40 miles above Hankow. It cuts off a large
bend in the Yangtze River, and saves some 70 miles in the
journey. Native craft use it almost exclusively, as it not only
enables merchants to curtail the distance between Hankow and
Shashih, but it affords them a safer and surer means of conveyance.
Shashih not a An enormous quantity of merchandise must pass through
large market Shashih, but the town itself is not a large distributing centre,
anci " 8' Its trade is chiefly in native produce, and from its position it is

not likely that foreign steamers will share largely in the carrying-
trade. In the traffic from north to south we cannot take part, as
waterways in these directions are not open to us. Our steamers
have the run of the Yangtze east and west, but, as steam naviga-
tion-does not now extend beyond Ichang, 80 miles above Shashih,
it is probable that Ssu-chuan produce destined for Shashih will
"continue its journey as now in the native junks that have con-
veyed it from the upper waters of the river.

The produce from the provinces north and south of the
Yangtze which passes through Shashih is not destined for the
lower portion of the Yangtze, â–  and the junk trade on the section
of the -river between Shashih and Hankow is small. Such produce
when bound for Hankow, instead of going by way of Shashih,
can reach Hankow more easily by way of the Han River if coming-
down from the north, and of the Tungting Lake if coming from
the south.

Native goods It must also be remembered that when the native merchant
using steamers wishes to avail himself of a steamer for a portion of the journey
pay extra (-,|ie expense of transhipment and the steamer freight charges are
duties. not the only factors that enter into his calculations. The very
fact of native merchandise being put under the foreign flag'at
once places it under a different, fiscal administration. No matter
what duties it may have already paid to the native customs
vvhile yet in the junk the merchandise on passing into a steamer
has to pay to the foreign customs a duty of 5 per cent., and on
leaving the steamer per cent. more. Thus for the privilege of
being carried by steamer it has to pay to the Chinese Govern-
ment 74 per cent. In a short journey within the limits of the
same province, as Hankow, Shashih, and Ichang are, a junk cargo
which had already, as it probably would have, paid something to
the native customs administration, would certainly escape paying
as much as per cent, additional if it remained in the junk.
o£ Soochow, the capital of the Kiangsu province, and Hangchow,

Soochow. the capital of the Chekiaug province, are the other two ports to
be shortly opened. Soochow is some 70 miles to the west of
Shanghai, with which it has excellent communication by canal
and river. It is a very rich city, Avith a population of about
500,000, and its chief industry- is the weaving of silk fabrics of
various kinds.

Cit of Hangchow is 110 miles south-west of Shanghai, 100 miles

ifangehow. south of Soochow, and 80 miles north-west of Ningpo, and


china.

-53

between all these places there is communication by canal.
Hangchow has a population of over 500,000, Chinese estimates
even put the number at 1,000,000. It is a busy manufacturing
city, and is noted for its silk fabrics, fans, and tinfoil which is so
largely used by Chinese in making imitation money to be burnt
as offerings to the dead.

The opening of Soocliowand Hangchow will not largely benefit Opening of
foreign trade, and it is doubtful whether foreign firms will be J^1®*®
tempted to establish themselves there. The import trade will differencVto
certainly remain in the hands of the Chinese already in business import trade,
there, and the benefit that will accrue to the trade is that mer-
chandise can reach these cities after' payment of one import duty
without being exposed to the attentions of the native officials.
That is to say, foreign merchandise will reach a certain point out-
side the city walls, wherever the new foreign custom-house may
be situated, but it is doubtful whether after it has been cleared at
the foreign customs it will not be taxed by the Chinese officials
before passing into consumption inside Hangchow or Soochow.
They will not attempt to tax goods in foreign possession ; it is
only when they pass into Chinese hands that they will be required
to pay something over and above the import duty. There are
already indications that the officials will try to keep foreigners
and their establishments within the narrow limits marked out for
a foreign settlement outside the city walls, and that, consequently,
foreign merchandise will have difficulty in going beyond these
limits save in native hands.

As a centre of distribution, even for the neighbouring districts, Shanghai as
it is doubtful whether Soochow will displace Shanghai. All the .

localities which Soochow might serve have equally good canal ^^g l^3ing
communication with Shanghai; there is little reason, therefore., Roochow.
why goods should in future be forwarded via Soochow instead of
as now direct from Shanghai to their destination; the market
being already well established at Shanghai it is likely to remain
there.

Hangchow from its position on the Chientang River may Hangchow
become the entrepot for central Chekiang, as all merchandise may become n
destined for that section of the country must pass through mg

Hangchow. Foreign goods can now, at any rate, reach one more
important centre with no heavier impost than the tariff import
duty, and may be laid down 100 miles nearer the consuming
districts safe from the interference of the native mandarins. To
this extent, native dealers, and through them our manufacturers,
will be the gainers ; but the general effect of the opening of these
two ports will be a shifting of the scene of operations rather than
an increase of business.

Hangchow is not a seaport; it is situated at the apex of a Hangchow
bay which is too shallow for steamers, and the bore, or tidal wave not a seuport.
which introduces each flood tide, is a bar to navigation. But the
canal communication with Shanghai is good, and it is through the
inland waterways that its trade will be conducted.

As regards the export trade, tea and silk are the staples that ^thetisa

trade.


-54

china.

enter into foreign trade. Soochow is not in any way connected
with the foreign trade in tea; but the opening of Hangcliow as a
treaty port will affect the tea tra.de to the extent of offering the
leaf an easier way of reaching the market at Shanghai. At
present the Fychow teas from the neighbouring province of
Anhui, instead of finding their way to the treaty port of Wuhu
for shipment to Shanghai, are driven by unequal taxation to take
an 18 days' journey over the Anhui border to Ningpo whence it
is carried by steamer to Shanghai. As these teas pass by
Hangchow, the natural course would be to take them by the
inland canals to Shanghai; but here again another tax causes
them to select the Ningpo route. In future these teas will be
cleared at the Hangchow foreign custom-house and proceed to
Shanghai without further payment. Shanghai will continue to
be the chief market for the tea trade, and the changes resulting
from the opening of Hangchow will affect the native dealer only.
Soochow and Soochow is the centre of the silk industry, but the opening
the silk trade. Q£ ^e cjf_y foreign commerce is in no way likely to affect the
course of trade. Now that Soochow is a treaty port the advantages
which this change imports are as open to Chinese as to foreigners;
the native can take his goods to Shanghai on the same terms as
the foreigner, and as the native dealer always prefers to put his
goods on the largest market, there is no probability that the
market for raw silk will be shifted from Shanghai.
Silk filatures. Of recent years both foreigners ancl Chinese at Shanghai have
erected a number of silk filatures where the cocoons produced in
the Soochow district are reeled off by foreign machinery and under
skilled supervision. There are now some 25 of these filatures,
and the number is increasing yearly. It is probable that in future,
filatures will be erected at Soochow rather than at Shanghai; the
proximity of the cocoon districts, the larger supply of skilled
hands and cheaper labour, will tend to transfer the industry to
the new port.

Chinese more The opening of new ports is always considered by the Chinese
than Government as a concession to foreigners ; but the history of our

beneHt b8 commercial relations shows that each new port opened is a greater
opening of boon to the native than to the foreign merchant; and Soochow
new ports. and Hangchow will form no exception.

Opening of The chief change effected by the opening of a port is not only
new ports an that all articles which enter into international trade, but also all
domestic610 g°°ds of any kind which maybe carried in vessels of foreign
trade. type, or even in native craft in which foreigners may claim to

have an interest, are at once withdrawn from the control of the
native customs administration, and placed under that of the foreign
customs, and moreover have the advantage of the treaty tariff.
Under this tariff internal trade between any two treaty ports may
take place on an assured basis. Native produce may thus pass
between any two treaty ports, however distant apart, on payment
of a 75 per cent, duty, that is an initial export duty of 5 per cent,
and a reimport duty, or " coast trade duty " as it is called, of 2\ per
cent. Not the least benefit which Hangchow and Soochow will


china.

-55

derive from being opened to foreign trade is that this purely
domestic trade will be removed from the control of the native
administration—a distinct boon to two such large manufacturing
cities. At the present day, to open a new port to foreign trade
may mean little else than giving to native merchants at that port
the blessing of a fixed tariff and an honest customs administration.

Under Section 3 of Article VI foreigners will have the right Pei-mist ion
temporarily to hire warehouses in the interior of China for the
storage of their merchandise without the payment of any taxes „ iu
or exactions whatever. This is a concession which will be of no the interior,
practical value for, as already explained, the distribution of goods
into the interior is in the hands of Chinese. On the rare occasions
when foreigners have accompanied their own merchandise through
the country, they have had no difficulty in storing it; and when
foreign owned goods are in charge of a native he can always hire
a place to warehouse it.

Under the former Japanese Treaty, Japanese subjects were A greater
expressly forbidden to proceed into the interior for purposes of
trade, and it is probably this disability that suggested to the than to
Japanese negotiators the insertion of this clause. foreigners.

Of more far-reaching consequences is the fourth section of the Importaiion
same article which gives to foreigners permission to engage in all
kinds of manufacturing industries at all the open ports of China. of factories.
Up to this time the Chinese Government has, when it suited it,
denied our right to manufacture at the open ports, and by way of
affirming its decision, orders had been given to the custom-house
not to pass the machinery necessary for the erection of cotton
mills at Shanghai. The reasons alleged was that machinery
would interfere with the means of livelihood of the people, the
real reason being that certain highly placed officials wished to .
retain the monopoly of cotton spinning and weaving. To
machinery in principle it is clear the Chinese Government had further
no objection, for at the very time that a factitious opposition was private ends,
being made to the importation of spindles and looms by foreigners
there were already at work in China steam mills for pressing
peas, match factories, silk-reeling establishments, machinery for
pressing brick tea, sugar factories, and other industries requiring
machinery. But these did not come into competition with
mandarin owned factories, and no question was ever raised as to
the right of foreigners to use machinery in these works.

Now that the Japanese treaty has forced the Chinese to remove Ere. lion of
all obstacles, four foreign joint stock companies have been formed foreign-owned
to erect cotton spinning and weaving mills, and within a few m'113-
months these will be at work. In any other country but China Everything in
the prospect would be very encouraging. With cotton in abunfavour,

i

dance at their very door, an ample supply of cheap labour, and an parti(!9 ma"y
almost unlimited demand for the output in China itself, success prevent
seems assured, but the same influence which succeeded for years success,
in preventing foreigners from entering into competition with the
factories erected with the money of the most powerful official in
China, and in compelling Chinese owned mills to pay a royalty to


-56

china.

Question of
excise on
output of
factories not
settled.

Japanese
mills may
undersell
Chinese.

Number of
mills in
China.

No trust-
worthy
information
respecting
working of
Chinese mills
obtainable.

this highly placed monopolist, may yet succeed by occult methods
in so handicapping foreign owned mills as to put them out of the
race. Discriminating duties on the raw material on the way to
the mills, and a preferential rate of excise on the output of the
mills, are weapons which Chinese officials are adepts at using, and
to defraud the public revenue in order to benefit individual enter-
prise is a device to which Chinese fiscal methods easily lend
themselves.

It is somewhat ominous that the question of excise, which all
who are interested in foreign owned manufactories in Shanghai
were hoping would be set at rest by the commercial treaty
recently â– â–  concluded between China- and Japan, has been left
unsettled. The interpretation and amplification of the clause in
the Shimonoseki Treaty were naturally questions for the Japanese
negotiators of the commercial convention to dispose of, and
seeing that the conditions under which local manufactures may
be placed 011 the market have been allowed to remain in a state
of uncertainty, it may be that on reflection the Japanese perceive
that the development of cotton manufactures in China will be
injurious to their own home industry.

Chinese raw cotton may be exported to Japan for a duty of
Itstt taels per 400 lbs., and the finished yarn may be re-imported
on payment of a duty of taels per bale of 400 lbs. The
Japan made yarn would thus be handicapped 3TyV taels per bale,
plus whatever the freight charges might amount to. A 10 peiv
cent, excise on the output of the Chinese mills, which the.
Government now proposes to impose, would at the present price:
of yarn come to about 7 taels. The Japanese mills would thus
still have something in hand in competing with the output of
Chinese mills.

As the question has now been left, China, if permitted, may
stifle all industry by excessive excise. What the Chinese Govern-
ment, or more correctly speaking, the mandarins pecuniarily
interested, will do, if left to themselves, will be not to foster
native industries as against foreign competition from abroad, but
to seek to place native owned mills at an advantage vis-i-vis
foreign owned mills in China.

The number of cotton mills in Shanghai now completed iy
four, with 123,000 spindles and 1,800 looms. In course of erec-
tion there are four more with 155,000 spindles. At Ningpo there
is one mill at work with 11,000 spindles, and at Hankow there is
one completed with 30,000, and another being erected with
50,000 spindles. Others are talked of in different places, but it
now looks as if the success of the existing mills would be awaited
before more capital is invested.

Only Chinese owned mills have been running so far, and it is
impossible to obtain trustworthy information respecting their

working.

The Chinese themselves are satisfied that they are
making handsome profits, but their returns, even if accessible,
would- be useless unless the accounts could be audited by a foreign
expert. Especially in mandarin managed institutions there are


china.

-57

bewildering intricacies such as the superintendent's salary being
paid by some other department, or some independent institution,
lending capital free of interest, or repairs being charged to some
other account, or depreciation of stock being left out of considera-
tion,. so that any estimate of profits would be misleading. We
shall have to wait until the foreign owned mills have been running
some time before auy trustworthy opinion can be pronounced.

As far as can be ascertained in the existing Chinese mills the Proportion of
proportion of workers in every 100 is 51 women, 24 men, and 25 hands and
children, and the average wages all round are 5 dol. (lis.) a wascs-
month. In Shanghai, owing to the increasing number of factories,
and the gradual rise in rents, and cost of living generally there is
a tendency for wages to rise. As to the efficiency of the labour Mill hands'
this will probably improve as time goes on. At present, so I was oD>clcnc.v-
informed by a foreigner in the best position to form an opinion,
the existing mills employ twice as many hands as similar mills in
England would require.

Much has been written to prove that the fall in the gold price Effect of lo«-
of silver must tend to encourage manufactures in silver using priced silver
countries, for whereas, it is argued, the purchasing power of silver "'^'f",®86
in China being the same as before, wages and the prices of raw tures.
material are uuchanged, on the other hand, the laying down cost
of the products of gold using countries increases pari passu with
the increasing ratio between gold and silver. This argument is Silver not the
based on the assumption that silver is the money of China, but it of

has been overlooked that copper much more than silver is the p^^of
currency of China, and that the relative value of -gold and copper copper an
• is an important factor.in any calculation of this sort.. The tillers important
of the soil, the workers in mines and factories, are all paid in copperfactor'
cash, and they insist on receiving their honest wage in this medium
regardless of the exchange between silver and copper coin. Their
daily food and other wants have to be paid for in copper cash, and
the price of labour and of raw material must be measured in
copper. If -it now costs one tael of silver to turn out 1,200 cash,
when formerly 1 tael would buy 1,500 cash, it is not that the
copper cash can now purchase more labour, but that silver can
purchase less. Whether Shanghai can compete with Manchester
depends as much on copper as on silver.

Part V.— What may be clone to promote Trade,.

To ask what steps can be taken to promote British trade in china's own
China is almost the same thing as asking what steps can be taken resources
to improve the condition of the people, for China's capacity for ^yoio^d
buying progresses with the development of her material resources, tcve0Pcc-
and this development is at present struggling against every
obstacle that bad government can put in the way. The measures
which we can of ourselves take to effect an improvement are
confined within narrow limits, and I can but indicate certain
directions in which something may be done with the prospect of
beneficial'results.


-58

china.

China at The absolute poverty,

present a very of the Chinese population reduces

amounting

to destitution, of the bulk
to less imposing figures the

Official class
opposes all
development.

poor country. numbers of those whose needs it is the aspiration of the British
manufacturers to supply; and the improvement of the condition
of the semi-starving millions must be worked out independently
of any efforts of ours.

But without venturing beyond legitimate limits, there still
remains something to be done. We have obtained a footing in
China, but we move forward very slowly; and we are too
tolerant of the "vis inertia" which Chinese officialdom ever opposes
to us when we try to advance in any direction. We fail to
perceive that the perversity of theChineseGovernment in continuing
in its suicidal methods is due to the utter selfishness and corruption
of the ruling classes. We too readily assume that a spirit of
conservatism, ignorance of the first principles of political economy,
and a policy of China for the Chinese, are the true explanation
of China's arrested development; and we console ourselves with
the reflection that enlightenment will bring about a change. We
devote our efforts to imparting that elementary knowledge which
once absorbed and assimilated will, we hope, work a change in
the minds of China's rulers, and through them of China's millions.
Meantime all progress is arrested, and in our tolerant mood we
allow our grievances to go unredressed, and we fail to turn to
account the opportunities placed in our way by the commission
of Chinese official misdeeds.

I have more than once alluded to the antagonism existing
between the provinces and the Central Government in matters
of revenue. In accepting the obligations put upon it bv the
treaty the Chinese Government undertook, if not more than it
could perform, certainly .more than it is disposed to carry out.
Disputes arising out of commercial questions necessarily have
their origin in the provinces, and the attempt to settle them has
in the lirst instance to be made there. The willingness of the
provincial government to make redress for any injury clone to
British interests in the province is dependent on the local official's
appreciation of the gravity of the situation. If in declining to
make any restitution he sees nothing worse ahead of him than a
reference to the higher authorities at Peking his mind is at ease,
Teking for Peking will always take the side of the province, and will be
provincial1, mosfc reluctant to disavow any action there taken. Even if unusual
shortcomings, pressure is put on the Central Government, and it can be brought
to admit that the claim is just, matters are not necessarily much
advanced, for the Chinese Government's orders are not always carried
out in the provinces even when earnestly meant, and much the
less so when it is understood that they have been reluctantly
given. The British Minister's most urgent expostulations may,
indeed, result in orders from Peking being sent to a provincial
governor; these are passed on to the authority at the port, but
by the time they have reached their destination the momentum
of the pressure is lost, with the result that the orders are obeyed in
a purely formal way with as bad grace as possible; but, meanwhile,

Futility cf
Eendiujr
complaints to
Peking.


china.

-59

the time for repairing the mischief has probably gone by, and the
net result is that we are virtually defeated. To give one specific
case out of many such. A British merchant at a treaty port An instance
appoints a Chinese agent to sell coal for him. Some local revenue of Chinese
office)' directs the Chinese agent to add 5 per cent, to the price, con unmc:r"
and to pay the money to his department. The Chinaman under
instructions from his employer refuses, and he is seized and
imprisoned. The usual reference to Peking is made and orders
in due time arrive, but meantime the business has been injured
and all Chinese concerned intimidated. The net result is that
the purchasers are still surcharged the 5 per cent., and that the
Chinese agent holds his tongue in future.

When the Minister of a foreign Power in Peking has to make Chinese
representations to the Chinese Government, he addresses himself Foreign Office
to the Tsungli Yamen, or Board of Foreign Affairs. This Board *™thn0°it over
has no direct authority over provincial governors; it can but provinces,
address a communication suggesting or recommending that such

CO o o

and such a course be followed; but it has happened to me more
than once, when pressing a provincial viceroy to carry out the
instructions which the British Minister had been assured by the
Board of Foreign Affairs had been sent, that the Viceroy has
replied that he was responsible for the government of the province,
and that the Board could not give him instructions.

In important matters such as the promulgation of a new
regulation, or the removal of a culpable official, the Board of
Foreign Affairs would apply for an Imperial Decree which would
ensure immediate compliance; but for everyday matters the
Board's communications to provincial governors take the form
which official usage prescribes, and are by no means in the nature
of an imperative command.

The financial difficulties which now beset China may turn out Hopes based
to be more productive of reform than the severe lesson lately
forced upon the country by Japan. If Chinas need of money is eLi'uits.
wisely utilised by foreign Powers she may be driven to husband
her resources, and to adopt measures for still further adding to the
national wealth.

From this time forward China will have to meet an extra call New drain on
of something like 15,000,000 taels a year to pay the interest and China's
sinking fund of her recent loans. This to a State whose national reiemie-
budget is estimated at about 100,000,000 taels is a serious matter,
and imperatively calls for a reconsideration of her financial
position. China's first thought is naturally of the foreign Foreign
maritime customs as the only portion of machinery in her complex customs offer
political system that is in good working order, and can be trusted
to increase the production at a moment's notice. To double the the revenue,
foreign customs tariff is to nearly double the customs revenue ;
to double the native customs duties or the likin tariff would
probably mean no increase at all in the amounts remitted to the
Treasury. The foreign maritime customs is the willing horse that
must be worked to death. If the likin collection and not the.
maritime customs had been entrusted to foreigners then it would


-60

china.

Use China's
difficulty as a
level1 for
forcing
reform.

IIovv much an
increase of
tariff would
produce.

Foreign and
Chinese
interests
identical.

How domeotii
trade is
strangled.

haye been to the former that the Chinese Government would have
looked for aid in the time of need.

If China can now obtain unconditionally the consent of foreign
Powers to increase the tariff the Government will be relieved of
its embarrassment without an effort, and no attempt will be made
to introduce any sort of order or honesty in the provincial financial
system. It is only under the stress of necessity that the Central
Government can be expected to nerve itself to tackle such an
uncongenial task.

China comes to the foreign Powers with the proposal that
the treaty tariff shall be doubled. Taking the revenue of 1895
as a basis, the duties on foreign imports, exclusive of opium,
amounted to 3,7iSl,000 taels. Assuming that the increased duties
would not restrict the trade, China can at most count on getting
4,000,000 taels additional. If the export duties are to be increased
it cannot fail to affect the trade, and a doubled revenue cannot
be expected. In 1895 the duties on exports to foreign countries
amounted to 5,940,000 taels. If it be assumed that an increase
in the export duties would acid 3,000,000 taels to the revenue the
estimate is, perhaps, too sanguine.

At most, then, China might get 7,000,000 taels more than at
present. Probably in not more than three or four of her best
provinces the money now collected under the name of likin and
embezzled by office holders amounts to this sum.

It is for foreign Powers to name the terms on which they are
willing to grant China's request. From these Powers who only
desire to look upon China as a country possessing enormous latent
wealth awaiting development for the benefit of mankind the terms
which self-interest suggests are also those that will prove a source
of profit to China herself.

If the Chinese Government is sincere, and is not merely striving
to obtain what, with its confused ideas of economic questions, may
well appear to it to be a cheap advantage over foreign nations, we may
fairly require it to give evidence of good faith by showing itself
willing toentertainproposalsdesignedto attain the ends itprofesses to
have in view, and if after we have indicated a course which will
not only enrich the State but bring prosperity to the people, the
Chinese Government still persists in preferring measures which
must be injurious to the nation at large, we may well refuse to be
a party to the suicidal act, and withhold our consent. to any
modification "of the treaty.
; To what extent the domestic trade is strangled, we can
only surmise; foreign merchants are not interested in inter-
provincial commerce, and we have, therefore, but little infor-
mation on the subject. Along the coast domestic trade has some
chance of subsisting, for fortunately likin stations cannot be
established in mid-ocean, and sea-going craft can only be taxed at
the start and finish, but when commerce has to follow inland
routes it is soon taxed out of existence. It would be an
interesting experiment for some one to start in any direction

g, as it became necessary, a

with a quantity of merchandise, sellin


china.

-61

portion to pay the taxes imposed en route. Like water poured on
sandy.soil, it would all he absorbed before going far.

â–  ! To what, extent purely domestic trade is "taxed, ihay; be Pseudo
inferred from the ' following. Under the transit pass rules J^cMnkifu]68
foreigners, but foreigners only, may buy produce in the interior a m m"8'
for exportation to a foreign country, and pay one transit duty in
commutation of all inland taxes. This transit duty is 1\ per
cent, ad valorem. As the inland taxes are much heavier than
this, Chinese traders in collnsion with foreigners hit upon the
idea of escaping the crushing inland taxation by bringing pro-
duce from the interior to a port under a transit pass, as if it was
intended for exportation; having reached the port the produce
which had only paid per cent, would be. sold locally and not be
exported at all. Or again, foreigners would obtain transit passes,
bring down produce from the interior to the treaty port, and there
ship it to another treaty port for sale there. This was using
transit passes for a purpose which the treaty did not contem-
plate. To check such malpractices the precaution is trow taken
at Chinkiang of requiring the merchant to deposit a certain
sum at the time that lis applies for his transit pass. The amount
is equal to six times the transit duty, that is 15 per cent, of the
value of the goods. If in course of time the merchandise is
duly exported to a foreign country, one transit duty is retained
and the balance is returned to the merchant. If the produce is
sold locally, or is sent to another port, then the whole amount is
retained. This mode of bringing produce from the interior to
the port is now considered legitimate, and foreign merchants are
relieved of the stigma of applying for transit passes on false
pretences. A considerable amount of trade in native produce is Xativo
done in this way, and the fact that these pseudo transit passes merchandise
are in demand proves that the inland taxes from the interior to J,'^3
Chinkiang must mount up to more than 15 per cent. dues.

This gives some idea of the burden of taxation which inter-pro-
domestic trade has to bear. The result must be that the surplus vincial
of one district cannot stand transportation to a distant market, and
production is thus discouraged. Districts within certain limits restricted bj-
must in a great measure be self-supporting, each producing sufTt- cscessive
cient for its wants and no more. The channels through taxation,
which remote districts can most freely exchange each others'
products are those that exist between the treaty ports; and
this relief, to domestic trade is an indirect result of our treaties
with China.

If the Chinese Government needs money the way to obtain it Apian to
is clear. Restore to life the domestic trade now in a state of sus- regulate
pendecl animation, and nurture with care. the goose that lays the l"1'1"^

ii mi ' , . . ° i taxation.

golden eggs, lilts is nou the place to elaborate a scheme lor
increasing the revenue of China, but her. good faith may be put
to the proof by offering to her an arrangement something like
the following: China's revenue from foreign trade is known
exactly, and the revenue from likin and other forms of inland
taxation may be roughly estimated. .Foreign Powers will consent


-64

china.

to double the import tariff, and revise the export duties, on condi-
tion that the number, position, and tariff of the likin stations
shall be a matter of international arrangement, and that the
present likin collectorate shall be replaced by a foreign adminis-
tration on the model of the foreign maritime customs ; that the
likin taxes shall be paid to an agent of the provincial government,
as the maritime duties are now paid to a Chinese agent of the
Imperial Government, the function of the foreign staff being as in
the Imperial Maritime Customs, confined to examining merchan-
dise, checking the duties, and protecting the revenue. As a basis
serving for future adjustment, the revenue from import duties
would be taken at double the present collection; and the revenue
from likin at whatever estimate could be arrived at. In the
future, as trade revived and the revenue improved, a gradual
reduction in the import tariff and the likin tariff would be made
until that tariff was arrived at that yielded the largest amount
of revenue, when it would remain fixed.
No plan to As long as provincial governments retain the power of open-

regnlatc ing new tax stations, ancl placing them in the hands of corrupt
taxation will officials, our goods will never be safe. Whatever promises the
work if left to Chinese Government may now make, there is no reason for
native believing that it has the will or the power to abide by its new

executive. engagements more faithfully than by the old. Any talk about
refunding illegal imposts is vain; before restitution can be
demanded there must be proof, and proof will never be forthcom-
ing, for no Chinese will venture to bear witness against his own
officials.

It is the uncertainty as well as the burden of taxation that
acts in restriction of trade. Chinese merchants complain that
they are unable to base any estimate on the published tariffs of
the likin stations, for these are enforced in a very loose way.
Two merchants in the same line of business may fare very
differently, and the less favoured may find that his venture
results in a loss.

There is one step which Iler Majesty's Government can take
in furtherance of trade. There appears to be wanting a link
between the consular service ancl our merchants and manufacturers,
which could be supplied by the appointment in China of an
officer who could devote his sole attention to the development of
trade.

Consuls too While in other countries a consul's attention is devoted chiefly
much occupied to commercial questions, and in the discharge of his duties in
tim^tcf6 connection with these, he is assisted by the systematic way in
commercial which foreign governments ancl commercial bodies prepare statistics
matters. and publish information; in China the ordinary duties of his
office leave him but little time to devote to commercial matters in
the abstract, and in the investigation of these he meets with
difficulties out of all proportion to the results attained.

At the more important places, political matters, judicial cases,
claims on behalf of his countrymen against Chinese subjects
or officials, cases of assault or other form of outrage, questions




china. -63

connected with shipping, and many other affairs which could only
occur in an oriental country, occupy a consul's time to the exclusion
of other matters which are nevertheless deserving of attention.
The time, labour, and persistence that must be expended in
disposing of any matter involving discussion and negotiation with
Chinese officials, would seem incredible to anyone who has not
had the personal experience, and the bulk of a consul's work is
of this nature. Delay and evasion are the Chinese official's
weapons, and whatever the question may be, a consul must choose
whether he will write reams, and spend hours in arguing in a
strange tongue, or whether he shall confess himself tired out and
retire from the contest.

Under such conditions a consul cannot do justice to the com-
mercial interests of his country, he must attend to what is
pressing and immediately before him, and leave alone what can
wait. He can at best but devote intermittent attention to subjects
of vital importance to our British industries.

The remedy for this deficiency in our consular system in China Suggested
lies in the appointment of a specially commissioned officer to
study commercial questions. Whatever might be the designation secretniy.
of the officer—"commercial secretary," or "attach^," or "com-
missioner "—the purpose of his appointment would be to combine
in one man specially qualified for the work the duties which are
now but inadequately performed by 20 consuls all working inde-
pendently of each other. Such a commercial secretary would
still be largely dependent on the assistance of Her Majesty's
consuls at the different ports, but he could also assist them by
suggesting the sort of commercial information that is desirable,
and indicating the-direction in which their services can best be
utilised. The scope of his duties may be inferred from the The scope of
following remarks :— hls duties-

1. Chambers of commerce in England occasionally make
suggestions to the Secretary of State for Foreign Affairs regarding
the assistance which might be rendered by Her Majesty's consuls
abroad, and describe in detail the services they are in need of.
It would be for the commercial secretary to consider to what
extent in China the wishes of the chamber of commerce can be
satisfied, and to frame directions for such of the ports as might
come within the sphere of the inquiries set on foot.

2. At all the ports consuls receive many trade circulars and
letters referring to manufactures of all kinds. Both in the
despatching and the receiving of these, much time and money is
wasted. As frequently happens, a consul has to answer that there
is no opening for a business of the kind referred to. He can but
speak with regard to his own district.

Could all this correspondence be centralised in one office, the
commercial secretary, having a bird's-eye view of the conditions
of trade in all China, could give a more complete.answer. Through
his agency, also, firms in England desiring to be put in communi-
cation with houses in China could be directed in the right quarter,
(2297) M


-64

china.

and similarly Chinese business men could be put in touch with
firms in England.

3. Of recent years many new products have been exported
from China. There can be little doubt that there are still many
products untouched and available, and the collection of samples
of such products, with reports thereon, would be one of the duties
of the commercial commissioner.

4. Some of our British products are being driven out by
imports from other countries, or by articles of native manufacture.
This requires careful watching. Samples and all possible infor-
mation regarding price, native taste, mode of packing, &c., should
be sent to England, and this can only be done from some central
office like that of a commercial secretary.

5. An important part of this officer's duty would be to obtain
early information about projected public works3 so that our people
could be early in the field to secure contracts. Much business is
lost because local firms are not prepared to give estimates off-hand,
or to supply all the information a Chinese official or company
director requires of them.

6. He would specially study the conditions and requirements
of trade in China; be on the look out for probable openings for
British trade; report on the growth of manufactures, and the
imports of raw materials; and when necessary, suggest that an
expert should be sent out by commercial associations in England
to study any particular question.

7. In the compilation of commercial reports there is room for
improvement. What is wanted is a comprehensive review of the
trade and commerce of the country arranged under subjects. At
present, a manufacturer or merchant in England wishing to know
to what extent his goods are consumed, or are likely to find a
market in China, has to refer to some 20 trade reports to arrive at
the information he requires. In trade reports as they are now
made up there is a want of uniformity in the collection of returns,
weights and measures are differently stated, and each consul in
converting silver values into sterling fixes his own average rate
of exchange.

8. At each port some change in the course of trade or in the
requirements of the people may be gradually taking place, but
passes unnoticed because of not much local importance. In the
aggregate throughout China the change may be of great signifi-
cance, and a commercial secretary having all China within his
purview could study the cause and effect.

9. Some of our manufacturing centres in England ask that
samples of goods be sent home, together with every information
bearing upon the origin, price, import duties, quantities, &c. Such
work cannot be properly performed by 20 consuls in different
parts of China, this would merely result in useless multiplication
and repetition. In the hands of a commercial secretary very
complete information on all points desired could be supplied.

10. Much importance is attached to expedition in presenting
reports. With a commercial secretary at Shanghai in touch with


china.

-65

the general chamber of commerce and the statistical department
of the custom-house considerable delay which is now inevitable
would be avoided.

11. A man in an official position in China can, without doubt,
have access to officials more easily than can a merchant, and as
he is not pushing his own private business, he is listened to with
less distrust. A commercial commissioner who gained the con-
fidence of the Chinese might be occasionally appealed to for advice,
and if he could not achieve any more direct success, he might at least
put them 011 their guard when about to fall into a trap. In the way
of personally introducing agents from firms in England, or putting
Chinese officials in communication with trustworthy firms he could
do good service.

The expression " Chinese official" is so often used because in
China almost every large work or enterprise is under official
direction.

12. The commissioner ought to be in direct communication
with the chambers of commerce in England so that they could
have ready means of obtaining any information they desire.

13. Being on the staff of Her Majesty's Minister in China,
such a commercial secretary could give valuable advice as to the
effect of any change in the tariff, of fiscal innovations in the
provinces, of opening new trade routes, ancl by means of well
conceived memoranda place Her Majesty's Minister in a position
to point out to the Chinese Government the advantage or the
reverse of any proposed line of policy.

What merchants and manufacturers can do to help themselves What
is a question I approach with some diffidence for not only do men
resent being taught their own business, but to suggest any method faCt^rnaue'ai,
by which they may do more than at present may seem to presume do to help
a want of energy, enterprise, and intelligence on their part. To themselves,
merchants now in China nothing I could say would be of any
value ; they have established a business on certain lines, and it is
not now profitable for them to change their ways. They are
satisfied that all that their own efforts can accomplish is now
being done, and that they can do no more until new markets are
created for them, existing obstructions are removed, ancl generally
until China's material resources become more developed.

Ancl yet is it to be said that even with China in her present Further
backward, state, our commerce has reached its utmost possible development
limit ? I think hone will admit this. We have not yet bought ^p™^® on
from the Chinaman all that we can profitably buy nor sold to him foreign
all that we can profitably sell, but the what ancl the where are enterprise,
discoveries which we must make ourselves. When the discovery
has been made the Chinaman will do his utmost to reap the
benefit, but he will not spend one dollar or move one yard to
further the preliminary investigation.

The great questions are:—

1. What does China want that we can supply ?

2. What do we make that China would buy if she saw it ?

3. What does China produce that we can use ?


-66

china.

No induce-
ment to
foreign
merchants in
China to
exploit new
ground.
Home manu-
facturers mu't
initiate
research into
China's
needs and
resources.

Little is
known of
inland
markets.

Nothing to
hope from
enterprise of
Chinese
merchants.

4. How can we see and procure it ?

This is information to obtain which the local foreign merchants
cannot be expected to set on foot a systematic inquiry. The
research would take time and cost money, and the local merchant
cannot feel assured that the resulting profits would be his.

There is doubtless much valuable information to be gained in
this direction; the question is at Avhose expense shall it be
obtained ? If it is worth having it must be paid for by those
who in the end will be chief gainers, and these are our English
manufacturers. The prosecution of the inquiry calls for co-opera-
tion on a broad basis, for if the results are satisfactory, it is not
one or two manufacturers but a whole industry that will profit.

I believe that there are markets but ill supplied with our
goods, whither they .have drifted by chance as it were, and where
they are now offered for sale at prices far exceeding what they
could be laid down for if a regular trade was established. Foreign
goods of all kinds reach the furthest places accessible to steamers
easily enough, dealers from an inland city come to a port to lay
in their regular supplies and as an experiment take away a few
novelties. Dealers still more remote coming to this inland city
on other business by chance, catch sight of the new article and
take a small quantity with them. At each remove there is a great
enhancement of the price, and in distant places it becomes
prohibitive.

Of markets in the interior, even those not very remote, we
know next to nothing, the few travellers who visit the interior of
China are not men who give their attention to details of trade,
they have come for some special purpose and probably are not
men versed in business matters. Our missionaries are the men
who are making us acquainted with what is passing in the interior
of China, but naturally they have neither time, inclination, nor the
aptitude to make trade questions a special study. Still in talking
over such matters with our missionaries, and discussing with them
the price of foreign goods in the interior, some one has sometimes
remarked that if he was a merchant and not a missionary in such
and such a city he would rapidly make a fortune. I do not believe
he would, for as soon as he had established a trade, the Chinese
would come in and undersell him ; but if these potential markets
exist they will remain potential until foreign enterprise has given
them a start, and the enterprise must come from that quarter that
has most to gain from the result.

The chief obstacle to the development of trade in China is the
want of enterprise in a people of stagnant ideas. They will not
advance towards foreigners to seek their trade until foreigners
have pressed it on them. They will not, left to themselves,
develop new wants like progressive nations; foreigners must create
the wants they wish to supply, by offering their goods and
introducing them to their customers. Commerce requires to be
energetically pushed to be successful, and this is particularly true
of the trade in foreign manufactures in China. The spirit of
enterprise is all on the side of foreigners, and the impetus of every
forward movement in commerce must spring from them.


china.

-67

In Shanghai several firms have sampl .e-rooms, where are dis- Showrooms nl
played almost every foreign article that Chinese can require. I Shanghai,
have been astonished to learn that there was a demand for some
of the articles exhibited there ; I am sure that if a firm in England
had written to enquire whether there was an opening for such
articles, I should have said there was no chance for them what-
ever. But the sight of these tilings has created a demand, and
new articles are being introduced in this way. Shanghai is well
attended to now ; but the same thing remains to be done in many
other parts of China, which so far have only had offered to them
what the conservative Chinese trader has introduced.

The large Scotch sewing-cotton manufacturers are furnishing Pushing the
an example which should be more extensively followed. They sale of sewing
have formed a trade association, and in China are making their ootton-
cottons known throughout the empire. Their traveller is an
Englishman, who speaks Chinese well; he travels all over the
country to the principal cities introducing his cottons; where it
is worth while he appoints a native agent, who receives a salary
and a commission on sales ; and in all cases he gives full informa-
tion to the shop people about prices, the best way to obtain new
supplies, &c. In China once a mark is well established and keeps
up its reputation, it is very difficult to supplant it.

In the same way the sale of sugar made in the Hong-Kong
refineries is being pushed. Chinese agents are appointed where
the prospects are favourable. The question of profit is for the
time neglected, the main object being to introduce and create a
taste for the refined sugar.

In these two instances the trade is in a few hands, and when
the demand has been created, there is little danger of others
securing the profits. Such direct results cannot be expected in
every line of business. What I am recommending is co-operation
on a broader basis, having as its object an extension of business,
which will bring profit to a whole trade or industry. The experi-
ment could be limited to certain districts or certain classes of
goods, and the results would decide whether the method should be
extended in other directions.

So much as regards goods which are already known in the Chinese European
trade; but there must still be a good many things in use in China imitation of
which we could make for them better than they can themselves. ^"j®®6
It is not many years ago that native-made brass basins were seen
in every house and on every barber's stall; they are now being
replaced by block-tin basins made in Europe, Quite recently the
brass saucer that holds the Chinese teacup has begun to give way
to a metal saucer made in Germany. English-made goloshes,
patterned on the Chinese shoe, now find a large sale. These are
the results of intelligent observation, for the exercise of which
in a populous country like China there is always ample scope.

The point is, how to proceed on the lines indicated above. The Required: a
first step is to form an association where there is community 0f C0"°P.e^tlTe.

r,, l-Ti-n association ot

interests, so that the necessary funds may be obtained. manu-

Qualified men should visit the most important cities of China, facturers.


-68

china.

China should
be systemati-
cally

exploited.

Enlist the
assistance of
inland
missionai'ies.

Continental
manu-
facturers mori
accommodat-
ing than
British.

A knowledge
of Chinese

and form some idea of what will meet with a sale; and having
studied the ground, these places should be revisited with samples
of everything likely to sell. A show-room should be opened for a
few days at each place, ancl the local shopkeepers should be invited
to visit the exhibition. Printed advertisements should be dis-
tributed, giving full information how to obtain supplies from the
nearest port at which existing firms should be appointed as
agents. Samples should be freely given away or sold at a sacrifice ;
ancl where there appeared to be a prospect of future business,
arrangements should be made with one or more shops to receive
goods for sale on commission. The object which is to be con-
stantly kept in view being to introduce the goods in that locality
even at a loss.

Reference has already been made to the presence of missionaries
in the interior. If we could enlist the co-operation of these men,
they might, once rightly directed, render much service to trade,
without in any way detracting from their usefulness as missionaries,
or endangering the success of their spiritual work. To the
sceptical Chinese, the interest manifested by a missionary in
business affairs would go far towards dispelling the suspicions which
now attach to the presence in their midst of men whose motives
they are unable to appreciate, and therefore condemn as unholy.
Both to the commercial association I am proposing, ancl to the
commercial secretary, whose appointment I have suggested, the
establishment of relations with the missionaries inland would be
of value. They are, constantly coming in contact with Chinese
traders, and men of consideration in their own localities, ancl they
must often obtain useful information which now is wasted, but
which might be turned to good purpose if it could be communi-
cated in the right quarter.

While on the subject of what British manufacturers may do to
push business, attention may be called to the greater efforts which
! continental manufacturers systematically make to meet Chinese
requirements in matters of taste, prejudice, or fancy. Continental
firms are more ready to make a present sacrifice with a view to
developing a business. Our own people before consenting to
change their style or methods wish to be assured large orders, and
are unwilling to touch anything in a small way. My attention
was directed to this on several occasions, and instances were cited
to me of orders, which had been refused in England, being
willingly accepted in Germany. More often than not it was not a
case where cheapness of production came into the calculation,
some change in the manner of packing or in the quality of the
article was required, and the German proved himself more accom-
modating than the British manufacturer. It may well be that our
people know their affairs best, ancl that the particular manu-
facturer concerned had more profitable business to attend to, but
from small beginnings a large trade may grow, and this readiness
on the part of the Germans to put themselves out to please is
telling in their favour.

In another direction we have something to learn from German




china.

-69

firms. In almost every German mercantile house there is at least language
one German partner- or clerk who speaks Chinese—this is seldom lieuessai7- ■
found in English houses. We seem to rely on Chinese learning
our language, which they do when it is to their own advantage,
but there must occasionally be times when it is a distinct disad-
vantage to have to carry 011 negotiations through an interpreter
whose good faith is not above suspicion.

I shall conclude these remarks by transcribing some notes Some
made for me by an intelligent and practical merchant, who has 3ugg0st>°^8 b7
much experience in " pushing business." merchant.

" Home agents are too frequently without actual personal
knowledge of places they ship to. Consequently extension work
can only be done by the man abroad. The home man buys to
order and sees to financing and shipping, the man abroad has to
create the demand. Knowledge of what can be got at home is
absolutely a sine qua non, without it he can only take but not
make orders.

" More attention should be paid to the qualifications of men
who are to manage a practical part of business, i.e. men who are
to sell goods abroad. A wide business experience is necessary for
abroad ; one has to know something of everything. There is 110
more valuable experience than that of the traveller who has
' worked new ground' successfully at home; no mere collector
of orders, but a maker of business. Mercantile houses should
follow tlie usual German method of giving a commission on profits
or sales to salesman and manager in addition to salary.

" Manufacturers in sending abroad should be content to let
their representatives work up business and pass it through
merchant houses, otherwise the merchants will push other goods,
and purposely avoid those of firms who work direct. If a
merchant introduces and works up a trade for certain goods his
interest should be protected by giving him the sole sale of a special
brand, and selling to other firms only different brands, thus
avoiding danger of absolute monopoly while giving the worker his
reward. Otherwise one firm has all the work and drudgery, and
another later reaps the reward.

"Merchants should in their own interest insist on their
managers and salesmen travelling occasionally in the country
around the port, and thus get in touch with needs and ascertain
what is likely to sell. But above all they should send such men
home every four or five years to visit manufacturing centres and
warehouses, see new lines, choose their own samples and get in
touch with home markets again. This can only be done by the
man who has to sell the goods and no one else.

"Manufacturers should supply sample ranges of goods, if
expensive, on the principle of so much business, such a value of
new samples up to a point, say 200/. worth of samples sent on
sale or return, but if business follows to the extent of 4,0001, the
samples to become the merchant's property. Samples should be
marked and numbered, and accompanied by proper details giving
lowest cost, mode of packing, discounts, size and weight of cases,


-70 china.

so that laying clown cost can be calculated. Catalogues should be
illustrated plainly and well, all details and prices being given with
the item and in the same place, and posted direct to merchants
not to London agents."

LONDON:
Printed for Her Majesty's Stationery Office,
By HARRISON AND SONS,
Printers in Ordinary to Her Majesty.
(1250 5 | 97—H & S 2297)


Full Text

PAGE 1

FOREIGN OFFICE. 1897. ANNUAL SERIES. N 1909. DIPLOMATIC AND CONSULAR REPORTS ON TRADE AND FINANCE. OF CHIN A. REPORT ON THE TRADE OF Arr rrHE CHINA. PORTS Presented to botli Houses of Parliament b.1J Commanl of He, :lfajes ty, ,lf.A Y, 1897. LONOON: rmxTED FOR mm J[,\.JF.STY ' S :'JT.ITTO~ERY OFr
PAGE 2

New Series of Reports. REPORTS of Lhe Aunu:tl Series have been issued from Iler lllaje.;;Ly's Diplomatic aud Consubr o:necr~ nt Lhe following place~, and may bL' obtaiucJ frJ II the ~O!ll' L:C.i i11 licalctl on the title-page:-. No. Price. I No. Price. 1787. Bangkok l
PAGE 3

No. 1909. CHINA. Consul Brenan to the Jlfmqucss of Salisbn1'lJ. My Lord, Chcfoo, October 15, 1896. HAVING now completed my enquiry into the state of Trade at the T1eaty Ports of China, I have the honour to enclose a Report embodying the results of my inve:::tigations. A copy of this Report. has been sent tfl Her Majesty's lV[inister at Peking. I have, &c. (Signed) BYRON BRENAN. Report on the State of Trade at the 'l.'recdy Po?'ts of Ohina. TABLE of Contents. PAOE P,wt 1.-Tlte P1esent Position. Jn frnct.ions of the t.rettt,y mny be committed without cnusing direct loss to local llrit.ish n1e1chants T1c11ty priYilcges benefit Chinese as much ns foreigners l:!'oreign t\"Catics indirectly protect Chinese from extortion .• Foreign trnde as nt present conducted., • • • • , , Direct intere,t of British mcrcl11wts in China trnde decreasing Our manufacturers more directly concerned •• J~ightecn ports open to foreign trade . . . . . • Distinction between treaty port and non-treaty port Foreign customs establishment Chinese nnd foreigners on 1111 cg ual footing at treaty porls.. • • Ii~112ort dut:Y does not free goods oven ,rithin limils of treaty ports L1k111 tux imposed o.t the port .. Likin tax at Cunton . . . . Chinese traders afraid to dispute legnlity of ta:xes Foreign firms excluded from Canton city Direct importation from foreign countries Ernited to Hong-Kong Shanghai Southern ports obtain stocks from Hong-Kong :Nortlwrn ports obtain stocks from Shanghai .• .F.ew British mcr,.Jrnnls at the outpor!& .• (229,) and .~ A 2 G G G G 7 7 7 7 7 8 8 8 8 8 9 9 9 9 9

PAGE 4

CHINA. TABLE of Contents-continued.-Import business at outporta done entirely by Chinese Advantages possessed by Chinese dealers British import merchants only founcl at Hong-Kong and Shanghai British merchants are not distributors Import business at Shanghai Chinese beginning to import un their own account Indent business increasing One lrnlf of cotton goods arrive on Chin_e~e acconnt .. Three-fourths of miscellaneous merchandise arri'l"e on Chinese account Chinese dealers ore the first to feel infractions of treaty Injurious results of trade passing into Chinese hands At first sight the foreign merchant appears to have ndvo.ntogcs over the native in distributing goods Reasons why this is not so Question of official support to British merchants Discouragement co.mes him to withdraw Sm.all number of British firms at outports Imports cannot increo.se unless exports increase Cheap silver bas developed export trnde Export trade rP.mo.ins in foreign bands Export tro.de now largely a commission business A commission a.gent less impat.ient of tren.t.y infrnct.ions tlmn n merchant-... Prwt Il.-1nland Transit Trade. PAGE !) n 10 10 10 10 10 10 11 11 11 12 13 13 13 13 14 14 14 14 H Hostility of 1mtivc officials lo transit pass system 15 Opposite ,•iews rego.rding commercial clauses of treat~15 'Ihe Chinese view-the profit of the individual 15 'l'he British view-expansion of trade.. 15 In Chinese opinion British goods once sold to Chinesr me withont p1 tection.. 15 How to nullify the commercial clauses of the 1reat.y.. 1G Chinese officials inclined to get round the treaty 1G Conflict between provincio.l o.nd Imperial interes1s 1G Provincial dislike of treaty commercial clauses l 6 Early failure of transit pass system , , 16 Success of forcible measures 16 Improvement in transit trn.dc . . 17 Ur~nt need of funds during Tn.iping rebellion c,rnsed 1ransit pas,e, to be ignored 17 Chinese dealers umiblc to fight transit pass q1teslions 17 Tro.nsit pass system disturbs pro-rincial flnn.nccs 17 Centro.I Government generous at pro.,-inces expense.. l 7 Provinces reduce their tariff's in 01der to cornpelc with Central Gowrnment 17 'l'ro.nsit pass goods have cerLnin disn,d,antages 17 Necessity of declaring destination of goods is a <'.r:iwbock , . 18 Chinese guilds make their own burgam wi1h proyincial gowrnmrnts 18 U uilcls form the taxes . . 18 And ohto.in a. monopoly of trade 18 A nemesis overtakes transit. pnss goods J 8 Destina.lion or terminal to.x 18 Transit pass should protect from I ermi1rnl tax 10 How the transit pass system works ut !he different p01t~ If) Not necessary o.t Newchwong and Chefoo Hl Works well at Tientsin • • J 9 'fhey are a failure at Chungking Hl Fnr reaching effects of this failure l 9 Not much used at Ichang 20 '..Vorks well at Hankow, Kiukiang, \Vuhu and Chiakiang 20 P::rt of Kwo.ngtung province rnpplied wi1h goods under passes from Kiukio.ng 20 Obstructions at Shen;:ho.i :n

PAGE 5

CHINA. TABLE of Contents-continued. Not much used at Ningpo, "\Vcnchow, Foochow, an:l .A.moy NotusedatSw.1tow .• •• ., •• " .. A dead letter at Ca,uton .. '.l.'empomry success ,it Ca,nton in 1891 .. Renewed opposition at Canton . . . . . • • . So-called collusion between Chinese and foreign merchants at Canton Yarn trade at Canton in hands of a privileged association • , , , Intimid11tion of tradcra .. Success of the intimidation Rival transit pass ~ystem Heavy taxes on way to Kucichow ntul Yunnan provinces The best part of likin revc,nue i, misappt opriatecl Likiu officinls pay for their 11ppointment . Mode of robbing the revenue .• How the C,mlon GoYernment d e feat the transit pass system A test case; transit pass goods penalised at encl of journey .. 01(anised opposition against n British mel'Chant using tmnsit passes 'l'ransit passes for goods outw0,rds . . . . . . . • . • Illeg0,l fee's 0,t Chinlci~,ng 'fea and silk t0,xecl before foreigne1•, can purchase them Grower's tiix on cocoons ,, tea Canton outward passes renderec l useless Likiu collectecl from Chine se selle1 after goods have boon exporte d '1'1•ansit passes only lead to tax being put on earlier . • • . . • want of uniformity in modo of issuing passes l'art III.-1.'lte Suggest-ions and Complaints of MercTtants. Few complain(s or subgcstions on part of British merclrnnts Hong-Kong Clmmbcr of Commerce's su6 gestions . • . • Inland tmnsit tmde in C,mton province Preferential tariff enjoyed by junks Opening of West river •• NaYigntion or West 1iver • . . • . . . . . . West river traclo diverted to 'l'ongking by exce s sive ta:rntion Amoy suggestions; t11a trndc . • : . . • : , • Foochow suO'rrestions tc11 trade and ltlcm on imports Slmnghai suggestions' . . , , , , , Appointment of a superintendent of British traJe 8epa.ration of office of Consul-G enernl ,mcl Chief J uclgo Residence in the interior N ativc ugencics in the interior . • . . . , Freedom of steam nnvigution on inland waters N ntional currency CiLnton and Wuchang mints .• Reform in the system of inlnncl taxation How native tax stations fleece the trader Reform of judici0,l system Fre e exportation of grain Irnp01tation of s1Llt .• Rt:gistration of tmde m0,rks . . Li•tbility of Chinese . shareholders fo, unpn.ul capital Del0,y in issue of drawbacks and re-export cert1ficntes Woosung H0,r and extension of foreign settlement Chungking suggestions; lrnnsit trndc .• Chinkiang suggestions . . . . , , ReTision of Yangtze trade regulations Detention of steamers at Chinki0,ng • . • • . • • Prepayment. at Shanghai of duties on Yangtze valley nnports (2297) PAGE 21 21 21 21 22 22 23 23 23 23 24 2'1 24 24 24 25 25 26 26 26 26 27 27 27 27 28 28 28 28 29 30 30 30 30 30 31 32 37 39 39 39 39 40 40 40 41 42 44 44 44 45 45 4G ,16 46 46 ,16 3

PAGE 6

4 UHINA. TABLE of Contents-continued. PAGE Part IV.-Consequence ef t1,e 1Vm 1cith Jazrnn. Effect of war on trade . • 47 How far British interests n-1"0 affected by Shimonoseki Treaty 47 Cession of Formosa 47 Formosa tea trade 17 War indemnity . . 48. Trade will ha Ye to pay the indemnity. . 48 Other forms. of tELxation not capable of expansion 43 \Vastefnl system of likin taxation <18 CommerciELI co:1rnntion makes no important chunges ,19 Opening of four new ports • • . . . . . , 10 Port of Clrnngking 49 Steamers may now proceed to Chnngking 4D Chungking so far disuppoinl.ing 4() Export trnde of Ssuchna11 must be clenloped by foreigners 50 System of chartered junks bet,ween Iclrnng uncl Chungking., , , , , 50 NutiYe cnsLoms at Knci-Fu compete with foreign customs-house for curgocs 50 An opening fol' slen.m launches at Chungking 51 Port of Shoshih , . 51 1\n important p!:tcc for transhipment., 51 Shashi!J. not a Jorge rnmkct for foreign goods 52 N atiYe l(Oods using steamers pay exLrn duties 52 City of Soochow . , 52 City of llangchow 52 Opening of these will muke litt.le difference to import trade 53 Shanghai ns good a distributing centre ns Soochow , , 53 Hangchow may become a distributing centre 53 Hangchow not a seaport 53 Hangchow and the tea trade . . 53 Soochow and the silk trade 54 Silk filat ures 54 Chinese benefit more than foreignPrs by the opening of new ports,. 54 Opm,ing of new port.s arc an arhantagc to domestic trade . , 54, J.'el'mission to foreigners to hire warehouses in t.hc interior.. 55 .A. greater boon to Japanese than to foreigners 55 Importation of machinery and erection of factories,: 55 Former prohibition intended to further priYalc ends 55 Erection of foreign owned cotton mills 55 Everything in their foyour, but interested parties may prevent success 55 Question of e.wise on output of factories not settled. , 56 Japanese mills may undersell Chinese mills. . . 56 Number of mills oncl spindles in Chinrt 56 No trustworthy infornmt.iou regarding the working of Chinese factories 56 Proportion of hands and wages 57 Mill hand's efficiency 57 Effect of low-priced silYcr on Chinese manufactures 57 Silver not the only money of the Chinese 57 The price of coppel' an important factor 57 Part V.-W!,at may be clone to Promote Trade. China's own resources must be deYelopc,l China at present a very poor country .. Oillcial class opposes ull deYclopmcnt .. Peking connives at provincio.l shortcoming~ ]futility of sending complaints to Peking One instance of proYinciol contumacy., Chinese Foreign Office has no authority over provinces Hopes based on China's financial straits New drain on China's reYenue .. 'l'he foreign customs offer simplest way of inc1easing re.enue U sc China's neressit.y _as n ]eyer for exacting reform , • 57 58 58 58 58 59 69 59 59 59 60

PAGE 7

CHINA. TABLE of Contents-continued. Ho" much an increase of lariff wonlcl prucltwc Foreign uncl Chinese interests iclen(icnl .. How domestic trucle is strunglecl , , .. Pseudo transit pnsses at Chiukiang . . , , Natirn merchandise pays 15 per cent. inluncl clues , , , . , , .. Inter-provincial exchange of commodities rest.rictccl by excessive tn.xatiou A plan to regulate in!anrl taxation . , , . , , . • • , , , :No plan to reorganise inland tftxation will succeed if left to natiro exccutirc • , , , , , Consuls too much occupied to clcYotc attention to commercial nrnttcrs Suggested appointment of commercial secretary The scope of his clut.ies , . , , . • . . , . , . \\" hat merchants and manufactmcrs can do to he! p thcmsel rcs Furt.J1r.r clcrclopment of trade depends 011.foreign ~nterprise .. No incluccrnent for foreign merclrnnts in Chin:1 to exploit new ground Homo nrnnufocturcrs must initiate research into China's needs and resources Little is known of inland nrnrkets Nothing to hope from enterprise of Chinese mcrclu111ts Show-rooms at Shanghai Pushi11p; the sule of sewing cotton European imitations of Chinese articles Required, a co-operative association of manufacturers China should be systemiitically exploited . , Enlist the assistance of inlaucl missionaries .• Continental nmnufocturers more accommodnting tlinn British A. knowledge of Chinese lungungc necessary , , Some suggestions by 11 practicul merchant Sketch map of China showing the position of places mentioned. in this report. GLOSSARY. PAGE 60 (iO 60 61 61 61 61 62 62 63 63 G5 65 66 Gfi fiG 66 67 67 67 G7 68 68 68 68 69 5 Foreignas.-'l'bc subjects nncl citizens of Powers having Lrenlies with Chinn. Foreign C11slom-l,ouse-Forei9n Oustoms.-'l'ho es!ttblishrncnt thnt controls foreign shipping at llJC treaty ports, nncl collects duties on the morchnndiso cn1ricd in hrcign ships, or in Chinese-own eel ships of foreign typo. It is composed entirely of foreigners. Naliv e Customs.-'.l.'hew collcet clnl!cs on me1•clmncliso carried ~y j qnks. Likin.-A tnx imposed by tl,c prol'incinl govcmrncnts on goods moving from one part of the country to another, 01 on goods nrriving nt their destination. T1eal.'f ports or open ports.-'l'he ports open lo foreign trade, which foreign Yc~scls may frequent, and where foreign merchants mu.y settle. Oulports.-Thc lefs irnportunt pol'ls, pradically nil the Lrc,il.y ports, except Shanghai. Picul.-A Chinese weight= 133} lbs. arnirclupois. A tael of sil-ver.'-A weight of sihe1; it rarics in difl'erent trades 1111d loc!llities. H is about 580 grains troy. The eqninilent in English money deper:cls on the price of silver. For ,1 rough calculation the tael nrn.y be taken at. from 3s. t.o 3s. 4d.

PAGE 8

CHINA, PMt I.-Thc Present Position. Infractions of If the complaints which our merchants in China have reason the trenLy to make in respect of their own operations, either in their gravity ~::at~tcd or their frequency, are to be taken as a measure by which the without present position of British trade may be judged, then we must causing come to the conclusion that matters are 11ot in an unsatisdircct loss to f f I h 11 1 1 h I d ] local llritish actory state, or, as s a s 10w ater on w en o t 1em merclinnts. the justice of recapitulating their views, the mercantile communi-Treaty privileges b~nefit Chinese ns well as foreigners. Foreil(n tre1ties indirectly protect Chinese from extorlion. ties at the ports cannot as a rule point to any difficulties or obstructions which hamper them in the pursuit of their lawful avocations. A closer inquiry into the subject, however, reveals the fact that complaints are few because our merchants are bi.1t little engaged in pnrsuits out of which complaints may arise; and that, being denied the opportunity of doing what they fain would, in creating the r:onditions out of which a prosperous international trade springs, the scope of their operations is so limited that there is nuw scarce room for the appearance of any question that has not already been fully uebated and finally settled. The impression which a visit to nearly all the treaty ports of China leaves upon the mind is that the Chinese people are mono polising in . an increasing degree the commercial advantages obtained nuder the several treaties which foreign Governments have concluded with China. Foreign Powers having prepared the gronncl for their nationals, the Chinaman is gradually elbowing them out and occupying the position for himself. This of itself need not be deemed an unsatisfactory result of our wars and diplomacy. The development of trade is the first consideration, and if the measures we have adopted to this encl have hall the indirect effect of freeing the native trader from the fetters which heretofore trammeled him, and of placing him-much against the will, doubtless, of his own ofiicials-in as favourable a position as the foreigner, the natural advantages which he enjoys as a native of the country have, as might have been expected, enabled him gradually to supplant his foreign competitor. But so long as this result is obtained, not by curtailing the treaty rights or our merchants, but rather by extending these right8 or their equivalent to the native of the country, we must rest content to let the business pass into the hands of those who can do it the mof;t successfully. That some of the rights we have been at great pains tci sc1:nre are not exercised by our own merchants is no reason for rn1clervaluing them; they serve the good purpose of keeping the rneasme of oppression and extortion below a certain level, anrl this of itself is a service to British trade. As soon as trade in Chinese hands is too severely harassed it finds its way into foreign hands, and the self.seeking mandarin in his own interest has to reduce the pressure. It is the very faet of our treaty rights being ready to hand in case of necessity, that in many . . instances malrns recourse to them unnecessary. l
PAGE 9

CHINA. of our trade, it is well that the conditions of trade as it at present exists should be understood; not that I have anything new undet this head to impart to the British merchant in China. He is in a position tu know everything which affects his interests, and if the a.mount of information which he deems sufficient for his pur pose may frequently strike an observer as very limited, it is prob ably because experience has taught him or his predecessors before him that research further afield than he now ad ventures has no money in it. . The British merchant in China appears to Le disappearing, but Dircc( i_u~erest the interests of our manufactmers remain, and as a rnarke of Bi 1 1L15L1 • bl f . . Cl , ll l . n~erc tan s rn ci:ipa e o immense extenswn, una may we c aun more attenChin11 trade tion than she at present receives. "\Ve should look beyond the decreasing-. China as it is and think of the China as it mioht be if a ])Ortion Our manufoc' o , . turers mor.J of the restless energy we display in new lands could be diverted directly to hasten the development of the unexploited if not undiscovered ~onccrnell. resources of this ancient country. It is the British capitalist, manufacturer, and artisan who have to gain by hastening the process, and -what I now write may 'not be so well known to these as to my fellow residents in China. To judge from the letters from business men in England which the post frequently brings to me and my brother Consuls in China, the conditions under which trade is carried on, and the opportunities of extending it, are but imperfectly understood by them. It is apparently assumed that trade in China proceeds much on the same lines as in the United States, France, or Germany. My desire to enlighten those who are interested in the subject must be my excuse for venturing to give what to those on the spot must appear as very elementary information. At present British subjects are at liberty to carry on their Eighteen mercantile operations at 18 ports in . China. These are, taking f;1:;tg~P~:~\fc. them in the order adopted by the Clnnese custom-house: Newchwang, Tientsin, Chefoo, on the northern coast; Chungking, Ichang, Hankow, Kiukiang, vVuhu, Ohinkiang, and Shanghai, on the Yangtze river; Ningpo, ,~r enchow, Foochow, Amoy, Swatow, Canton, Hoihow (Kiungchow), and J'akhoi, on the coast south of the Yangtze. To these will now have to be added Shashih, on the Yangtze, between Ichang and Hankow; and Hangchow and Soochow, two inland cities in the neighbourhood of Shanghai. . . . The advantages which a treaty port possesses over a non-treaty D,strncf.wn ] f b' l l ] between port 1s t rn.t ore1gn su Jects may own property anc res1c A t 1ere ; treaty port foreign vessels may load and discharge there; merchandise, both nnd nonforeign and native, may be i1i1ported and exp0l-tecl under a fixed trcnl-J' port. tariff of duties.; and from 'these points foreign merchandise may be sent into the interior, and native produce may be brought down from the interior for shipment abroad on certain definite conditions. At these points the collection of duties is under the F . control of the Imperial Maritime Customs, tl1e personnel of which is entirely European, and being directed from Peking is quite este.blishindependent of the provincial government. This service exerment.

PAGE 10

8 CHINA. cises superv1s10n over the trade carried on in steamers and in vessels of foreign type, irrespective of nationality, even if such craft are under the Chinese iiag. All merchandise carried by these, q nite regardless of the nationality of the owner, comes Chin~sc 1tnd under the control of this adrninist1:ation--the so-called " foreign foreigners on customs "--as it enters the port. In this ,rny, Chinese importers on equnl and exporters find themselves on the same footing as the foreign footing nt 1 t l [ t f 1 . treaty ports. mere rnn as regarc s tie paymen o ( uties. Import duty At all these treaty ports our British imports should pass into does not free consumption locally after payment of the tariff import duty, but g~od~ e,:e': they are not let off thus lightly. At Shanghai, true enough, wf \111n thmit\ within the area of the foreign settlement, where most of the 0 rea Y por Chinese retail business is don~, no additional tax is levied, but at Likin t,,x nearly every other port a tax callerl likin is levied as soon as the imposed 1tt goods pass into the shops. This tax varies with each article, but the pnrt. amounts to about 2 per cent. ad va1orem. This means that even e,t the port British goods cannot be retailed before a tax of 7 per cent., instead of the treaty 5 per cent.., has been paid on them. Likin ti,x at At Canton where the retail trade is larger than at any other C1tnton. port in China, the import duty is merely a first instalment of what British merchandise has to pay. Canton obtains its supplies from the British free port of Hong-Kong; and thither resort all Chinese dealers from different parts of the mainland. The goods pmchased in Hong-Kong are conveyed to the Canton province either by junk or by steamer. Steamers from Hong-Kong may only proceed to the ports open by treaty ; junks may go any where; hut the treaty stipulations regarding tariff duties and inland clues only apply to goods imported in foreign craft at the treaty ports. We haYe nothing to do with the treatment accorded to junkhome goods. Goods imported at Canton by steamer pay on landing the import duty stipulated in the treaty; this is paid to the Imperial Government through the foreign custom-house. Immediately afterwards the goods have to pay a provincial tax called likin, and at the same time another provincial tax called defence tax, that is a tnx instituted of recent years to provide funds for the defence of the province. After these three imposts have been paid the goods may enter Canton and pass into consumption within a restricted area, beyond which more taxing stations are encountered. Clearly the intention of the treaty was that British goods after paying the import duty should be free in the city of Canton; but in practice the import duty is only a first payment to the Central Govemment, the needs of the provincial GoveTnment have iiext to be satisfied. Chinese As in nenrly every instance the importers are Chinese, they trad~rs 1tfmid are at the mercy of their own authorities and pay whatever is lo cli~pute demanded without clemnr. Individual rights are not recognised i:~:~i.ty of in China, and any Chinese merchant bold enough to raise a question would be so dealt with that his case would serve as an example for years to come; It may lw thonght that under these

PAGE 11

CHINA. 9 circumstances a British merchant would have a great advantage over the Chiuese dealer, and that he could import his merchandise on payment only of the treaty tariff duty. So he may, but a British merchant imports goods not for his own use but in order to sell them to Chinese. If he kept a shop and sold by retail his Chinese customers might escape detection, but as a merchant he can only sell wholesale, ancl if the Chinese purchaser before taking delivery of his good,; failed to go to the proper oitice and pay the Canton tax, he would certainly be anested and made an example of by being made to pay the tax seYeral times over. If foreign merchants were able to obtain business premises Foreign Arms anywhere they chose within the Canton city limits it might be excluclecl_from lm 1 f' 1 fX! l I I . l' . Canton Clt-y. c 1 cu t or t ie tax o 11ce to rnep a c iec ( on a 1 transact10ns ; but although the treaty states clearly enough that " British subjects shall be allowed to reside for the purpose of carrying 011 their mercantile pursuits without molestation or restraint at the cities and towns of Canton, &c.," our merchants are practically confined to a small settlement, and the officials would make it extremely unpleasant for the Chinese landlord who by leRsing premises to a foreigner in the city enabled him to open a business establishment. The small settlement where foreigners live is closely watched by spies, and any Chinese caught in the act of removing goods that have not paid the provincial taxes is treated as a smuggler. As an importer for local consumption then the foreigner has no advantage. over the Chinese merchant, so the import trade remains in the latter's hands; and he has to submit to whatever exactions the provincial authorities may impose. Although eighteen ports are open to the commerce of the Dired. imworlcl. the importation of goods into China from Europe, the f1-ta~wn. Unitecl States, and India, almost entirely takes place thrnugh the c~~i~trf::igu British colony 0f Hong-Kong in the south, and through the treaty limited to port of Shanghai. From them two great entrepots of the China Ho1n8g1 -K0n1g . . I 11 1 I t 1 d 1:r I{ 1 nnc 10,ng 101. trace a t 1e oL ier par s arc supp re . :i.ongong supp ies Southern ]foochow, Amoy, Swatow, Canton, Hoihow, and Pakhoi; while ports supplied Shanghai satisfies the wants of the six Yangtze ports, and the ~ram three northern ports. It is at Hong-Kong and ShaDghai that are ~~;f ~ong. established the British firms that supply the China market. ports At the other ports, or the "outports" as they are known in the S,J1angh~i: China trade, the British merchant, and the foreign merchant Few n1 ritt15h, 1 . . . A l l f l . l mere ion a u, genera ly, 1s ceasmg to ex11,t. t on y twe ve out o t 1C e1g 1teen tbe outpoi!s. ports a.re there fonnd British subjects engaged in any sort of trade, a,nd at only three or four are there any British subjects interested i~1 the ~mport. trade. ~s already explained, the Ch.inese. t_rader Import fmds lumself 111 the enJoyment of all the commercial pnv1leges business ot conferred on foreigners by the treaties. According as he lives in par.ta clone the north or in the south he can proceed to Shanghai or Hong~1;;;:~~-hy Kono to lay in his supplies. He prefers the larger choice which 'd t o l , . 1 f . 1 . I .,,_ von oges he. finds in these places; he ms all the financia aci 1ties w uc 1 possessed by .the well organised Chinese banking system affords ,him ; he can Chinese tnwel more cheaply than his foreign rival, and his establishment dralers.

PAGE 12

io CHINA. at the treaty port costs him much less to keep up. He can thus lay down his stocks at any of the outports on cheaper terms than the foreigner, and can easily undersell him. But the native has still further advantages in disposing of his goods at the treaty ports. He is in touch with the up-country dealers, and knows the standing of the people he is dealing with; he is able to obtain information about markets which the foreigner cannot; and the power of combination in matters of trade in which Chinese are so strong enables them to control the market and to render the B t h. 1 t business of their foreign competitors unprofitable. It may thera-r1 is lUl[ or f b l l . l f . . "fj , l b . mercl111nts ore e statec t rnt, wit 1 a ew ms1gm cant except10ns, tie us1only fo~nd ,1t ness of the British import merchant is confined to Hong-Kong and II01118g1 1\.on1g . Shanghai, and th:1.t from these entrepots the further distribution anc ll1llg lal. f l 1 I l ( I . . . 1 . l I l t' o mere Hmc me t iroug 10ut : una is e11t1re y 111 t rn rnnc,s o British mcr Chinese. C?nce the_ ~ood_s ham left his warehouse. in H_ong-K01!g chants are not or Shanghai the Bnt1sh importer has no longer a dll'ect mterest 111 distributors. their fate. He doubtless wishes them well, because the greater Im1iorL bn~iness nt Shanghai. the consumption the better for his business, but snch remote interests clo not incite him to spend much time or money in clearing the way for British manufactures which have ceased to be his property. And yet this is a service to our British industries which he alone can render. Chinese traders are power less to remove obstructions which the rapacity of their rulers may put in their way. To lodge a complaint against his own officials is fraught with so much danger that recourse to such a step is 1;ever attempted ; and to bring a case of extortion to ihe notice of a British official on the ground that the goods concerned are of British origin would mean the ruin of the ill-advised Chinaman. The import business at Shanghai is also undergoing a change, not exactly in the same direction as that which has taken place at all the other treaty ports. At these, as already explai11ecl, the Chinese dealers have displaced the foreign merchant; and dispensing with the services of any foreign go-between they Chinese be obtain their stocks at Shanghai or Hong-Kong. In Sh.anghai ginning to I l 1 f Cl 1 imporL on t 1C tell( ency 1s a so or nnese to import, on t tell' own account, Lheir own but the business is still done through the agency of foreign accou t. merchants residing at the port, who in their Sha11ghai offices I ~dent busines~ incrP.using. make contracts with Chinese for goods that are still lying in Manchester or other European centres of trade. The local foreign merchants are more and more ceasing to be merchants in the true sense of the word; and rather than take their chance of the market in China prefer to settle their terms before the merchandise leaves Europe. One-half of Of the textiles imported from England and America as much c:ot.ton goods as one-half is specially indented for under instructions from ~~;:/~~5 ~11 . Chinese dealers; and the foreign firm through whom the order 11ccount. has been sent abroad has no interest in them on arrival, except as security for the payment by the Chinese principal. The Chinaman gives his order in tlhanghai, takes his risk of the exchange and of the market, and awaits the arrival of his goods. It was Cl\Stomary, not long ago, to settle the exchange with the

PAGE 13

CHil{A, 11 banks as soon as the order was booked, but of late, since the fluctuations in exchange have ceased to be so great, Chinese have shown a disposition to take their chance of the exchange as part of the risk which a merchant has to run. The gambling element in this has some attraction for the Chinaman, but it has also been found that the silver price of the goods follows any marked rise or fall in exchange, so that the risk is more apparent than real. 0 f Lancashire goods imported into Shanghai one-half arrive in this way already contracted for to the Chinese, and one-half are received by three or four large importing firms for their own risk; but in other goods the proportion coming entirely for the account of the Chinese is much larger. Cotton and woollen goods Thre.e-fomths apart, about 75 per cent. of Shanghai foreign imports arrive wholly ff miscelon Chinese account. 1~~:i1~~8nclise It thus happens that the Chinese in a greater degree than the nrriYes on British merchant feels the immediate effect of any infraction ol' Chinese the commercial clauses of the British treaty; but the Chinese ~1~i~:1;: are merchant's voice cannot make itself heard to the same effect as first to feel that of the more independent foreigner, and treaty infractions are infractions of thus allowed to endure without attracting much attention, or at trcnt.y. any rate without any serious effort being made to set matters right. That a certain amount of apathy follows, resulting in British t . . t l f tl J • t fi l 1 t l t l merchants stagna 1011, 1s na ura, or ie nes1re o nc new rnar rn s anc opus 11 a..-e no sales which wonld animate the holders of large stocks of unsold i~terest in goods is not to be looked for in men who have already secured goods once a purchaser. The profitable disposal of his own merchandise is sold. to any man a more powerful incentive than the general increase of a trade in which he may not after all become a participator; so the merchant with a warehouse full of unsold goods is more likely to bestir himself and find an outlet for his wares, and to make himself heard if he meets with obstruction, than Lhe man who is already assured of his profit 01 hic; commission, and has no stake in the ultimate disposal of the merchandise that has heen contracted for through him. Trade, of course, must be conducted on the lines that best Injurious suit those eni;raged in it, but the chanrre in the meLhods of 1tes, 1,11 s of . ...., ,.., u l'llC C fOS'--lllrr business that is taking place does not bode well for the expansion iuto Chin~se0 of trade, which in China can only be looked for from the activity hnncls. and energy of foreign merchants, supported and stimulated by their own Governments. From the agitation of the Chinese dealer nothing is to be expected, for the simple reason that he dare not agitate. It is even a difficult matter to ascertain from him the amount levied on goods between a port and an inland market ; he fears, and with good reason, that his officials will Ycnt their displeasure on him if he supplies information which may jeopanlisc their private gains; and he is also unwilling to take any fltPp ,vhich howeYer sure to result in an extension of trade, rnny nt tlw same time rlimir;ish l1is own share of it. In taking a broad view of commerce it may at first sight seem immaterial whether the distribution of our manufacturefi throughout China is in the hands of Chinese or of our own

PAGE 14

12 CJ!TN A. lller0ha11ts; but ll!lder cxisLiug circu111sta11ces it is to lJe regretted that. onr merchants have not found it profitable to be themselves the distributors, and thus retain an interest in the goods until they have reached the consumer in the interior. The Chinese distributor has to submit without hope of redress to the extortions of all the tax: offices .he may encounter on his journey, whereas the foreign distributor might occasionally obtain redress, and onr manufactures in his hands would be allowed to circulate more freely. But, as explained already, the outport is no place for the foreign import merchan f;, and he cannot profitably take part in the work of distribution. -were it otherwise then the advantages to us would be far reaching, for the British merchant would become acquainted with the difJiculties that beset om goods, he would resist illegal taxation nrnl Yexatious detention, and he would be keen to discover new markets and to introduce new goods. As things now arc, tl1is is all left to the unenterpriHing Chinaman, who, astute merchant as he is in well worn grooves, never thinks of striking out in a new direction. At the treaty ports where the native and the foreigner are 011 the same footing it can be understood that the native can more than hold his own, but when it comes to sending goods to inland markets it might be supposed that the question of ownership would tell in favour of the foreigner; for beyond the treaty ports the functions of the honestly managed foreign customs cease, and trade finds itself at the mercy of the rapacious and corm pt native official. At first sight, U ncler our treaties a British merchant may lay down his t.he foreiger merchandise at the door of any consumer in the Empire on nppeurs to t f ,. . l t Tl f' . t 1i~vc ndvan-paymenf o ccr0am c u ies. . l 1e1 payme1~t o an 1mpor t nges over the duty o G per cent., ancl an 111 am duty o! 2} per cent., or n,~ti,e_ in dis-7} per cent. in all, should lay down our goods anywhere. It !,r1bf rng is, however, certain that, except in some favoured localities where 000c s. the taxgatherer finds it unprofita hle to establish himself, the law abiding Chinese trader never succeeds in putting his goods on the market on these favourable terms. The difference, then, between tlrn amount of duties the Chinaman has actually to pay, and of the duties which the foreigner ought by treaty to pay, shonld be the margin of profit in favour of the latter, ancl one sufficiently handsome to t'ucourage foreign merchants to become distributors. It is true that the treaty clauses bearing upon the inland trade in Jlritish goods also confer the same privileges 011 the Chinese as on our O\Yn countrymen, and that the right of commutation of inlaml taxes appertains to the merchandise iri'espcctive of ownership. In principle indeed the Chinese Government has conceded this, but there is a vast difference in China between a right conceded to a Chinese and a right conceded to a foreigner. The native is diffident about claiming rights conferred on him by foreign treaties when the exercise of these rights is displeasing to the Chinese officials with -whom he comes in contact. The foreigner has no such fears; he at any rate feels secure in person and property; nncl if his goods are illegally

PAGE 15

CHIKA. detained or surcharged his loss can be appmi::il!d in money, and the intervention of his Consul shotllcl lead to reparntion. How then is it that the wants of the distant Chinese consumers Reason why ara not supplied by foreign 1twrchants? There are three reasons : this is not so. One that the trade would combine against the foreigner, and that men of small capital could not carry on the fight; another, a lack of that feeling of enterprise which it is necessary to possess and exercise before the connections in the interior can be formed ; and still another, the misgivings which fill the minds of British Q,ne3tion of merchar,ts lest they should not receive adequate support and otB.ci~l~upport t f 1 ] I 1 d'ffi l to Br1t1sh pro ect10n rom t rnir own :rnt 10nttes w rnn t rny are 111 1 cu ties, mei•chants an apprehension that they will be left to shift for themselves, and that the British authorities will allow them to suffer unjust losses. It is this sense of insecuril-y that has discouraged our Disconl'age• l )ioneers at the treaty IJorts and caused the British merchant to n~ent cJ1u~e, ' !um to with keep clear of any ventures except such as from his own experience clr11w, or that of others he knows to be not only legitimate, but also safe. A merchant is not a missionary: the latter persists in his efforts in spite or every obstruction and disappointment. If in his quality of British Bnbject he surfers wrong, he seeks redress, but his failure to obtain it does not deter him from continuing in his self-imposed task. A merchant as a man of business has to look to practical results. He cleri vcs little satisfaction from being assured that his complaint i8 well founded, and that he i~ entitled to reparation; he look8 at his ch.ances of obtaining reparation, and if, as frequently happens, he sees that these are remote, and that his officials can do no more for him than address futile remonstmnces to the Chinese authorities, he retires from the unprofitable business, rind instead of spendiug his time and money in upholding treaty rights, he devotes these to otlrnr purposes where the prospects arc more encouraging. It will probably cause surprise to leo.ru how few British Smull merchants now exist in China. In Shanohai there are 80 British m1?1~er of , o . . British firms firms, large and small; at the outports the list 1s as follows :ut outporls. Newchwung TienL.sin Chefoo Chungking,, Ich11ng linnkow Kiukiang , , \Vuhu ,, Chinl,i11ng , , Ningpo \Vcnchow . , l•'ncchow Amoy SwaLow Cnn~on Hoil1ow P11khoi Outpor(a. Number of Firms. _____ 1 ____ _ 3 0 1 12 2 4 G (i 2 (i

PAGE 16

14 CHINA. And of these not a few are merely commission agents. If the firms which are solely intere.sted in tea are excluded, then the number is indeed insignificant, and yet it is on these that we Imports have mainly to rely for the extension of our trade. China as a cannot incrcaseunless cnst.omer of onrs cannot buy unless she has sometlnng to pay exports with. It has ofLen been pointed out hy those who study trade increase. statistics that China buys as much as she can afford. In the long run an increase of exports means an increase of imports, but it has to be remembered that the Chinese producer does not seek a markP-t for his goods in foreign countries ; he stays at home till a purchaser comes to him, and it is donhtfnl whether a single article has ever found its way to a foreign market through the enterprise of the Chinese merchant. If the interchange of com modities between the East and the ,Vest is to grow, it is the wrstern merchant who must discover what more the Chinaman has to give us in exchange for 011r manufactures. The initiative must come from our side, and until we can take more from Chin:1, she must not be expected to take more from us. Cheap silver The increased purchasing powr.r of gold in silver-using conn hns developed tries now makes profitable the exportation of many articles of export trade. Chinese produce which were neglected before. The customs returns for the :year 1880 give a list of 50 articles exported to foreign countries, of a value of 76,339,000 taels, and sum up the rest as sundries, valued at l,54+,000 tnels. In 1895 these same !50 articles represented 129,355,000 taels, and the sundries then had mounted up to 1:-3,938,000 tacls. \Vhile the principal staples had increased 70 per cent., the sundries had increased 800 per cent. Once an article becomes a constituent of the export trade, the Chinaman may be trusted to bring it to a market; but it is for the foreigner to discover what kind of produce is suitable, and then introduce it into the trade. Expo.rt t'.ade The export trade from China to Europe and Ameriut, unlike rfern~ms1m d the import trade, has shown no tendency to pass out of foreign orc1an 1n.11 s. . . L 0 hands. Occas10nally, but so rarely as not to be of any 1mportExport trude now lu1gely :L eommission business. ancr., the Uhinese dealer will be persuaded by the foreign mer chant to retain an interest in produce consigned to a foreign market; but the results are usually discouraging, and the Chinese are too distrustful to leave the sale of their merchandise in foreign markets to fl, foreigner whose proceedings they have no means of checking. I3ut although the export trade remains in foreign hands, a change of another kind is noticeable. ,Vhere years ago a few large firms with large cnpital bought China's products and sent, them to Europe on their own accou11t, there are now many small firms who receive orders from Europe by telegraph, ancJ whn fulfil these for a small commisRion at 110 risk to themselves. The telegraph and, banking facilities have made it unnecessary to possess capital, and the business of the export merchant in Chinn _-\. commission bas in a great mcasnre changed into that of the commission ngem less a ,;ent. One of the comeqncnces of this is that the commission agent impatient. of who is lJuying on a limit, and who receives a commission on the 1 ,e,t.v infrncamount of th~. in\'oice, bevs on the best tcr01s he can at the tre:it)' t ions than a J 11,erchunt.

PAGE 17

CHINA. 15 port, but has no personal interest in the previous treatment which the merchandise has experienced at the hands of the tax-collector, and does not fael disposed to engage in the interminable disputes which an attempt to profit by the treaty stipulations affecting the inland transit of merchandise would land him in. Were he dealing with his own money, and was every dollar saved in taxes a dollar in his own pocket, he probably would try to bring this taxation down t.o the legal minimum; but in filling an order he now takes what the local market offers, and makes no research into the past. Part II.-lnlcmcl Transit Tracle. The stipulations regarding inland transit trade, which are con-Hostility of tained in certain articles in our treaties of 1842 and 1858, have no.tive officiuls from the outset been but reluctantly observed by those Chinese ttowa:tds . . rans1 po.ss officials whose pockets were touched by the change wluch the new system. system involved. The chief cause of our disputes with China which arise out of Opposite commercial matters i.s that the officials of the two countries do views regardnot take the same view of the object which the treaties and reguing_c?m1 • 1 . _ 1 . . , l . l . cl . me1cia c n,1,c~ at10ns governmg comrnercia mtercourse were c es1gne to attam. of treaty. In the estimation of the Chinese Government, the treaties were The Chinese framed with a view to securing for British merchants resorting view: eh . f t d S 1 1 1 theprofitof to ma certam aci 1 ies an m11numt1es. o ong as tie eg1t1-1 .. 1 .. 1 1 t l l f . th t l tl . llLf d l L, t 1emc IYI( 1"1 • ma e c emanc s o cse are gran ec, or 1e1r we onn ec gnev-ances are redressed, China has acquitted hersr.lf of her obligations, and any action on the part of a foreign Governnment to obtain more than this is an attempt to interfere with China's independence, which she must oppose by covert means or passive resistance. To the mind of the British official this view is too limited. The Briti,h The purpose which we wish to make the treaty subserve is the view: . f 1 f b 1 . d expansion o general deve opment o commerce etween tie two countnes, an trade. the removal of every unnecessary impediment to trade; and our repn,sentations are always directed to that end, no matter whether the person immediately affected lJy the obstruction is a British subject or a native of the country. Our desire is that our manufactures should reach their ulti mate destination, and that the produce of China should be pro curable from the place of origin on the cheapest possible terms. The Chinese official, on the other hand, will not admit that we may in any way concern ourselves as to what may happen to the Chinese possessor of British goods after the British irnp(lrLer has been paid for them, or to the Chinese producer who has sold his native goods to a foreigner. What may happen to Chinese-owned goods in Chinese hands In_ Cbincse has nothing to do with either the foreign merchant or the foreign ~P1.~.'~11 1 Consul. This is a Chinese official nrnxim,and indicating the attitude 0:~e':~1~0t,',' of tb.e Chinese official mind towards the treaty provisions which ,vere C?inese arc intended by us to put some limitation on the taxation to which with1ou~ (2297) ll pro ec!10n.

PAGE 18

How to nullify the commercial clauses of the treaty. 16 CHI~A. the constituents of foreign trade might be exposed. 0nce the soundness of t-he Chinese contention is admitted, then the import and export tariff ceases to have any meaning. British goods cai1 sooner or later be traced into Chinese hands, and the prodi1ee of the country which we may purchase in the interior for exporta tion must originally lmve been Chinese owned. . If in the one case taxes may be imposed retrospectively, and in the other in anticipation; the treaty tariff can be robbed of any value .. Chinese There is a tendency now noticeable on the part of Chinese oflic 1 inls officials to attain their ends in this round-about way; ,and un_der inc ined to get tl f l fi l l l Cl ' b round the 1e pressure o t 1e nancrn straits m w nc 1 una 1s a out to trenty. find herself, the temptation will be strong to levy at the one encl or other of the line the taxes which by the-treaties they have been debarred from levying 0~1 the journey. This is a growing clanger, and one which for want of information, or absence of direct or personal interest we may have great difficulty in overcoming. C,mflict The complaints we hear of are always in connection with betw_ee~ articles that eutel' iuto foreign trade, and they are usually due to r0;m.:1f1 and the action of some provincial officials rather than of the agents of i;::,e;:;ts. the Central Government ; but it is not for this reason to be assumed Provincial dislike of treaty commerciul cluuses. that the provincial r,uthorities wish to press more heavily on foreign merchandise than on native goods. They are quite willing. that they should be put on the same footing; and indeecl it is when, from their provincial point of view, that they attempt to subject both to equal treatment that we have cau1;e of complaint; for in effect we demand that the pro vincial officials shall put our goods on a favoured footing, and exempt them from all provincial taxation whatsoever; whereas Chinese procluGts nre liable to such local taxation _as_ the officials think fit to impose. The one transit duty which our &oods have the option of paying in commutation of alt inland dues are paid to the account of the Central Governmrnt, and although a portion of this is allowed to remaii1 in the pro vince, it is assigned to some pai;ticular service, and does not go to swell the general provincial revenue, out of which all provincial expenses have to be met, and ill-gotten gains provided. _ _ Early failure The system of franking British goods throughout the empire of transit pass by one payment after entry at the treaty port was deemed one of system. the most valuable concessions obtained under our treaties, and :its Success of forcible measures. failrire from the beginning to work satisfactorily cause~l general clisc1,ppointment. Af; long as foreign merchants were r,ersonaHy interrsted in the distribution of British goods in China; any infraccions of the treaty regulations were rapidly prought to the notice of the British authorities, and remonstrances and reclama tions addressed to the local authorities or Central Governhrnnt immediately follmved. It must be admitted that these wera unsuccessful more often than not ; and mere paper wa1fare would probably not have advanced matters very much; but the occasion presented itself once or twice of tacking the inland trade question on to matters which were demanding more drastic treatment; and in this way obstructions were removed, which otherwise might have remained as a barrier to trade down to the present day.

PAGE 19

CftINA. 17 . That an i1:1provement in tl~is inland tt:ade has take11place Improvement smce the provmces first set then face agamst the-:--to .them-in tr:1nsit obnoxious innovation cauuot lrn denied; lmt that our goods are yet trnc1e. far from enjoying all the arlvantages they are entitled to is equally true. Both the Nanking Treaty of 1842, and the Tientsin Treaty of l 858, make it plain that after payment of one transit duty, British goods may reach any market in the interior, free of all further inland charges whatsoever; yet it is certain that few goods ever do reach their destination on such favourable terms. In the early years following the Treaty of 1858, when British firms were established at all the open ports, a serious effort was made to take advantage of the transit pa8s system. Circum stance3 at that time were against the successful issi.rn of the attempt, for many of the provinces were engaged in a life and ~rgent need cle~:th struggle with the Taiping and Mohameclan rebellions, and 01r f~nds I 1 1 1 l f f d c urmg t 10 provmcrn governments were iarc pressec or un s; money Taiping had to be obtained somehow, even at the price, not a very serious ~e~el_lion consideration to the Chinese provincial Governor, of throwing the 1tmm1 . 0 ,111 to B . . l T b d l c . 1 c1 b 1 mns1 •. passes. nt1s 1 reaty over oar , anc 1or many years m t 1e . 1stur ec provinces the transit pass regulations were a dead letter. Gradually order was restored, but meantime the conditions of trade had changed, and by degrees the import trade at most of the outports (under which designation may be included all treaty ports except Shanghai) had been passing into Chinese hands. In this wise the persons directly interested in Eieeing the transit pass system work smoothly were Chinese, and they are so Chinese utterly helpless against their officials that none would venture to dc11lcrs insist on his foreirm o:oods being accorded the privileges nominally f1!n10,btlte to ., " ,., 1g l rl1US1• conceded by treaty. pass In estimating the provincial oppositiou to the scheme, it must qucsti_ons. be borne in mind that the effect of the transit pass system is not 'l'mnsit pass only to reduce and regulate the inland clues, but it is also to transfer so much revenue from the provincial to the Imperial Ex-proviociul chequer,ancl between these departments there is a perpetual struggle. finm1cc~ In agreeing that all the inland charges might be commuted by Central one payment, the Central Government made a bargain profitable Government . lf 11 f l . f . tl t I . t generous ut to 1tse , anc e t tie execut10n o 1t to 10se a w 10se expeuse 1 . expense of hacl been made. provinces. In some parts of the empire the local oH:icials resisted the Provinces innovation very resolutely and in others the main effect was to reduce U.1ei1 1 l 1 ' l t l 1 l t tariff so ns to ma rn t 10 provmc.ia government roe uce 1 s _ 111 anc c rnrg?s o a cc,mpete with level that would mduc.e traders to cease usrng the transit pass. Cent.rol And it may well happen that a Chinese trader will consent to Governmrnt. pay successive inland charges which, in the aggregate, amount to a good deal more than the treaty transit duty, for merchandise unaccompanied by a transit pass enjojrs certain advantages worth paying for. Merchandise going inland under tra~sit pass . mu~t 'frnnsit pm be in the orio-inal l)ackao-es the name of the slup by wlnch 1t goods have • ::, • 0 ' 1 l 1 1 1 t t t L c.:,rLain diswas 11n1)orted must be 0ven anc t 1e Iii anc c e.s nm 1011 mus ue 1 (. d ::, ' Ill v11n agr~. eclared. (2297) B 2

PAGE 20

18 CHINA. Necessity of This latter requirement is a serious disadvantage, and detracts decl~rin~ from the value of the transit pass. A good market might be destmation of found at some place short of the ori0rrinal destination, but if the goods is a drawback. goods are sold there they are liable to confiscation ; or again, on Chinese guilds mo.ke their own bargains with provincio.l governments. arrival at the declared destination the market rnay be b"J.d, and the goods may have to be sent elsewhere, but in this ca:3e the transit pass has done its duty and is cancelled, and the merchandise is liable to further charges en route, charges which uncertificated goods may escape, owing to the fact that they have alreadypaid their full quota to the particular province. There is naturally a disposition on the part of the provincial offices to treat more leniently goods that have loyally contributed to the necessities of the province, and to be harder on those that by means of one payment to the Central Government have shirked their local obligations. There is also another reason why it is found difficult to bring our British products to the consumer burdened with no heavier duty than the regulation 7t per cent. In China almost all persons engaged in trade form themselves into guilds or associa tions, and the constitution of these is recognised and upheld by the authorities. It is practically impossible for any person to engage in business in defiance of the rules of the guilds, for its decrees are enforced with great severity, and no outsider can resist them. When a provincial government is hard pressed for money, as every provincial government always is, or professes to be, it may happen that a particular trade will consent to pay an annual amount into the provincial treasury, and in return it will obtain permission to levy a certain tax on the merchandise in Guilds farm which that guild deals, in fact the guild farms the taxes, and the the taxes: profits of the farm are distributed at the end of the year amongst the several members of the guild in proportion to the business done by each firm, that is, a pro mtci return is made to all con tributors. When the trade is in a few hands, and the guild is given authority to tax outsiders, this farming of the taxes is a o.nd obto.in a monopoly of the trade. method that commends itself both to the provincial government and to the merchants, for it virtually gives to the members of the guild a monopoly of the particular business, and for this advan tage they are willing to pay a heavier tax than by treaty the goods should bear. They prefer to pay 5 per cent. and keep the trade to themselves, than see the transit tax reduced to 2t per cent., and the trade thrown op~n to all and sundry. Of recent years the officials of some of the provinces hare had recourse to a plan intended to counteract the, to them, injurious effects of the transit pass system. They respect the transit certificates, true enough, and allow the goods to pass freely, .A. nemesis but on arrival at t11eir destination, they trace out the purchaser overt~kes and make him pay what is called a " destination" or " terminal " tro.ns1t pass l f '2 d l 'l . goods. tax, usual y a tax o .:, per cent. a va orem. 'I ns recoups the Destination or province for what it has been robbed of by the transit passes, and terminal tnx. also teaches the dealers the lesson that they had better leave these passes alone.

PAGE 21

CIIINA. 19 Much argument has been used to show that this terminal tax is not covered by the transit pass, and that this document has done its duty once it has protected the goods up to the outskirts of the place for which they were declared; but this terminal tax is one specially devised to catch transit pass goods, and is not collected from merchandise that has paid its way at the different stations passed en route. It is in the nature of a payment of Transit pass arrears, and it is a differential tax from which ordinary merchanshould pro-d . t If tl t b ' . tect from 1se 1s exemp . ie rans1t pass system 1s to e any protect10n terminal tax. to our manufactures, the document must be held to cover the goods until they reach their destination, by destination being meant the warehouse of the inland dealer who is going to break up the parcel and sell it retail; and this inland dealer must not be called upon to pay anything more than others in the same trade. But commutation once for all is not the meaning which the provincial authorities are willing to admit should be put on the transit pass regulations, they doubtless know that is the right construction to put on the treaty clause, but they will not admit it, for this would be cutting the ground from under their feet. It is the Chinese official method to resist making reparation until they have had to confess themselves convinced, and by refusing to be convinced they can put off reparation indefinitely. Even a criminal is not put to death until he has confessed, but then the confession is obtained by torture. Taking the ports from north to south the transit pass system How tho works as follows :-At Newchwang and Chefoo, the inland taxes transit pass are so light that it is not profitable to use them. At Tientsin they :r:~m works are used chiefly for Hong-Kong sugar and English piece-goods, but ditrer:nt as the passes are issued by the native and not the foreign custom-ports. . house, no returns are available. In Chungking they are not ~otre~uired applied for because their use is discountenanced by the pro~hwa:~ and vincial authorities. An attempt was made in 1893 to send goods Chefoo. up c,:mntry under transit pass, but with ill success. A quantity :.-el\ ~t of cotton yarn was cleared for an inland market, and obtained the .A.1f~if~~~ o.t necessary documents on payment of the legal transit dues. On Chungking. reaching the first tax office en route the boats were detained. After a delfty of some days, some of the boats rathe1 than lose more time, paid the likin tax and went on their way. The other boats were released after 12 days' detention, but the goods were followed up and the consignee at destination was made to pay a terminal tax, invented for the special occasion, of 3 per cent. ad valorem. After this occurrence the head likin office at the provincial capital, in order to circumvent the new school of traders, issued a notice that all transi~ passes must be surrendered at the last tax office passed by the goods, and that on arrival at their final destination the goods must pay a terminal tax of 3 per cent. This terminal tax is payable only on goods that have attempted to benefit by the transit pass system ; ordinary goods that pay the prnvincial dues are exempt. The mischief caused by a case of this kind cannot be measured Fo.r reo.ching by the loss suffered in the !)articular transaction. So soon as the fea:e1cts of this 0.1 ur0.

PAGE 22

Not much used at Ichang. 20 CHINA. trade learns that transit passes expose goods to delay it takes alarm, and reverts to th1o old plan of paying provincial taxation. The tardy reimbursement of the illegal dues that may be subsequently obtained does not repair the mischief. Left to themselves Chinese traders are afraid to rnnew the experiment. In the case above described the injurious effects were felt even in the neigh boming province of Kueichow. Her Majesty's Consul at Chung king reported that some Kueichow merchants were in Clrnngking at the time making enquiries about the possibility of taking back merchandise under transit pass. They took the lesson to heart and said no more about transit passes. It was not until 189G that Chinese merchants at Olnmgking could agai1i be persuaded to buy goods covered by transit pass. A British firm sold cotton-yarn to a Chinese dealer, paid the inland transit duty, and pl'ocured the necessary documents. On their way the goods were detained at the first tax station met ,vith, and the pass was ignored. Another lot of yarn was allowed to pass, but on arrival at destination the yarn was made to pay the terminal tax of three per cent. At the same time the Chinese firm in Chungking, through whom the goods had been sold, was intimidated by the officials, and with this unpleasant experience it is unlikely that any further attempt to use transit passes in that region will be made, especially as the saving to be effected is not great. At Ichang it now scarcely pays to use transit passes, as the officials of the chief tax office on the main lino of traffic have, in their competition against the Central Government, made such large reductions in their tariff that on most articles it is now cheaper to pay to the proYincial than to the Central Governn'ient. Works well n.t At Hankow, Kiukiang, "\Vulrn, and Chinkiang on the Yangtze Hankow, River, the system seems to work well. At these four ports the Kiukiang, proportion which the Vitlue of the foreign goods sent inland u'nder Wuhu, and Chinkiang. transit pass bears to the net total of foreign imports is respectively Pnrt of Kwangtung province ~11ppliec1 through l(iukiang. 41, 40, 2G, and 70, but at all these places, notably at Hankow, the complaint still is that the transit pass is efficacious only within the limits of the particular province. Beyond the limits of the province it ceases to protect the goods. For example, at Si-an-fu, in the province of Shensi, which is the great distributing centre for all north-west China, piece-goods have to pay over and above the commuted transit duty, which, of course, ought to clear them to destination, additional taxes aggregating to three times the amount of the stipulated transit duty. At Kiukiang it is noteworthy that of the whole amount of cotton-yarn imported 98 per cent. goes away to the interior under transit pass, and about half of thfr; is cleared for a city on the extreme south of the province, on the border of the Kwangtung province. The explanation can only he that from this city it is carried over the Meiling Pass into the North River districts of the K wangtung province, which, but for the excessive taxation along the Canton waterways, would obtain their supplies direct from Hong-Kong.

PAGE 23

CHINA. 21 At Shanghai less than five per cent. of the foreign imports_ go Obstructions to the interior under transit pass. Here the reason is not that the o.t Shanghni. transit pags is not respected, but that there is a difficulty in procuring it. At most of the treaty ports it is the Imperial Maritime Customs (the so-called "foreign customs") who issue transit passes; at Shanghai it is not so. They have to be applied for, through the foreign custom-house, to a Chinese department which is interested in discouraging their use. The Chinese official in charge of this department, for a consideration, issues passes of his own which protect goods throughout the province, but his price is dearer than that of the treaty transit pass. On the other hand there is no delay in obtaining these passes which bring him in _ money. Applicants for what may be called the regulation pass have to wait for da.ys. A delay of even one or two clays_ is_ a serious matter, because it is not until the trader has completed bin purchase and is ready to start on his journey that he can supply the particulars required at the custom-house, and being ready to start he prefers to pay a little more to the rival establishment' so as to get away at once. _ .At Shanghai also the inland duties on piece-goods are farmed by the Piece-goods Guild, and the opposition of that powerful body is enough to deter any outside merchant from striking out" a line of his own. So far as can be ascertained foreign goods can be laicl" down in any part of the province, of which Shanghai is Lhe commercial metropolis, not more heavily burdened than with a tax of five per cent., but the delays and petty exactions in the shape of fees at the munerolis barriers are a source of nirrch irritation. At Ningpo; Wenchow, }'oochow, and .Amoy the proportion of Not much transit pass goods to the net foreign imports is respectively 14, 7, us_ed o.t 9, an_d 8 per cent., but the provincial taxation is not very heavy, N,~ngpho, d l . . l:!' d b . h . ,. enc ow, an t iere is no great savmg euecte y commutmg t e transit Foocl.tow o.nd duties . Amoy. ' .At Swatow no passes are applied for, there would be some Not used o.t saving in using them, but the authorities set their faces against Swntow. them. It is at Canton that the treaty stipulations regarding inland A dead letter transit trade is a dead letter; and it is in this province of all nt Canton. others that trade would improve if our goods could be laid down in the province, or be allowed to pass through the province on their way to more distant markets on the terms prescribed by our treaty. But from the beginning the Canton Government resolved not to allow its revenues to. be interfered with by the operation of any treaty clauses, a11cl for many years applicants for transit passes met with a flat refusal. After much discussion and negotiation the Canton Government was made to yield, in form at least, but not in substance. Transit passes were 110 longer refused, but indirect means were adopted to discourage merchants from using them. In 1891 an effort more concerted and more energetic than '.l'emporary . l d . h h . l success at usual on the part of the foreign C011suls, coup e wit t e s1mu c,mton in 1891.

PAGE 24

Renewed opposition at C,mton. So-called collusion between Chinese und foreign mer clmnts at Canton. 22 CHINA. taneous presence of a Viceroy more disposed to carry out tbe treaty than: his predecessors, di
PAGE 25

CHINA. native merchant dare not apply for them, and if a foreigner uses them the goods arc followed up to their destination, and the final purchaser is made to suffer for dealing in tabooed goods. when it was found that the extensive use of transit passes, for Ynrn trade iit cott,Jn yarn especially, was cutting into the provincial revenue Canton in l 1 l 1 l l t l il b 1 , l . , hands of n tie met 10c emp oyec to r~a rn race ?W ac ( mto its eg1trnrntc pri,ile~ed channel---as the channel 1s called wluch brings revenue to the nssocial ion. provincial treasury-was to give to a certain commercial association a special reduction of 50 per cent. in the likin tax. The association has to pay a certain tax to frank their yarn throughout the province, and all others have to pay a.double tax; but even then the reduced rate is twice as high as the treaty transit rate. By this means the association practically obtained a monopoly on the 5'arn trade, for it is impossible for others paying a double tax to compete. The means employed by this semi-official, semi-commercial Intimiclntion association to deter traders from importing goods except in the of traders. "legitimate" way is to accuse them of being smugglers and to proceed against them as such. As an instance :-In February, 1892, a proclamation was issued offering a reward of 50 dol. for the arrest of the compradorc (a sort of native manager) of a British firm who had sent goods under transit pass into the interior. Her Majesty's Consul addressed a remonstrance to the Viceroy, but failed to obtain redress. In March, 1892, the daily steamer, a British vessel, arrived from Hong-Kong, haying as part of her cargo 310 bales of cotton yarn consigned to a British firm. The firm sent a native servant in a cargo boat to take delivery of the yarn. The servant found forty soldiers from the likin tax office standing on the wharf, of whom ten boarded the steamer. They warned the servant not to take away any of the bales, as otherwise they would seize both him and the yarn. As soon as the affair was reported to Her Majesty's Consul he sent an officer to look into the matter, bu~ when he arrived the soldiers had left, and the cargo was allowed to be removed to the British firm's premises. B1~.t another threaten ing proclamation was issued to intimidate Chinese dealers from having anything to do with goods imported through foreigners. The Consul in reporting the matter to Her Majesty's Minister SLH:ccss of Lhc in Peking, remarked :-" The terror which the above and certain int.imid11tion. othe1 proceedings of a like character have caused amongst the Chinese traders is very great; the transit trade seems to be extinguished; Chinese merchants in the interior are afraid to have foreign goods sent up to them under transit pass, and the dealers in inland markets . are frightened against buying goods which are kno~n to have come np under transit pass." The pri vi1eged association above referred to issues a sort of Rival tmnsit transit pass of its own. According to the treaty a bale of yarn piiss system. should be cleared to any destination on payment of a transit duty of 12\> tae1s. This private association clears cotton yarn throughout the province of Kwangtung for a payment of 2/0 taels, and throughout the adjoining province of K wa11gsi on a further payment

PAGE 26

Heavy taxes on way to Kneicbow nnd Ynnnan provinces. 24 CHINA. of 2--/0 taeb. Beyond these two provinces the association's passes do not ruu. To reach the provinces of Yunnan or Kueichow via the "\Vest River, which is the natural route, it costs 8 taels in imposts of various kinds to lay down a bale of yarn weighing 400 lbs. On piece-goods the tax is much heavier; on the cheaper kinds it amounts to as much as 40 per cent. on the value. Other goods are equally burdened with taxation, and are indeed in a worse position than cotton yarn, for owing to the magnitude of the yarn trade, the likin collectorate by adopting a system of commutation has in a way regulated taxation, and dealers can aecurately calcu late their expenses. In other goods all the delay and oppression inseparable from likin stations impede the trade as much as the burden of taxation imposed upon it. The best part If the neeessities of the State was the excuse for imposing of likin is these burdens, the infraction of the treaty could be viewed with misapprod l 1-f l J f l ' priated. more m 11 gence, uut o t 1e amount ta rnn out o tie traders Likin officials pay for their'. appointment. Mocle of robbing the revenue. How th~ Canton pocket not 30 per cent. reaches the Treasury. The modus operandi is this :-Every tax station in the province-and these remarks apply to all parts of China-is appraised to yield a certain amount, not a Iixed amount, but a rough average of previous years' receipts is taken as a basis. If the office fails to produce this sum the incumbent is de11ounced by the likin superintendent to the governor of the provinces as incompetent, and he is set aside. If his returus show a con siderable excess over the estimated sum, the incumbent can have his name mentioned for special commendation, which helpstowai:ds promotion ; but as a rule the Chinese official prefers to conceal and keep the surplus, and forego the approbation, which is"only of use to him if he has some particular post in view. Before obtaining his appointment to a tax station, the officfral has to spend a good deal of money-about a year's emoluments of the coveted post is the Canton average-and after he is safely installed he has to spend more money to retain his place. AU this without drawing a regular salary, so that the receipts of the station must of necessity provide the funds. The way in which the revenue is defrauded is simple. A boatowner on arrival at the station with a cargo of merchandise, with the connivance of the likin official and his staff makes a false declaration of quantities; 100 pieces may be passed as 70. A receipt for the 70 is given, and the tax on the remaining 30 is di videcl between the mc'rchant and the official. Towards the middle or encl of the month, when the receipts have. reached about one-twelfth of the annual amount expected from the office, this month is closed, and snhseL1uent receipts du-:ring this month are either not entered at all, or are entered to the credit of the follo\viug month. . It must not be supposed that these subordinate likin officers grow very rich. The competition for these posts is too great ; and it is those higher up in the provincial hierarchy who :finally pocket what should have gone into the provincial treasury.When in 1893 the Canton likin aclministration decided to

PAGE 27

CHINA. 25 crush the transit trade as carried on under treaty regulations, government there was a o:ood deal of friction betwen the foreign Consuls and tdefea_ttthe . . . rans, p11,8B the local authont1es. The outcome of the campaign against system. transit passes was that the Canton Government laid it down as law :-(1) that Chinese may take out passes for their own foreign goods ; (2) that foreigners may take out passes for their own foreign goods; and (3) that foreigners may not take out passes to cover goods \vhich they have already sold to Chines~. How vafoeles,; is the first rule may be judged when it is stated that Chinese never dare apply for transit passes, although the treaty transit clues would be far less tlmn what they actually have to pay. The second rule is ec1ually valueless, because even if a British subject were willing to contract to deliver goods in .the interior he could scarcely fiucl a purchaser, experience having shown that goods sent up country on foreign account really cost the purchaser more in the encl. The experiment has actually At t . . b l b B . . l l H . f , e. en.sc , een mace y a nt1s 1 mere iant. e startea rom Canton tra.nsit pa.ss for Kueilin, the capital of the neighbouring province of Kwangsi, go'.)ds_ with two cases of thread; one was covered by a transit paf;S and pe~alrd ut the other was not. The uncertificated case paid at the various ;;~ey. barriers on the way taxes amounting to 4 clol. 18 c. The certificated case was allowed to pass free on the journey, but on arrival at a barrier about a mile below the city of Kueilin this case-and not the other was called upon to pay a terminal tax of 3 dol. 33 c. As the transit pass had cost 1 dol. 3 c. the total amount paid on this case was 4 dol. 36 c. against 4 dol. 18 c. paid on the other. And this was under the most favourable conditions, for a foreigner was in charge. A Chinaman would have been harassed and delayed at every barrier en 'l'oute. Under such discouraging circumstances it is difficnlt to find either Chinese or foreigners willing to make experiments, for they only result in showing that the provincial government may infringe the treaty with impunity. The latest venture in the transit pass business has been as Organised 1111:,uccessful as the rest, bi1t as showing the methods of the likin opp?sition . ffi . 1 l . 1 1 l t 1 u.gamst a o crn s t ie part1cu ars are wort 1 c e m mg. British Mr. Andrew, a British merchant, left Canton in January 0f merchnnt this yea!' with a quantity of foreign mel'chanclise, chiefly piece-using transit goods and yarn; his destination was the city of vVuchow on the passes. West River in the province of Kwangsi. All the goods were covered by transit passes. On arrival at Wuchow he found that a steam launch had preceded him, and cautioned .the local dealers against having any dealings with him. In China the system of official terrorism is as complete as iu any secret political society. The effect was immediate; the local dealer who had contracted to receive the goods threw up the bargain, and no other purchaser would come forward. Mr. Andrew even found it difficult to obtain food. In view of this organised opposition Her Britannic Majesty's Consul at Canton urged the Viceroy Lo direct the Wuchow officials to reassure merchants by publicly announcing that they were at liberty to trncle with the foreigner. It seehrn

PAGE 28

26 CHINA. strange that such an announcement should be necessflry 38 years after the conclusion of our treaty of commerce, and stranger still that the Viceroy should refuse this very innocent request. After 2 months' delay the official interference was so far withdrawn that Mr. Andrew was able to dispose of his goods at a considerable loss. It is true that after a protracted discussion with the Central Government, the Canton authorities had to indemnify Mr. Andrew for the losses actually sustained, but trade cannot stand such shocks, and it is probable that this incident has done more to discourage the transit pass trade than the reverse. The 1,000 or 2,000 dol. which such affairs cost the likin ofiicials in the way of indemnity are nothing to them as compared to the revenue and private gains they would lose if the transit trade were to revive. Transit passc5 So far only the movement of foreign goods towards an inland for goods market has been sr)oken of. In the convevance of native produce outwards. J to a port for shipment difficulties and obstructions of a similar kind are encountered, but even when the validity of the transit pass is admitted in principle, in practice the local officials find Ill~gnl_ fees at it difficult to forego their own private perquisites. At the port Chrnkiang. of Chinkiang, where a large quantity of inland produce is brought to the port under transit pass, I wc1,s supplied with the following statement which shows how much is extorted over a:nd above the regulation amount. On a parcel of lily flowers worth 550 dol. the legal transit duty is 20 dol. Over and above this the irregular charges are:-Irregnlnr Charges. Fee to Iocnl official for prompt issue of trnnsit pass Pee pnid to local official at pince of purchase .. Fees paid at various stations en route (about } doL each) :Fees paid 1Lt last barrier to prevent delay .• Total .. Amount. Dollars. 1 5 15 2 23 That is, the irregular fees amount to more than the legal transit duty. This is probably a fair specimen of what goes on in all the provinces. 'l'en nnd silk In the tea and silk district.s, the authorities finding that they taxe~ before could not touch the produce after it had passed into foreign hands, foreigners can have hit upon the device of putting on the tax at an earlier period purelta8e b f . 1 l f Cl . . I l '11 1 . them. e ore 1t iaR p~ssec out o unese possess10n. n t 1e s1 r c 1stncts Gro7'ers' tax of the Kiangsu province, for example, cocoons pay a tax of 10 dol. on cocoons. per picul (133f lbs.) before a foreigner can get hold of them; and if he did succeed in securing the coc.:oons before, still the original seller would be called upon to pay all the same. Even after this, the foreigner finds it profitable to bring his cocoons to the port under transit pass in order to escape further taxation en route, and for this he pays a further 1 ! dol. per picul. As it takes 4 piculs of cocoons to make 1 picnl of reeled silk this tax on cocoons is equivalent to a tax of 46 dol. on a picnl of raw silk, the ex.port duty 011 which is only lG clol.

PAGE 29

C[IINA. 27 In the tea districts the same simple way of getti110' behind the G , I . . . o ro,vcrs t11x treaty ms suggested itself. Formerly the foreign merchant would on tea.. commute tbe inland clues by payment of 11 taels per picnl, and thereby escaped a considerable likin tax en route. To meet this, the provincial authorities imposed what they called a arowers' tax so as to catch the tea before it became foreign prope~ty, and now no saving is effected by using transit passes. In miscellaneous articles, where the trade is not so centralised, it is more difficult for the Chinese officials to Le beforehand with the foreign purchaser; and thn.s general merchandise escapes more easily than tea and silk; and it is also true that in many producina districts the inland taxation is so moderate that transit passes ar~ unnecessary. The Canton province in the matter of exports as of imports Ca.nton is firm in refusing to allow its rrwenue to be diverted to the outward Imperial treasury, and any attempt 011 the part of the foreign pnsr~. l merchant to buy at the fountain head before the native produce ~.:~1e:~~( has been burdened with taxes is unfailingly frustrated by occult methods. Repeated failure to carry through a transaction successfolly has caused the foreign merchant to retire from the contest. fn exports our merchants at Canton have had to adapt them selves to the exigencies of the situation, and there trade follows the line of least resistanr:e, which is found by letting the Chinese dealers make their own terms with their officials until the goods reach the foreigner's premises, after which no further difficulty is encountered. Whatever illegal taxes may be imposed are paid by the Chinaman and put on to the price of the goods, so that the foreign buyer has no pretext for making a complaint. Tea and silk are the chief exports, and while the former is let off fairly easily, silk on being exported has to pay a Canton likin tax as heavy as the export duty. The Chinese seller is held responsible, Likin rol nnd the modus operandi is for the likin office to take count of the lec~cd from silk that is passed for export at the custom-house, and then if the cr:uese ~Iler seller has not paid already, to seek him out and collect the likin 1~11.,; tax. It is often only after the silk has passed into the possession cxportetl. of the foreign merchant, and has actually left the port that the illegal tax is demanded of the Chinese seller. The cynical official when the injustice of this is pointed out by the British merchant, mE.rely answers that it does not concern the foreigner as the tax comes out of the Chinaman's pocket, and at the same moment he tells the Chinese dealer that he has no ground of complaint as he can add Lhe amount of the tax on to the price of the silk. A 11 that can be done in the way of argument and remonstrance has been tried r.t Peking and Canton, but the Canton official continues to have his way. The last time that an application was made for a transit Tr,rnsi1. pusses pass to cover native produce was early in this year. A new only !~ad to tax on cocoons havina been instituted in the city of Canton, !•ix bcrn 11: . . o . l impose, a Bnt1sh merchant was mmded to purchase t ie cocoons earlier. in the producing districts, and to bring them to the port undel' transit pass. He was sent about from one office to another befo1:e he could get his application for a pass attended to, and before 1t i'r" I !

PAGE 30

28 CHINA. was granted he was required to give the name of the locality where he had bought or intended to buy the cocoons, in order that the officials might satisfy thernsel ves that the seller had paid all the taxes previously due. U ncler these circumstances the wisest thing for the merchant to do was to cancel his application. Want of In the manner of issuing both the inward and outward passes uniformity in there is a diversity of practice at the different ports. At some ~o~e of ports they are issued through the foreign custom-house, at others issumg 1 l 1 t 1 \ l 1 d" "b l tmnsit passes. t 1roug 1 t 1e na ve aut 10nt1es, anc t 18 con 1t10ns 1nscn ec on the passefi also differ at the several ports. The inconvenience of this was felt from the beginning, and in 1876 a clause was inserted in the Chcfoo Convention pledging the Chinese Government to anange that transit passe,3 should be framed under one rule at all the ports, " uo difference being made in the conditions set forth therein." The Chim,se Government has failed to give effect to this stipulation, and local authorities are consequently left to introduce cl1anges which tend to nullify the advantages of the transit pass syste111 . .Part III.-Tlw Suggestions and Complaints of Jltlerchrmts. Few com. As I have already stated at the beginning of my report, our mer-plaints on chants in China are on the whole satisfied that within the limits prcscribed by treaty they are frP,e to pursue their avocations without merchon(s. let or hindrance, and my invitation to make suggestions for the promotion of British trade did not cwoke such a response as at the outset I had been looking for. Even the casual observer must be impressed with the' iLlea that there is room for a vast cxpansioi1 of commerce in Chiua, and, when speaking in general terms, none is more emphatic than the British merchant on this subject, but when asked to define more particularly what share he would wish to take in this development, it becomes evident that the chief ground of his discontent is that the Chinese Government is unprogressive, and bent on restraining the people of the country from developing its resources. In sum, all are convinced that things are not as good as they might be, but few can indicate, except in general terms, the means by which their own particular husine;;;; can be improved. A long and painful experience of thwmted efforts has had such a Lliscouragmg effect on foreigners in China tlmt a condition of stagnation has come to be accepted as in lhe nature of things. I shall proceed to set forth the subjects brought to my notice by the mercantile communities at the places I have visited . .Hong-Kon~ . The matters of importance from a commercial point of view Cha.mber of to which the Committee of the Hong-Kon,g General Chamber of Commerce " suggestions. Commerce desired to call my attention were the unsat~sfactory state of the inland transit trade in the K wangtung and K wangsi provinces, the preferential duties which place junks at an advan tage vis-c1-vis steamers, and the opening of the West River to steam tratlic and to foreign trade. Inland transit Tile first matter I have already treated of while on the subject trade in f l d t d TI d"ffi 1 l l" l 1 Conton o . 111 an rans1t tra e. 1e 1 . cu ty m r ea mg wit 1 sue 1 cases province.

PAGE 31

CHH'iA. 29 is that the merchant is not obstructed while in the act of exercising the right Sl!Clll'eLl to him by treaty. It is that previous i~timiclation mak~s him forego the right, or subsequent punishment makes him regret h'.lving taken advantage of it. The transit pass privilege may be compared to a right of way across a common at the exit of which a savage clog is on guard. The public are allowed to walk through, and are told not to mind the clog. One more daring than tile rest occasionally takes the short cut with the usual consequences, and his only solatium is the price of a new pair of trousers, if he gets as much. The metaphor also suggests the only eff~ctual remedy. The pref'ereutinl tariff enjoyed by junks has its origin in the Preferential dual system of collecting customs duties on the .,Canton River. te.ri!f enjoyed ]foreign vessels pay duties to the foreign custom-house, and the b,v Junks. full amount is honestly accounted for to the Central Government. Native junks pay duties to the native custom-lrnusc. As the superintendent of this establishment remits a fixed smn and keeps the rest, he does what he can to divert trade from steamers to junks; and the surest way is by giving junks preferential rates. The foreign customs tariff is fixed by treaty and immutable; the native customs tariff is also fixed on paper; in practice it is what the Chinese superintendent chooses to make it, ancl on some of the most important articles he underbids the foreign customs by an amount sufficient to cause shippers to prefer junks to steamers. In order to silence the remonstrances of the steamer company the Chinese superintendent professes to adopt the same tariff as the foreign custom-house; but by allowing 100 chests to pass as 50, or by privately returning a bonus to contributors he can attain his object without detection. If it is difficult to produce proof that Chinese officials impose heavier duties than the tariff allows, when, of course, the merdiant is a sufferer, how much ni.ore difficult is it to convict him of accepting less than the tariff, when the merchant is a gainer and an accomplice. The Central Government informs the foreign ministers at Peking that stringent instructions have been sent to discontinue such pre ferential . treatment, and the Canton superintendent assures the foreign Consuls that his tariff is identical with the treaty tariff. And yet in the face of such assurances this is what happens. Canton teas are sent down either by steamer or by jnnk to Hong-Kong for tranship1i1ent to a London bound steamer. By the c,rntom of the trade the Chinese dealer contracts to deliver the tea duty paid either on board the river steamer at Canton, or ori boaid the ocean steamer at Hong-Kong. If allowed to follow t.he latter. ccnrse th~ Chinese dealer will make a reduction of 2s. per cwt., and, of course, have to pay the junk freight to Hong Kong in addition. It is the preferential duty by junk that enables him to do this. In this particular matter the British merchant gains and the British steamer cornp:rny loses; the Chinese revenue with the corinivance of the Peki11
PAGE 32

Opening of the We~L River. 30 CHINA. lesson is useful as showing the danger of making any compact with China when there is left any loophole for evasion. If the Chinese Government were really desirous of putting a stop to this preferential treatment of junks the obvious course would be to place junks and steamers under the control of the foreign customs. It is only where these junks and steamers come into competition that the preferential tariff concerns us, and it is an open question whether the favoured treatment accorded to junks is injurions to trade in general. The opening of the West River to foreign trade would give us access to the provinces of Kwangsi, Kuei-chow, and the eastern portion of Yunnan-all poor provinces that have not yet recovered from the ravages of the rebellions of 40 years ago; but their recovery would be hastened with the assistance of steam navigation. '\Vuchow, just within the borders of the Kwangsi province, is the _most important distributing centre along the course of the West River, and once it is open to foreign steamers we shall be able to overcome the obstructions to foreign trnde which so beset the Canton waters. The Kwangsi officials doubtless also know how to place hindrances in the way of trade, but it would be a great gain if we could get face to face with these without having previously to run the gauntlet of the Kwangtung obstacles. Xavigation of It is doubtful whether steamers can proceed all the year round West River. further than Wuchow; during some months of the year Nanning, another considerable distributing centre, could be reached by steamer~ but beyond that it is doubtful whether anything but light draught native craft could proceed with safety. These can ascend the river as far as Pose in Yunnan, and if the system of chartered junks such as. I have mentioned as being in vogue* betll'eE'n Ichang and Chungking could be introduced between '\Vuchow and Pose our trade would thereby be greatly protected \Vest Rive1• tru
PAGE 33

CHIN.A, 31 treaty of 1842 it is the city of Foocl10w that is opeil to foreiun trade, the Chinese officials, for purposes of taxation, treat Fooch;w as outside the limits of the port. All merchandise after paying import duties at the custom-house is further taxed on its way to the cit.y 01 suburbs. It is at the important port of Shanglrni, with its large forr.ign Slrnngh11i population, its growing industries, and its foreign trade amounting suggeslions. t,o 140,000,000 taels that one may look for an exposition of the wishes and aspirations of the British mercantile community, aml an array of their legitimate complaints against the central and provincial governments. The Shanghai Committee of the China association, a body of gentlemen thoroughly representative of 11ritish interests in Ch;na, commnnicatell to me their views on tlrn present situation of affairs, and malle imggcstious for reforms which if adopted, would, in their opinion, tend greatly to promote trade. Their suggestions may be summarised as under:-I. The appointment of Her Majesty's Consul-General at Shanghai to be superintendent of British trade in China, and the association with him of a Chinese Commissioner; these two to form a Board of Control to safeguard commercial privileges and righti;; secured under the provfr.;ions of our treaties. In addition to this the appointment of British consular officers unc1er the superintendent of trade to reside at each provincial capital for the purpose of watching the interests of British commerce. II. As the new duties imposed on the Consul-General at Shanghai would ue incompatible with the exercise of judicial functions, the scpnrn tion of the offiee of Consul-General and Chief J nclge would become necessary. III. The right to reside and to trade in any part o_f the Empire, umlcr such regulations as may be fonllll necessary. IV. The freedom of navigation in all navigaule rivers nrnl waterways in China by foreign steamers. V. The establishment of a national currency. VI. Reform in the system of inland taxation with a view to placing it on a fixed and improved basis, and the re-organisation and extension of the transit pass system. VII. The establishment of a court of competent jurisdiction to hear and determine all suits where British subjects are plaintiff-,. and Chinese subjects defendants ; and the 1aaking of the foreign settlement at Shanghai into a separate jurisJiction. VIII. The removal of all restrictions on the transport and export of grain. IX. The importation of salt to be permitted. X. The registration and protection of British trade marks. XI. The liability of Chinese subjects for the unpaid capital in shares held by them in English registered companies should be declared and defined. " XII. Prompt issue of drawback and re-export certificates. XIII. Extension of the powers of the foreign municipalitie~ within the limits of the foreign settlements, especially in the (2297) C

PAGE 34

•) i) ol..; citr!--A. matter o~ sanitary measures, and extension of rnunicipai eo11trol to the harbours and approaC'hes within certain limits. XIV. The improvements of the approaches to Shangbai, especially the deepening of the "\Voosung Har. AppoinLm~nt The point on which the Shanghai Committee laid the most 01 "1 superfmstress is the one I have placed at the head of the list. Their view, temcnto 'tl. ft . t] J ] 1 1 l ; lh-itish ttacle. to put 1 Jne y, JS rnt uncier t 1e pre.sent r ecentra 1sec system ot Bri(.ish int.eresls rlepcnd upon ilM adoption bv Chin:1 of r~forms beneficial to the empire at large. Existing system of communic11t i11g with the Goremment on tmdal 11,0.tters defectire. Cu.uses of d,fect. government material reform in the provinces is not to be looked for unless we can directly treat with each semi-independent pro vincial government, and that while the British minister at Peking is accredited to the Chinese Government, we should have an agent apart who, ,vhile subordinate to Her l\'Iajesty's minister at Peking, should be accredited to the provincial governors. The views of the Committee are fully set forth in a letter from which I rnal:c a long extract:-" When framing their letter of April 10, 1895, the Shanghai Committee were of opinion that British interests could only be suitably benefited by the adoption by China of measures calculated to increase the prosperity of the empire as a whole. This principle animated, and continues to animate the Shanghai Committee in all recommendations they have hitherto made and may still have to make. The Committee hold the belief derived from . long experience and some knowledge of the evil iniiuences of the decentralised system of government which prernils in China, that representations dealing with commercial matters made directly~to the Tsung-li Yameu, or the Board of Foreign Affairs, in Peking by the minister resident there have so far Yirtually failed in theit object; and there is little reason to anticipate improvement in this respect unless the method of making these communications is materially changed. All past experience has made it clear that the Imperial Government of China, or that part of it entrusted with the administration of foreign commercial affairs, cannot lie relied upon to deal effectively with matters which primarily relate to and affect the viceregal or provincial governments. When a communication is made by Her Majesty's minister, on the enmtest representation of merchants in the treaty ports, to the Tsung-li Yamen, the minister is invariably informed that l,eforc the matter can be decided upon the Viceroy or Governor of such a province will be consulted. The Committee are aware that the Consn!s in Tieritsin, l<'oochow, Canton, and perhaps iu some other places haYe better opportunities to com1nunicate with the Viceroys; but the most important trade centre of Shanghai is precluded by clistance from free or ready intercourse with the Viceroy of the Li:wg kiang resident in Nan king. It will be urged that there is nothing to prevent perfect freedom of communication between the Consul General in Shanghai and the Viceroy at. Nanking. Theoretically this is correct, but the Shanghai Committee have reason for stating that although official communications on matters of i mpor0 tance are occasionally addressed to the Viceroy, his reply is invariably made through the Taotai of Shanghai, which is tantn moun~ to an allegation that no direct intercourse is possible ; nor

PAGE 35

ClllNA. 3::1 can it be until the Viceroy is brought to understand that dispntches of the chan,cter implied in consula: comnrnnications an~ entitled lo suitable respect wd considr.ration. If the Viceroy frels jnstified in disregar:ling, or treating clisdainfnlly, the only Ji1etliod of communication availal>le to British subjects, it follo\\'s that a Hccessity arises for the nppoiutment of a British official of rank snfficient to comrnnnd the rer,pect arnl attention of the Vicernys throughout the empire. Such consular representations ns liave l>een rnarle have related chiefly to local affairs; the1'e has been 110 concerted action iii the matter of British i11terests throughout China; :md what may be clone at one place is :not made ki1owu at another. In those cases, therefore, where no previous communication lrn.s been made to the Viceroy or Governor concerning an application to the T:=mng-li Yamen, the official whose interests are nffected inrnriably opposes e\'Cry proposition rnade, with the result that the Tsung-li Yamen, being unwilling to act in opposition, tlie question nt issue is never adequately answered and the minister obtains no satisfaction. The fact must Cho.ncres be reco 6 nised that many of the changes desirable may, and many affecting qf them nncloubteclly do, nffect the revenues of the provincial provinciul 1 b , . . f l l . d . governmrnts goYem rnents, t iere y creatrng oppos1twn ata to t 1e1r a opt1011. musL be It is not a sufficient answer to this olijection to say that the adopo.pproved by tio. n of the suoaested channe or reform althoucrh it may diminish the Viceroys t:>t:> 0 ' "' be for tl the income of a particular province, will more than compensate by cnn b: icy a larger addition to the reve1rne of the Imperial Customs. The o.dopted. system may be bad, but to refuse to recognise it would be to display unpardonable fatuity; while to admit its existence and p~rscvere in ignoring it is to confirm a policy which cannot succeed; which must perpetuate the reign of obstrnction of which the Shanghai Committee, the Chambers of Commerce in China, and other commercial borlies and nssocintions, ha,e so jn,;:tly complained. . -, ' Acting upon this principle the Shanghai Committee liave no Pr:iwiples, intention of alluding at tbis time to the details, or to whut may not d~tuil,, appropriately be termed remedial evils, such as, for example, a.bro '.lc,ilL will, l I f 1 l . l . '11 l V t.1c _1reac ie.s o t ie treaty aw cornmercm convent10ns; 1 ega sh,i.n du,i exac1.io,is or eva!:iions of rules and reoulations. Although in tliese Cum,7,itteP. rnaLten, redress is fresnently ditficult to ohtaiu, yet tC1e existing o tti cin 1 machinery is able to clenl with them more or less ndcqu:1tely: . ' The aim of the 'Shanghai Committee wns and is to obtain the Appoint mcnt nppointment of a special co:nmissiuner or commercial agent who of spe~i":l :-,hall have definite rank; f!ccrcdited to the Board of l<'oreign con~m,ssw,,n Attiiirs,. yet subordinate to Her Majesty's minister in Peking, a.gnrn urg .. d. thi'ongh whom aHcommunications with the Imperial GoYernmeut of China would then, as now, be made. Such an appointment would be J.10 riew departure in the diplomatic. serYice inaSlllUCh as SirJ. A_. Crowe, KC.IvI.G., C.B., holds a similar position u11der Her )\Iajesty's -4111bassador in Paris; while in St. P_etersbnrg and . Uonst_antinople commerce is specially represented. The functions Ifo functio1i$. of this commissioner would be principally exercisable among tl,e (2297J C 2

PAGE 36

The reforms to be ad meal ed. ciiiNA. Viceroys and Governors of the provinces, with whom, as wetl as with his nationals at all the treaty ports, he should be in continuous communication. It is by the adoption of measures such as these that the great national reforms which have been advocated, such as the extension of internal communication by means of roads, rail ways, rivers and canals; the establishment of a coinage system, and equalisation of provincial taxation (these two latter being indispensable adjuncts to the creation of a railway system); the opening of rivers to steam trausport; the systemati sation of 1 he tax known as likin, and of transit passes ; the administration of justice in cases in which foreigners are parties; and the opening of mines and development of the great national resources of this vast nation in territory and population, can alone Le Lronght a Lon t. Spasmodic efforts in the direction of reform are of little vnlne. Success can only be achieved by the exercise of sustained persevereuce on the part of a commissioner ol' snfticieut experience in China, haviug considerable knowledge Possible of the language, and holding re.;ognised rank. "\Vhatever objec-objecrion on t' l I tives should be beyond all suspicion-for example, one of entire of the firnt measures that sho11l
PAGE 37

CHINA, 35 of which will recognise nothing but direct and weighty into actiYe fl support of his uence. G0-rernmcnt. "The Committee are impressed with the belief that in former Commercial years, when British influence in China was potent, the affairs of11_fl'airs con 1 1 l 'd t' t H l\'r , L . s1dered lesd commerce 1ac _muc 1 more cons1 era 1011 a er '.i.aJesty s egat10n now than than they receive at present; and that the tendency of the time formerly. is to make British commercial interests in China entirely sub-servient to the exigencies of the diplomatic situation in Europe. "The Shanghai Committee are unshaken in their opinion that Value of.'1 the advocacy of domestic improvement which ex1.icrience !ms comnwrcutl d b . . . ugent lo proYe . eyond all doubt beneficial to ernry other nat10n adoptrng .l:lritish them, 1s amongst the legitimate function;; of a British commercial inrcrcst~. commissioner in China; nor is there any reason whatever to conceal the desire that part at least of the irnportant public works, that must sooner or later be carried ont if China desires to emerge from her state of stagnation, should be cntrnsted to British enterprise and be carried out by rnerns of British capital. At present the etiquette which governs British diplomatic rer-resenta-Etique:.te tion abroad appears to preclude the exercise of any official influence t0~?~mg for the promotion of Brit:sh interests except in the general sense di~l~:n~cy. of promoting trade; nevertheless it is notorious that the diplomatic Laxity of representatives of several European nations have been most 0d~h1er t . . l d f } d 1 I f l . . 1 ip oma IC energetic 111 t 1e a vocacy o t 1P tra a sc 1emes o t rnrr nat1ona s. agents in this While it is desirable that the British system of non-interference regard. by diplomatic representatives in the commercial transactions of 'l'he remedy tl ' Ch' l ld b d l proposed. 1c11 countrymen m ma s 10u e contmue , t rnre seems no reason why a commercial commissioner specially appointed to further British trade should hesitate to advocate the personal interests of the British merchant in Chinn. "Of the indemnity of 200,000,000 Haikwan taels, or approxirhe 6no;'einl rnately 3:3,000,000l. sterling, exacted by Japan, a large part has c~!:. 0 been anauged for by means of foreign loans. The remai11der, with some 20,000,000 taels of interest, still remains to bP. paid, and it is perfectly certain that without extraneous aid China will l1e uuable to cover this liability, the national means being inadequate to meet domestic requirements. The only availalJle security is the customs revenue, and that is now almost entirely hypothecated. The financial system of the Imperial Government is so defective Fi,!o.ncial that it may truti1fnlly be said no man in China has any adequate ~~:~\;c~ of knowledge of the income or expenditure or of the potential system. resources of the empire. It would be within the province of l'ossib~Iity of B t h t l t 1 tl 1 procunng 1:1, ri !s. connmss1oner o enc ea~our o pers~rnc e. 1e prov~ncrn udopticn of authonties to adopt a system of finance winch, 1f established, methodic would consolidate the eredit of the nation and provide means sJStem. wherewith to defray liabilities, The great trnuule of China at the present time is the ignorance of the governing classes of the principles of financial administration. Such a thing as a budget Po~sihlc or estimate for the future of income and expenditure is unknow111 ~st.unatcs of . . . , . l 1 . l tl [ rncorne a11d and will remarn so until an effort 1s mace to en 1g it.en rn ru ers al(penditure. and to assist in a complete reform of the system Ill a 111anno1 The nation simih1,r to .that sq $ccessfullv emnloyed i Egvnt, '.fhe nation lea.diug in • ,r I' + ~hes~ ,efol'ms

PAGE 38

36 CHINA. "ill confer an which contributes to this great reform will confer an everlasting everlasting benefit UIJOll China; and the one 11ation whosfl action. woultl henefil, 011 China. be most free from susp1c10n or misconstruction is -Great Britain. Conclusior. "From these notes it uwy be seen that the object the Shanghai Committee had in view when pressing for the appointment of a commercial commissioner ,rns not limited to the petty details of official ob~tru0tion to trade, but comprehended a system of reform calculated to rnise and strengthen the Chinese empire, and sinrnltaneonsly promote the welfare of British ~ommerce and British interests." While folly agreeing with tl1c Shanghai Committee that nothing could be more unsatisfactory than the way in which the settlt)rneut of every question is shirked by the Central Govern ment, on the plea that the provinciu.l government _concerned must be con,:nlted, and that an interminable time is wast.eel in making references backwards and forwards l.ietween Peking and the provinces. I am not s::mguine cnongh to believe that the ren1edy sngge~ted by the Committee would improve matters. As the committee point out H.M.'s Consuls at Canton, l''oochow, Hankow, and Tientsin are in a position to have dired r~latiom; with the viceroys ruling over the provinces in wl1ich these pcirts are respectively situated, bnt it is doubtful whether they ham succeeded in persuading these vicerors enn to take iuto serious consideration, much less adopt any projr~ct of reform, howevm trivial. The difficulty is not that the governors or viceroys are insufficiently informed, it is that they arc unwilling to make any move in the right direction, and this unwillingness will endure; whether our representative is a consul or an official of higher rank. True, our consuls at ports where there are __ governors or viceroys find some difficulty in holding communicatio_ns with these high c,flicials unless they have some special Lnsiness to discuss, and possibly a superintendent of trade could have more easy access, bnt he could not more than a consul command attention for any particular matter in which the viceroy did not see some profit to his province, and more particularly to himself. , And herein lies the difficulty in Olli" dealings with provineial governments, that a rcL:iprocal bargain is out of the question, The cor.cession obtained ai; the expense of the province is paid for by sornething ,;\'liich brings profit to the Central Government. Every 1rnw port opened causes a pecuniary loss to the province, and, therefore, to tl,e personnel of the provincial govcrurnent. A national cu nency wou lLl lJc a sonree of gain to the Central Government, m~Ll of loss tu provincial officials, who make money out of the existing confnsion in weights aud ''fineness" of silver ; factories bring nothing to the viceroy who may permit their establishment, for if an excise is imposed it will be collected by the ageuts of the Central Government. The working of mines with machinery by foreigners ,vonld probably mean that a royalty ,ro:dd be exacted for the benefit of the I111perial Government. The Shanghai Committee's arguments are chiefly based. Ol)

PAGE 39

CHINA, 37 the asf'umption that provincial rulers have the welfare of the country, and particularly of their province at heart, and that domestic improvements which experience has proved to be beneficial to every other nation adopting them have for this reason a drnnce of being adopted in Uhina if properly pre<,secl by a duh' accredited superintendent of trade or commercial commissionei. Similarly the Committee seem hopeful that a British commissioner might persuade the provincial authorities to reform their financial system, and thereby consolidate the credit, of the nation. I fear the Committee are giving provincial rulers credit for virtues they do not posse;,s. Nothing is further from their mind than a wish to reform their financial system. The Chinese official of to-d::iy thrives by defrauding the State, and the more confused is the financial system the greater is his opportunity. The other matters to which my attention was directed by the Shanghai Committee ns a rule speak for themselves, but where it seems 11eces<>ary I shall make a few observations. II. The 11ecessity of separating the offices of consul-general Sep!1.rat_i0n of and chief j ndge seems very obvious. U uder the present regime office 1f l . L. I I . l
PAGE 40

38 CHINA. consul-general now performs the functions of chief judge, and his next junior, the consul, those of consul-general. It would add to 1.he usefulness of both offices if a separation which has to be nude dr, facto was also recognised de jnr-c. The Shanghai Committee supplies an instrnctive instance of the inconvenience of the amalgamation of the two offices. The case cited by the Committee is the following:-"Objections to the combination cif the di.ssimilar offices of Consnl Gencral and Clii1if Justice. "The objections from a legnl point of view of the corn bina tion of the offices of chief jn;::tice and co11snl-general were well illustrated in the case of 'Major v. Jardine, lVIatheson, a11d Company,' which came before the Suprenie Court in 1393. "SJrne cot1sidernblc time before Lhe amalgamatiou of the offices, am! before the institution of the snit whieh was brought to determine the rights of ri n1l clnimants to certain foreshore, the assistance of the cousul-general at the time was invoked Ly one of the parties to obtaiu from the Chinese authorities the recognition of the applicants' claim as riparian owuers to pre-empt the fore shore in question. "The application was supported by a statement which, if correct, fully justified the consular authorities in pressing it upon the Chinese authorities ; this was accordingly done, and the 11egotia~ions "ith the Chinescf authorities continued after the nmal gamation of the offices was effect•.:lrl. At length a snit wns instituted in Her Britannic Majesty's Snpreme Court, in which the title of the claimants, whose cause had been espoused by the: eonsul-general (in whose name all representations from the Con sulate-General to the Chinese authorities are deemed to Le made), came in question. The rights of the parties to the suit depended upon the accuracy of the views which had up till then been persistently urged by or in the name of the chief justice in his capacity as consul-general.. The position was further aggravated by the desire of both sides to secure the assistance of' the same chief justice and consul-general in outaining eYi'.icnce from the Chinese authorities in support of their respective cases. "It is not to be wondered at that this state of affairs gave rise to great dissatisfac.tion and ad verse comment. The in con \'enience is obvious of an authority, "ho has been called upon, bonct fide, and as a duty, in one capacity, to vigorously support a contention, to be called upon, in another capacity, to !3it judicially to decide whether such contention is right. " The recurrence of such a difl-iculty is not only po:,sible bnt probable, ancl can only be avoided by the holder of the combined offices conscientiously abstaining in many rnses from exercising the fnnctions of consul-general." Jn the orclinii-ry comae of the con;ml-general's chities c~ses

PAGE 41

ClllNA. 3!) similar to this cannot but occur. Tha~ they do not occur more frequently is due to the tact shown by the incumbwt of the post, hut this tact has to be exercisul at the expense of our general British interests. III. The right of residence in the interior for purposes of R,•si.denc~ in trade is one which past experience does not lead one to suppose t.he rnterwr. would be largely availed of. Even to some of the ports already open to us, and where consuls are established, it is found that foreigners do not resort, and under the passport system trading in the interior, to a certain extent, is now within the reach of British subjects. But something further in this direction might be done if we ou-Not.irn . tained permission for our merchants to have agencie::; in the interior agen_cies \n under the management of natives of China, for then the question the rntcrwr. of jurisdiction over the person would not arise. At present the Chinese Government dfJes not admit that foreigners have the right to open agencies in the interior, even under native management, although our treaty of 1858 contains no explicit prohibiLion. The chief ad vantage tlrnt this extension of our privileges would confer is that British merchants could send goods for sale in the interior, and escape the terminal tax thnt I have already described ; but the business to lm successful must be a retail trade, for merchandise in bulk could, as now, he watched until it passed into Cltine;;e po:3session, and then made to pay. Still, by these means. the distribution of goods might be fa.c:iiitftted, and the fact that a foreign firm's name was on the signlJOard would certainly ensure for the business an immunity it could not otherwise obtain. IV. The freedom of steam navigation in all watenrnys suggests Frcedo,_n of some difficulties in the case of foreign-owned steamers: for ~nngaiwn '11 l f l' I'-. . f l 111!0.nd wal c, e, instance, t 1e quest10n o ,1uns( 1ct10n m c ISputes, arJSmg out o co lisions, claims for missing or clamnged cargo, &c., but where one end of the voyage, as it prohauly would be, was a treaty port with a resident consul, the difficulty would be 110 more insmmountable than i~ is now, when collisions occur, bet,veen any two treaty ports. The suggesLion that foreign-owned c:raft may ply elsewhere thnn between treftty ports will be stubbornly opposed by the po vincial governments, who will see their likin revenue threatened; but there couhl not be tile same objection to the presence of steamers or tugboats under .the Chinese flag. On the Canton waters steam tugboats are common enough, but the regulations are fitful and vexatious-they may only tow, and may not carry cargo or passengers. Quite recently permission has at last been granted to a Chinese company to put tug-boats on the Poyang lake; and an extension of the permission to Chinese-owned boats in all directions would he almost as great a boon to tmdc as if the foreign flag was included iu the concr.ssion. The establishment of a uationftl mint i.~ a reform obviously Xntionol desirable, and against which there can be no honest opposition, currcnc~ for large atfE!-irs silve~ by weight is the medinm pf seWeml;)nt,

PAGE 42

c .. ,iton an,l ,vuclm.ng mint~. Reform in 1 ho syst.em of inl,u;d kL:mtiun. How r :11in, t,1,x sta( ions fleece the trader. 40 -CHI~A. and for smaller transactions copper cash. The silver unit is the tac( lint there are sixty different taels, the difference being in the weight a11d purity of the metal. Each pl11ce I-ias its own tael, and eve11 in the same place two or more sorts of taels may be used in dill'enmt trades. The copper cash are E>qnally puzzling, and uuequal in value. There is no fixed ratio between copper cash and silver; the exchange between the two depenfls on the 11 nantity of cash in circulation, aud this again depencl'l on the prnvincial governments who cause them to be coined in a hap hazard sort of way when they seem to be getting sea., ce. Tei add to tl1e confusion a great many spurious cash are in circulation, and the best cash in a stri11g are picked out and nieltecl, for at the prnsent price of copper these are wodt more as metal than as coin of the realm. It is true there is a pro,incial rni11 t at Canton, and another at vVuchang the capital of Hupel1, bnt in silver they only coin 1lollars and fractional currency which are 11qt legal tender, and are only current in such parts of China as have already become ac11uai11teLl with the Mexicmt dollar. .As the dollars which these rniuts turn out are only wol'th their intrinsic value, there is no protit in coining them, and for this reason, atCanton certainly, they are 110 longer produced. The Ca11ton mint, which has the lcLrgest plant in the world, is almost idh, and no\v only turns ont a small quantity of copper cash and small silver coins, ,vhich ou account of their convenience pass for more than their .metallic valtie, and thus show a profit in the coining. Neither the Canton 1101 the \Vuchm1g dollar is really a Chinese coin ; it is not accepted as a legal tender, so that it is difficult to see why the mints were estaLlished; they do not supply a want, fur iu course of time everv dullar minted returns to the crucible. VI. The suggestion contained under the sixth heall needs 110 nmplificatiou, Lut as an instance of what goes on all over China l shall mention a case which came under my observation at .Ki ukiaug. It will serve to expose the confused state of Ohiuesu money, awl the way in which officials turn this confusion to l11cir own profit. A British firm was Lringing tea from the tea-prodnci11g Llistricts to the port of Kiukiang. The tea was not protected l,y u lransit pss, and was couseq uently liable to pay all taxes en rnute. At a certain station a tull of 22HI taels of siber, Uovernment sta11clard, was demanded, and the native olticia I, . 1,y a process of his own, calculated that these 22 taels wen~ equivalent to :~0 taels of local currency. He next derna11de
PAGE 43

CHIXA, 41 in lucal currency 29 per cent. is added to covet "waste and miscellaneous expenses;" moreover, as the revenue has to be remitted to Peking, a further 12 per cent. is added to make good the difference of "touch" or "fineness" of the silver so as to briug it up to the Peking sta,nclard. Being further pressed to expbin the addition of :29 per cent., the olficirtl replied that this covered the miscr.llaneous expenses of collecLion, the cost of remitting to Peking, and "other office expenses too numerous to 1iiention." (It may here be stated that 100 treasury taels are equal to 104 Kiukiang commercial taels.) Now if China had a national currency, a merchant who had to pay ?.2 taels of duty would pay :22 tachi, and there would be an end of the matter. But this would be to deprive an :::.rmy of officials of their emoluments. VII. Here the Shanghai Committee point to one of the many Reform of reform~ necessary in the judicial administration of China. At all jucticinl. the ports the complaint is Lhe same, that it is almost impossible system. for a foreign plaintiff to get satisfactiou out of a Chinese Llefen-
PAGE 44

Free exportation of grain. (Joa.et trade in groin. 42 CHINA. judgment in every case. The foreign settlements should be made a separate jurisdiction of the Shanghai Hsien; the appeal should be to the Taotai and Chief Justice of Her Majesty's Supreme Court in China ; thence to a court in Peking of which Her Majesty's Minister should Le a member. The magistrate of first instance ought to be bound to hear in open court all cases formally brought before him; rules of procedure should be drawn up, and such other measures adopted as will ensure the satis factory administration of j nstice without unnecessary delay, and irrespective of the rank of the parties." VI II. This is a subject that must be dealt with in two parts. The exportation of grain from China is forbidden by treaty; and until their views on economical questions undergo a radical change, it is useless to hope that the Chinese Govemment will consent to remove the prohibition. The transport of grain by fo1eign steamer from one part of China to another is permitteLl by treaty ; lmt the provincial governments occasionally take it upon themselves to forbid the exportation on the plea, usually, that the province cannot afford to part with any portion of its food supply. This power, which tlie provincial goYernments arrogate to themselves, is not infrequently used to further private ends, as the following extract from the Shanghai Committee's Memorandum shows:-"Notes on the Shipment of Rice and Gmin, &c. "According to the Chinese Customs Tariff Rules (Rule 5, Clauses 3 and 2), forming part of the Treaty of 1858, rice and other grains cannot be exported to foreign ports, but may be ex ported from one of the open ports to another under bond and on payment of the duty specified in the tariff, after permission has been obtained from the native anthorities. In practice, however, it has been the custom for many years for the officials at the ports of the gre:it rice and grain-producing districts to fosue periodi cally, on dates decided upon by the various superintendents of trade, lmchaos permitting grain to be shipped to other ports where scarcity exists or is anticipated. Sometimes thtlse huchaos simply provide for shipments to te made on the ordinary conditions, i.e., on payment of tariff duty, and sometimes they authcrise the imperial maritime cmtoms to pass the grain for shipment without payment of duty. " As rice and other grain constitute three-fourths of the cargoes carritld by steamers all over the coast of China, and as fully two-thirds of this coast steamer trade is in the hands of British subjects and carried in British bottoms, it will be seen how important it is that nothing should J,e clone to interfere with or prevent the transportation of rice and grain. '' The permissive system abovE referred to has worked smoothly on tlHi whole, but on two occasions recently incidents have RGouried w4ich sliow that some nwre clearly defiri~cl aml qecide,l

PAGE 45

Cii:INA. 43 a.trangement is needed. In the autumn of 1892 the Taotai of Shanghai began issuing huchaos for the export of rice and whr.at amongst n~tive. merchants generally as usnal, authorising shipment to T1entsm, but on each of these lmchaos a clause was stamped to the effect that:-' Dy order of Viceroy Li all such rice and wheat could be exported duty-free if shipment were made by China Merchants' Company's steamers only.' . "The attention of Her Britannic Majesty's Consul was at once drawn to this infraction of treaty rights (Article 14 of the French Treaty of 1858, and more especially Article :1 of the United States Commercial Treaty of 1880), and eventually the objectionable restriction was removed, but not until after Tientsin was closed by ice in December, and in the meantime, of course, British ship owners suffered heavy loss. It is noteworthy that the above action was co-incident with the appointment of Sheng Taotai to the post of Superintendent of Customs at Tientsin, and as he is the Managing Director of the China Merchants' S.N. Co., the reason for the restrictive clause in: grain lmchaos needs no further explanation. "Ag:i.in, in the autumn of 1894, while the war with Japan was going on, the issue of hnchcws was suspended, notwithstanding that Shanghai shippers and Tientsin importers were clamouring for permission to provide their usual winter supplies for the northern distrids, until a few weeks prior to the closing of the Tientsin River. The reason given officially for this refusal to issue hilchaos was that if the shipment of rice was permitted, it might and pro bably would be shipped to Japan! But it was currently reported and universally believed that the Chinese officials at Tientsin were interested in a 'corner' in rice ; and their action was taken to bolster up prices ! " It is probably too much to expect that the Chinese Govern ment would agree to the exportation of rice and grain, &c., to other countries at once, bnt in view of the need for increased customs revenue to meet the interest on loans, &c., for which it has been and is now being pledged as security, the time may not be inopportune to urge that the question of permitting exportation to foreign countries might now be reconsidered. "There can he no reason, h0wever, why rice and grain, &c., should not be placed on the same footing as other produce-as regards allowing :,hipment from one tre'.lty port to another-simply on giving bond without requiring huchaos. The ordinary laws of supply and demand, as applied by such keen tradeni as the Chinese, would be a more reliable guide as to the needs of certain districts, and the ability of others to supply those needs, than the delibera tions of official superintendents of trade." Another way in which the power is ~bused is as follows:When the crops fail in any province-say K wangtung-the price of rice at once croes up, and large shipments from the other rice producing provinces take place-from the An-lrni province, ~or exim1ple. The An-hui Government takes alarm, lest t~e prwe of rice should go up, and puts an embargo on the exporta.t10n. It

PAGE 46

I mportntion of s~lt. Regislrutiou of trnd" m,r,'.I,,. LiaLilil f of Chinese shnreholder;i .J.4 CITTN ,\, next allows a few favoured incliYiduals to export, on the pret"'xt that assistance to the afflicted K,rnngtung pro,,ince mt1st not he wholly denied. These favoured few, being able to buy cheap in the O\'erstocked An-lrni n:arkct, and to sell dear in the Kwangtung lllflrket, rPalise handso111e profits. Another use to which this power of embargo is ptt is to enable the province to heap up taxes on rice. Foreign Rteamers at times will be refused permission to lollcl rice at ,vt1hn, but they may clo so at Ohinkiang, 100 miles further clown river. Between ,vuhu :md Chinkiang the rice must be carried in 1Jative junks, ami of course pay taxes at the stations en ronte. A steamer would escape these paynrn11ts. Here it is 1wt the fear of scarcity that suggests the prohiLitiou, for the prohibition only applies to Yessels that :ire exempt from provincial taxation. If absolute freeclom in the cRrryi11g tmcle of rice cannot lie securecl,.at least the arbitrary action of provincifll governors should be brought under control ; and the movement of grain, if it mnst he a matter of official interference, should at least be regulated by the Central Govemment in an impartial manner. IX. Under the treapy the importation of salt is forbidden. The trade in salt is a Government monopoly. For purposes of the salt administration the em pirc is di viclecl into seven circuits, and the salt produced in one circuit may only Le sold withiu its own limits. The n,vetrne derived from the monopoly is obtained in three ways :-l<'irstly, from the sale of licenses authorising mer chant,:; to deal in salt; secondly, from tlie profits on the sale 01' c;alt out uf the Government depots; and thirclly, from i11e likin tllx on all salt sold by the licensee:~ to the public. Hight through there is peculation on a grand scale. It has been estimated by cornpclent persons that if the importation of foreign salt was per mitted on payment of an import duty of 100 per cent. arl mlonm, the salt renmne would Le dcuL!ecl, m~d the consumer wonlcl get his salt for about half (he present price. X. Jt is eYidcnt to anyone who looks into Chinese Rhnps where:> forp,ign w:ires arc sold, that many articles of inferiOT make are rnllrkcd with the 11:imcs and devices of wcll-know11 firms of estal.,lishc.J reputation; lmt t],e falsification iu many instances has been clone out of China. No,v that China is becoming a mann factmi11g cmmtry, it is n~ry d0sirable that onr British mmrnfactnres shoulrl Im protected, for advantage ,vill surely be taken of the favoural)le footing which some 1nnrks ha Ye secured for thernseh'es. when < ases of counterf'eiting liaw been brought to the notice of Chinese officials, they lnne been relldy enough to prorni:;e that if t.he offence could be brought home to a Chinese snbjec.:t, Ji3 would receive punishment. l'r0tectio11 of trade-marks Ly registrationis a mP-asure wl1ich the Chinese Government will prolml,ly ue found quite ready to adopt; bnt the detection of 1,he offeuce must always remain a matter t1f great clifticulty in a conntry like thi$. XT. This matter might ha Ye been inclndeLl i:n No. VII., fc:ir the quest.io11 here rnisetl is one of jucHc.iuL arlrninistration. I am

PAGE 47

dt1xA. 11ot a\\'a1e thnt tlie liitbility of Chi11ese sharehoMer;; fot tl1e 1.tnpaill fot unp:ii.l halanco of theil' ,:h:ue,: has ever been disputed or called in que--tion cnpital. until a recent case of some importance oc~urrecl. A unmber o[ Chinoue lrn::l bought shares in a local joint-stock hauk, on which 1 /. 6s. \\'as paid up, find 81. His. still due. Tlie concern did not; prosper; and some Chinese shareholdern, when nppiied to, ref'userl to.pay up the cdl, and pref'el'rerl to forfeit their shares. The magistrate of the Chinese court at Shanghai refused to nllow fl case to be brought into court .. without going int0 thr. merits of the case, he ruled that tl1e slrn.roholclers were justified in getting out of the concern. It was a question of contrnct, tmd should have heen gone into like any oLher, whatever the judgment eventually might luwe been. But the remedy seems in the hamls or company directors who ran rofnse to lr.t Chinese lm.r shares which nre uot fnlly paid-up. The improbability that, defaulting Chinamen will be bro:i6ht to account suggest<.; that care should he exercised with regard to the "reserYe liability of share. holders." XII. when foreign merchandise i;; re-expol'tell to a foreign Delay in country it may claim to hafo i-ef'n11dcd the fnll import duty issuing 01'ie uf the monq. There is no v'ali. 01igi11al port of shipment the foll export duty and tl1c coast trade duty. \Vl1P11 it has been reexported to a foreign country from Shanghai, a re-export CFttificate has to be r,btafr1ed, on presentation ut' which at the original port of shipment the cot1.st trade duty is refuwl.::d. Here, again, the Shanghai official!, delay 11nrcasonably in issni11g thrJ re-export certificate. As ihe coast trade duty 11ns paiu at a Yangtze port it is difficult to see what motive tl1e Shanghai clti.cial has for thns delnying. It may be in order to f0rce the merchants to pay a fee in order to expedite matters; or it may be with the object of playing into the hand's or his colleague at the original port of sfiiprne11t who thus retains the use of the money for some mouths longer. 1Vhatevcr the reason lllfl,)' be, a period of 8 months usually elapses before the re-export ce1,tificate can he ootained. 011c British firm alone informed me that they had some 40,000 taels 011t in this way. XIII and XIV. These an local questions of great impor~ance, Woo,ung ~1r l I f • . l . l tt . [' I and extension rtlH ia\'e or some time )Oen engagrng t 10 n entwn o t 1c proper of foreign set.tlement.

PAGE 48

Chuugking sng!!cstions : transit trlLCle. 46 CHINA, authorities, and I do not think it falls within my province td discuss them . . A.Iler Shanghai the next port at which the local merchantil had reason to call my attention to hindrances to trade was Clrnngking, where, purely local matters apart, the principal complaint was that the treaty provisions regarding transit trade "ere ignored; hut on this subject I have already dilated at length umler the head of inland transit trade. Chinkiang At the port of Chinkiang the Chamuer of Commerce represug~~~tions. sentecl that the regulations for trade on the Yangtze framed in ~evision of cl 1863 required revision. These regulations were drawn up at a -'nngtze tru c t I tl Y ,;, 11 . 1 1 1 f" 1 T . . regulntiom. une Vi 1en rn angtze v a ey was 111 tie ianc s o tie aiprng rebds, and were chiefly designed to preveut arms and other supplies from finding their way into the reuel camp. The necessity for such precautions has lonG ago passed away, arnl now the only vigilance required is for the protection of the revenue. In the opinion of the Chinkiang mercantile community two of the regulations now in force might ue relaxed without in any way exposing the revenue to loss. Detention of One is the rule which requires steamers proceeding beyond st~umers nt Chinkiang to stop there on the way up and clown to report at the Chinkiang. consulate and the custom-house. The inconvenience of this rule Re-payment ut Shanghai of duLiPB 011 Yangtze Ya\Jpy imports. is felt chiefly by steamers bound for Wuhu to load rice. This is a large ,:i.nd increasing trade, and if the rule is strictly interpreted it may cal13e considerable delay to steamers; for under the mosL unfaYourable circumstances a steamer might have to wait from 4 P.M. one clay to 10 A.M. the next, merely to perform an act of pure formality. It is true that the foreign customs at Chinkiang, as a rule, do what they ca.n to reduce the ~tcanrnr's detention to a minimum, but thesr. facilities are given as a farnur which may ue refused at any time, and for any reason, good or liad, at the caprice of the customs authorities; and there are also oceasious when the failure to send timely notice of a steamer's intended arrival makes detention and delay unavoidable. wuhu is only 100 miles beyond Chi11kiang, and there appears no good reason why steamers shonhl not lie allowed to proceed there direct. . The other rule which the Chinkiaug merchants ,vouhl hase amended is that under whieh import cargo destiuecl for a Yangtze port must pay all duties at Shanghai before it is transhipped to a Yangtze river steamer. The effect of this rule is that all cargo coming out on a through bill of b,ding must ue examined at Shanghai, and that the steamer's agent must pay the duties in aclvance;and recover tlrnm from the consignee at destination. As the Yangtze Valley is chiefly supplied from the great emporium of Shanghai, where all merchandise has already paid import duty, I cannot believe that this rule can cause serious inconvenience; of all the Yangtze ports Chinkiang is the only one where reference wa1, made to the matter.

PAGE 49

CHINA. 47 Part IV.-Consequences of the War witli Japan. The war with Japan had scarcely any effect on the trade of Effect of wnr China. Except at the port of Newchwang, which was seized by on trnde. the Japanese and occupied by them until the close of 1895, trade went on much as before, and the cutosm-house returns for 1894 and 1895 show that quantities and values were not affected. The treaty which brought the war to a termination, satisfac tory as its terms may have been to victorious Japan, was a disap pointment to those who had been cherishing the hope that it would mark a new departure in foreign relations with China, and that at last the long deferred opening np of the country was about to take place. Neither from the terms which Japan has exacterl, nor from the severe lesson administered to China, are changes likely to follow which will materially affect our com mercial interests in these parts. Indications are already abundant that it is vain to look for any spontaneous effort on the part of China to rouse herself from her lamentable state of torpor. The extent to which our commercial interests in China are How British affected by the treaty of Shimonoseki I shall now attempt to set interests nr,, forth. ~f~cted byk. Article II. of the treaty cedes the island of Formosa to Japan. tre~~;.nose 1 Whatever portion of our manufactures was formerly taken by the Cession , f island will henceforth pay duties according to the Japanese tariff. Formos.,. For the most important articles of our British products the future scale of duties has been fixed, and has been calculated on a 10 per cent. ad valorem basis. This is higher than the tariff of import duties ruling in Formosa before the war, but this difference will be more than made up for by the free circulation of British goods throughout the island. . The annual importation of foreign goods into Formosa is on an average 4,000,000 taels a year. This amount will now be lost to the China trade, but Formosa under Japanese rule is likely to be a better customer of ours, and the cession from a commercial point of view will be a gain. The chief export from Formosa is tea. Under Chinese rule Formosnn ten : all this tea was sent abroad, chiefly to the United States, through trnclc. . , the port of Amoy, where the principal tea firms are situated, and : where the tea is manipulated and repacked. The tea having paid its export duty in Formosa was .allowed to enter and leave Amoy again without further payment. Now that Formosa ha<; passed into other hands it remains to be seen whether China will coutinne to treat a foreign country's produce with the same liberality. Any attempt to impose a duty at Amoy would certainly dri\'e the tea business away from the port, and the Chinese Government _w_i]l probably under the present enlightened foreign customs adnumstration not commit such a blunder. But it is also probable, independently of anything the Chinese may do, that through the (2297) D

PAGE 50

Wtir indemnity. 48 CHiNA. ',, action of the Japanese Government Eormosnn tea may desert Amoy, and find its way to America through oue of the. -Japanese ports. There being no safe anchorage for large steamer:s in Formosa the tea has been sent to A moy for transhipment to larger vessels; but with a line of Japanese steamers connecting Formosa with Kobe or Yokohama it may be found more simple to send the tea to one of these ports for tmnshipment there. This would be aserious loss to the mercantile community at Amoy, but to commerce as a whole the change would be immaterial Article IV. provides for the payment of u war indemnity of 200,000,000 taels, and by a subsequent arrangement the teiTitory of Liao-tung was restored to China fo.r . a further sum of 30,000,000.taels. China has thus to find 230,000,000 taels. It is in this extra drain on the cotmtry that there is a serious menace to our commerce. In order to pay off the indemnity China has already pledged the foreign customs revenue for two lonns amounting to 200,000,000 taels ; this means that for some years to come China will have to provide something like 15,000,000 tnels to meet the interest and sinking fnnd, and it is chiefly on t of trade that the money must come. The foreign customs revenue, which is the mainstay of the Central Government, will in futnre go into the pockets of the foreign bondholder; but Peking will not consent to go without money. Hrwiug no national budget it is certain that the provincial governments will now be called upon to send to Peking larger contributions than before, and this at a fime when they will be dcpri ved of the share of the foicig1i customs ievenue which was a1lotLed to them for provincial requirei11ents. It is always 011 trade that extra taxation falls. Ot.her sources The other sources of revenue at prese1it existing a1;e not capable of re,cuue !lot of expansion. The land tax, which is the chief ite1ii of each ""\;;:~~~0~ provincial budget, is immut::i,bly fixed by law, and any attempt to c,. increase it would Icrrcl to a rebellion. The salt tax has probably reached the point at which a heavier impost would mean ii. diminished revenue. The unfortunate trader seems to be the only source from which money" can be drawn: The. gcn;ernment ha"s before now, during the suppression of the several rebellions, been able to extract such enormous sums from the people, and this too at a time when the disturbed state of the country flnd consequent , stagnation of trade made the task doubly difficult, that the :i-noney ;~s~:~f~i will doubtless be forthco_mi~g, but !t _ha3 ~o be rememoere,cr "that Jikia tnJ:ntion. under the corrupt provmcrnl adn11111strat10n only about 30 per cent. of the amount exacted on trade is accounted for to the government, and that whatrwer be the number of millioi1s hencea forth required to repay foreign loans, something like three times that burden will be imposed on trade. It may be .taken as certain that the constituents of foreign trade will have to pay their share\ and that the means now employed to elude trenty restrictions will be used to a still more injurious cxtont. The necessities of -the situation will incite the provincial authorities to follow. with greater boldness a course which they have learnt from experience they may adopt with every prospect of impunity.

PAGE 51

CHINA. 49 The Commercial Treaty"referrcd to in Article VI. was signed in Commerci1tl Peking in ,July last, but it has not yet been pnbli!ohed to the convention worhl. It is known, however, that it does not introduce any ~nkes no ' f' . t l 1 . l 1 l ] 1 1mportn1Jt e_nanges u 1mpor ancc, anc t iat 1t noes 1tt e more t 1an p ace chunges. Japan on the same footing as other-l)owers in China. Under the old treaty, annulled by the late war, Japan did not enjoy all the advantages which the other foreign treaties confer upon Europeans. The principal disability under which the Japanese labomed iu China was that their merchants could only sell their goods at certain ports of entry ; they were not allowed to seek markets in the interior nor to aceomp::my goods inland ; neither could they commute inland duties by one single payment. Similarly with respect to Chinese produce, Japanese subjects could oi1ly buy at the ports; they might not go into the interior to collect native merchandise. By the new Commercial Treaty they are placed in as good a position as other foreigners, and the permission to trade in the interior will probably be more extensively nsed by Japanese thai1 it has been by our own merchants. Artide VI. also opens four new ports to foreign commerce. Opening of They are: Chungking in the province of Ssu-chuan; Shashih, in four new Hupeh; Soochow, in Kiangsu; and Hangchow, in Chekiang. ports. Chungking was already open to us in a way. British subjects Port of were allowed to establish themselves there, and to import and Chungkini:. export merchandise on the same tariff of duties as at other ports; 1:mt the right of British vessels to visit the port was not conceded, the carrying trade being rr.stricted to native junks. By the Japanese treaty, steam navigation is now permitted as. far a.s Steamers may Clrnngking, and under the most favoured nation clause the right now proceed accrues to' us. to Chungkin~. Neither the Japanese nor any other foreigners have yet attempted to replace native junks with steamers; and the dangers of nayigation between Ichang and Chungking may well cause shipowners to carefully count the cost. And yet when, in 1891, an agreement was signed by the British Minister which openqd the city of Chungking to foreign trade, but at the same time waived for the time the right to use steamers beyond Ichang, the article was severely criticised by the British mercantile community in China. It was denounced as surrendering a valuable privilege. It is, therefore, somewhat disappointing now that the right is established beyond dispute that no forward movement is being made. _ _ Until communication by steam is established, the tmde of Chnngking cannot be expected to expand. The province C>f Ssuclrnan, rich as it is, has the disadvantage of being almost. cut off from the rest of the world ; for merchandise can now only_ reach it dnrino certain months of the year, and after a perilousvoyage which ~rny take 6 weeks, but m;re frequently 3 rnoi:iths. Chunakina has now been opened to us 5 years, but so far only Chungking one B~itish merchant has been tempted to settle there, and his 8 ~ far . . l -. d dii:nppo1ctrng success has not been marked. As elsewhere, t 1e import tra e IS. (2297) -D 2

PAGE 52

Export tmde must be developed by foreignere. 50 CHINA. entirely in Chinese hands, and at Chuugking, more than in other places, the foreigner finds it difficult to get a share of the trade. The system of long credit which prevails there places the foreigner at a great disadvantage, for not only must he be for months out of his money, but at the end of the allotted period he runs much greater risk than the native of being defrauded. In the export trade the custom, at any rate where foreigners are concerned, is to pay cash, and as there are no foreign banks, nor, in the absence of insurable foreign vessels, any means of obtaiuing advances on shipments, the capital required for dealing in exports must necessarily be c.:onsiderable. The development of the export trade must depend largely on the enterprise of foreigners, and without, a large export trade there cannot be a return current of imports ; but the present isolation of the province does not invite the presence of foreign pioneers coming to seek out new articles which may be profitably exported. Pio neers are usually poor men, and under the present conditions an exporter must have means. Sys! em of The trade on that dangerous section of the Yangtze which ~h,1rktebred lies between Chungking and Ichang is now cani~d on in native JUn s etween • l F . h h . h l . l f 1 Ichang a.nd JUil rn. . ore1gners ave t e ng t to c rnrter Jun rn or tie voyage, Chungking. or to run their own junks. As a matter of fact none are foreign owned. Chartered junks are in all respects treated as foreign vessels : they pay import and export duties according to the treaty tariff at the foreign
PAGE 53

CHINA. 51 While the problem of steam naviration above Ichang is wait-0 . f . . . penmg or mg to be solved, 1t woul~l not alone be a great convenience, but a steo.m valu~ble step forward 1f steam launches could ply within the la.nnchP~ at limits of tlie port of Chungking. Them the current is extremely Chungkmg. strong, especially in summer, and it may then take an hour to progress one mile in a native boat. The services of a launch merely to tow cargo boats would be most useful, and it is certain that once the Upper Yangtze people had seen what a steam launch could do, there would be a general desire to employ them. The Ssu-chuan authorities and the Central Government are showing signs of an intention to open Chuugking in a very niggardly spirit, and it is unlikely that any Chinese subject or official will be allowed to use a steam launch, lest it might precipitate the general introduction of steam c~~ft; but Chungking being an open port " under t,he same cond1t1011s and with the same privileges and facilities as now e:xist at the present open cities, towns, and ports of China "-so declares the Shimonoseki treaty -a British subject would be within his right in using a steam launch in the harhour, although those now interested in the ques tion have been told that any attempt to run such a craft would .lead to contiscation. Tlie introduction of steam on the upper waters of the Yangtze is of such importance to trade that any person willing to make even a small beginning would be a public benefactor. The port of Shashih between Ichang and Hankow is a very Port of busy place. At all times 1 or 2 miles of native craft may be Shashih. seen along the river front, but it is principally a port of transhipment. It is situated at the intersection of two very important An importo.nt d f 1 Cl d I . l plo.cc of 1.ra e routes o centra una, an 1s t ms m commnmcat10n wit 1 tro.nehip important markets north, south, east, and west. It is at this mcnt. point that vessels from Ssu-chuan meet those from Hankow, from the Han River districts in the north-east, ancl from the ports in Hunan in the south. It is a great place of transhipment for cargo from Yangtze junks into junks better adapted for the navigation of the canals and shallow rivers that connect Shashih with the Han River to the north-east and the Tungting Lake and the rivers flowing into it in the south. The produce of Ssn-chuau and Yunnan almost all passes it on its way to other provinces. The Taiping Canal, which connects the Yangtze with the Tungting Lake, has its northern entrance opposite to Shashih, and being navigable for 8 months in the year, it offers a safer and shorter route for the tra,nsport of merchandise between Ssu-chuan and the provinces of Hunan and Kwangtung. By another canal whose terminus is at Shashih the upper waters ,of the Han River are reached. By this route the Ssuchuan produce destined for the provinces of Holl8n and Shantung, and for the districts supplied from thegreatcentres of Fanchengand Lao-ho-kow is sent, instead of being taken down the Yangtze as far as Hankow, and thence sent up the Han River. As there are no locks at eiU1er end connecting the canal with the Han and Yangtze Rivers, merchawlise has to. be transhipped, and it is clue to this that

PAGE 54

52 CHINA. such a vast array of shipping is seen at Shashih. There is also another canal called the Pien Ho starting from Shashih, which joins the Yangtze 40 miles above Hankow. It cuts off a large bend in the Yangtze River, and saves some 70 miles in the joul'ney. Native craft use it almost exclusively, as it not only enables merchants to curtail the distance between Hankow and Shashih, but it affords them a safer and surer means of conveyance. Shashih not 11 An enormous quantity of merchandise must pass through large market Shashib, but the town itself is not a large distributing centre, for foreign and does not promise to become a new outlet for foreign products'. goods. 1 . fl l f . . Its trace is cine y in native produce, am rom its posit1011 it 1s not likely that foreign steamers will share largely in the carrying trade. In the traffic from north to south we cannot take part, as waterways in these directions are not open to us. Our steamers have the run of the Yangtze east and west, but, as steam naviga~ tion does not now extend beyond Ichang, 80 miles above Shashih, it is probable that Ssu-clrnan produce destined for Slrnshih will cont.inue its joumey as now in the native junks that have con veyetl it, from the upper waters of the river. The produce from the provinces north and south of the Yangtze which passes through Slrnshih is not destined for the lower portion of the Yangtze, and the junk trade on the section of the -river between Shashih and Hankow is small. Such produce when Lound for Hankow, instead of going by way of Shashih, can reach Hankow more easily by way of the Han River if coming down from the north, and of the Tnngting Lake if coming from tlrn south. ~ntiYe goods . It must a_lso _be rememLierecl that. when th~ nati.ve m~rchant using steamers wishes to avail lumself of a steamer for a port10n of the JOmney pay_ cxti:n the expense of trnnshipment and t.lrn steamer freight charges are rl n i,I<'• 1 1 f I 1 1 1 Tl -not t 1e on y actors t rnt enter rnto 11s ea cu ations. 1e very City of Soochow. fact of native merchandise being put under the foreign flng!at once places it under a rlifferent fiscal administration. No matter what duties it may have already paid to the native customs y,fl1ile yet in the junk the merchandise on passing into a steamer has to pay to the foreign customs a duty of 5 per cent., and ou leaving the steamer 2! per cent. more. Thus for the privilege of being carried by steamer it has to pay to the Chinese Govern ment 7 ! per cent. In a short journey within the limits of the same province, as Hankow, Shashih, and Ichang are, a junk cargo which had already, as it probably would have, paid something to the native customs administration, would certainly escape paying ::i.s much as 7 t per cent. additional if it remained in the junk. Soochow, the capital of the Kiangsu province, and Hangchow, • the capital of the Ohekiang province, are the other two ports to be shortly opened. Soochow is some 70 miles to the west of Shanghai, with which it has excellent communication by canal and river. It is a very rich city, with a population of about 500,000, and its chief industry is the weaving of silk fabrics of various kinds. City of Hangchow is 110 miles ira.J\g~how. south of Soochow, and 80 south-west of Shanghai, 100 miles miles north-west of Ningpo, and

PAGE 55

tHINA. 53 between ,,11 these places there is communication by canal. lill.ngchow has a population of over 500,000, Chinese estimates even put the number at 1,000,000. It is a busy manufacturino city, and is noted for its silk fabrics, fans, and tinfoil which is s: largely used by Chinese in making imitation money to be burnt as offerings to the dead. The opening of Soochow aucl Hangchow will not largely benefit Opening of foreign trade, aEd it is doubtful whether foreian firms will be tl16s~ will t d bl ' l J l I 0 • m!l.kelittle -empte to esta 1s 1 t 1e111se ves t 1ere. The import trade will difference to certainly remain in tbe hands of the Chine<1e already in business import trade . there, and the benefit that will accnrn to the trade is that mercha:iclise can rnach these cities after, payment of one import duty without beingexposed to the rrttentions of the native otticials. That is to . say, foreign merchandise will reach a certain point outside the city walls, wherever the uew foreign custom-house may be situated, but it is doubtful whether after it has been cleared at the foreign customs it will not be taxed by the Chinese oflicial:, before passing into co11s1Hnption inside Hangchow or 8oochow. They will not attempt to tax goods in foreign possession ; it is only when they puss into Chiuese hands that they will be recp1irell to pay something over and above the import duty. There are already indications that the officials will try to keep foreigners and their establishments within the narrow limits marked out for a foreign settlement outside the city walls, and that, 0onsequcntly, foreign merchandise will have difficulty in going beyond these limits save in native hands. As a centre of dist.ribution, even for the neighbouring districts, S!umghni as it is doubtful whether Soochow will displace Shanghai. All the g?od.11 • 1 I . . ] . l S h . I t l 11 l 1 d1str1butmg oca 1t1es w uc 1 ooc ow nug 1 serve rnve equa y gooc cana contl'e as communication with Shanghai ; t.here is little reason, therefore, Roorhow. why goods should in future be forwarcled via Soochow instead of as now direct from Shanghai to their destination ; the market being already well established at Shanghai it is likely to .remain there . Haugchow from its position on t:lte Chientang Riyer may Hungchow become the entrepot for central Chekiang, as all merchandise n~:i,y .bec~me 11 l . . f l t tl h d1str1bu tmg t estmecl for that sect10n o tie country mus pass 1roug centre. Hangchow. Foreign goods can now, at any rate, reach one more important centre with no heavier impost than the tariff import ch1ty, and may be laid down 100 miles nearer the consuming districts safe from the interference of the native mandarins. To this extent, native dealers, and through them our manufacturers, will be the gainers ; but the general effect of the opening of these two ports will be a shifting of the scene of operations rather thau an iucrease of business . . Hano-chow is not a seaport; it is situated at the apr.x of a Hangchow bay whi~h 1s too shallow for steame rs, and the bore, or tidal wave not a se:iport. which introduces each flood tide, is a bar to navigation. Hut the canal communication with Shanghai is good, and it is through the iula;nd waterways that its trade will be conducted. l l l , Ifangchow A~ regards the export trade, tea and silk are tie stap e.s t 1at and the tea trade.

PAGE 56

54 CHINA. enter into foreign trade. Soochow is not in any way connected with the foreign trade in tea; but the opening of Hangchow as a treaty port will affect the tea trade to the extent of offering the leaf an easier way of reaching the market at Shanghai. At present the Fychow teas from the neighbouring province of Anhui, instead of finding their way to the treaty port of ,Vuhu for shipment to Shanghai, are driven by unequal taxation to take an 18 days' journey over the Anhui border to Ningpo whence it is carried by steamer to Shanghai. As these teas pass by Hangchow, the natural course would be to take them by the inland cmrnls to Shanghai; but here again another tax causes them to select the Ningpo route. In future these teas will be cleared at the Hangd10w foreign custom-house and proceed to Shanghai without further payment. Shanghai will continue to be the chief market for the tea trade, and the changes resultiug from the opening of Hangchow will affect the native dealer only. S0oc~1ow and Soochow is the centre of the silk industry, but the opening the silk trade. of the city to for1::ign commerce is in no way likely to affect the course of trade. No,v that Soochow is a treaty port the advantages which this change imports are as open to Chinese as to foreigners; the native can take his goods to Shrenghai on the same terms as the foreigner, and as the native dealer always prefers to put his goods on the largest market, there is no probability that the market for raw silk will be shifted from Shanghai. Silk filatures. Of recent years both foreigners and Chinese at Shanghai have erected a number of silk filatures where the cocoons produced in the Soochow district are reeled off by foreign machinery and under skilled supervision. There are now some 25 of these filatures, aud the number is increasing yearly. It is probable that in future, filatures will be erected at Soochow rather than at Shanghai; the proximity of the cocoon districts, the larger supply of skilled hands and cheaper labour, will tend to transfer the industry to Chinese more than foreigners benefit by opening of new ports, Opening of new ports an odvontoge to domestic trndc. the new port. The opening of new ports is always considered by the Chinese Government as a concession to foreigners ; but the history of our commercial relations shows that each new port opened is a greater boou to the native than to the foreign merchant ; and Soochow and Hangchow will form no exception. The chief change effeetecl by the opening of a port is not only that all articles which enter into international trade, but also all goods of any kind which may be carried in vessels of foreign type, or even in native craft in which foreigners may claim to have an interest, are at once withdrawn from the control of the native customs administration, and placed under that of the foreign customs, and moreover have the advantage of the treaty tariff. Under this tariff internal trade between any two treaty ports may take place on an assurell basis. Native produce may thus pass between any two treaty ports, however distant apart, on payment of a 7 i per cent. duty, that is an initial export duty of 5 per cent. and a reimport dut.r, or "coast trade dut,y" as it is called, of 2! per eent. Not the least benefit which Hangc_how and Soochow will

PAGE 57

CHINA. 55 derive from being opened to foreign trade is that this purely domestic trade will be removed from the control oi the native administration-a distinct boon to two such large manufacturing cities. At the present day, to open a new port to foreign trade may mean little else than giving to native merchants at that port the blessing of a fixed tariff and an honest customs administration. Under Section 3 of Article VI foreigners will have the right Permisi_ion temporarily to hire warehouses in the interior of China for the for f_orngners l l d" to lure storage of t mu mere rnn 1se without the payment of any taxes warehouses in or exactions whatever. This is a concession which will be of no the interior. practical value for, as already explained, the distribution of goods into the interior is in the hands of Chinese. On the rare occasions when foreignr.rs have accompanied their own merchandise through the country, they have had no difficulty in storing it ; and when foreign owned goods are in charge of a native he can always hire a place to warehouse it. Under the former Japanese Treaty, Japanese subjects were A greater expressly forbidden to proceed into the interior for purposes of ~oou to trade, and. it is probably this disability that suggested to the u~!::1;~sc Japanese negotiators the insertion of this clause. foreignere. Of more far-reachi11g consequences is the fourth section of the Importa~ion same article which o-ives to foreio-ners permission to enaage in all of machn'.cry . . o. . . 0 0 • aucl erection kmds of manufacturrng mdustnes at all the open ports of Olnna. of foctorie;;. Up to this time the Chinese Government has, when it suited it, denied our right to manufacture at the open ports, and by way of affirming its decision, orders had be~n given to the custom-house not to pass the machinery necessary for the erection of cotton mills at Shanghai. The reasons alleged was that machinery would interfere with the means of livelihood of the people, the real reason being that certain highly placed officials wished to Forh~e~. l 1 f l 'I' pro 1b1t1on retam tie monopo y o cotton spmnmg anc weavmg. o intended to machinery in principle it is clear the Chinese Government had further no objection, for at the vcr_y time that a factitious opposition was prirnte en:ls. being made to the importation of spindles and looms by foreigners there were already at "'orlc in China steam mills for pressing peas, match factories, silk-reeling establishments, machinery for pressing brick tea, sugar factories, and other industries requiring machinery. But these did not come into competition with mandarin owned factories, and no question was ever raised as to the right of foreigners to use machinery in these works. Now that the Japanese treaty has forced the Chinese to remove Ere. ti,m of all obstacles, four foreign joint stock companies have been formed forrigno~rned to erect cotton spinning and weaving mills, and within a few cotton mills. months these will be at work. In any other country but China Ev~rything in the IJros1Ject would be verJ' encouraaing. With cotton in abunthcu: forour, . o d but rnterc,tcll dance at their very door, an ample supply of cheap labour, an an pn,rtics may almost unlimited demand for the -0utput in China itself, success prevent seems assured, but the same influence which succeeded for years succrn. in preventing foreigners from entering into competition wJt~ tl:ie factories erected with the money of the most powerful official rn China, and in compelling _Chinese owned mills to paya. royalty to

PAGE 58

Question of excise on outpuL of factories not seUled. Japanese wills mo.y undersell Chinese. Number of mills in China. No trust worthy inforn;o.tion respecting working of Chinese mills obt.ninable. 56 CH~A. this highly placed monopolist, may yet succeed by occult methods in so handicapping foreign owned mills as to put them out of the race. Discriminating duties on the raw material on the way to the mills, and a preferential rate of excise on the output of the mills, are weapons which Chinese officials are adepts at using, and to defraud the public revenue in order to benefit individual enter prise is a device to which Chinese fiscal methods easily lend themselves. It is somewhat ominous that the question of excise, which all who are interested in foreign owned rnanufactories in Shanghai were hoping would be set at rest by the commercial treaty recently concludecl between China. and Japan, has bee11 left unsettled. The interpretation and amplification of the clause in the Shimonoseki Treaty were naturally questions for the Japanese negotiators of the commercial conventiou to dispose of, and seeing that the conditions under which local manufactures may be placed on the market have been allowed to remain in a. state of nncertainty, it may be that on reflection the Japanese perceive that the development of cotton manufactures in China will be injurious to their own home industry. Chinese raw cotton may be exported to Ja pan for a duty of 1-1 io taels per 400 lbs., and the finished yarn may be re-imported 611 paymeut of a duty of 2-r1o taeJs pei bale of 400 lbi:;. The Japan made yarn would thus be handicapped :31\{Ti taels per bale, plus whatever the freight charges might amount to. A 10 per cent. excise on the output of the Chinese mills, which the Government now proposes to impose, would at the present price of yarn come to about 7 taels. The Japanese mills would thus still have something in hand in competing with the output of Chinese mills. As the question has now been left, China, if permitted, may stitie all industry by excessive excise. What the Chinese Govern ment, or more correctly speaking, the mandarins pecuniarily interested, will do, if left to themselves, will be not to foster native imkstries as against foreign competition from abroad, but to seek to place native owned mills at an advantage vis-a-vis foreiuu owned mills in China. The number of cotton mills in 8hanghai now completed ii:; four, with 123,000 spindles and 1,800 looms. In course of erec tion there are four more with 155,000 spindles. At Ningpo there is one mill at work with 11,000 spindles, and at Hankow there is one completed with 30,000, and another being erected with 50,000 spindles. Others are talked of in different places, but it now looks as if the success of the existing mills would be awaited before more,capital is invested. Only Chinese owned mills have been running so far, and it is im possi blc to obtain trustworthy information respecting their working. The Chinese themselves are satisfied that they are rnakiiig handsome profits, but their returns, even if accessible, ,voul
PAGE 59

CHINA. 5'7 bewildering intricacies such as the superintendent's salary being paid by some other department, ot some independent insti~ution lending capital free of interest, ot repairs being charged to some other account, or depreciation ol' 8tockbeing left out of considera tion. so that any estimate of profits would be misleading. We shall have to wait until the foreign owned mills have been running some time before any trustworthy opinion can be pronounced. As far as can be ascertained in the existing Chinese mills the P1oportion of proportion of workers in every 100 is 51 women, 24 men, and 25 ho.ncls and children, and the average wages all round are 5 dol. (11s.) a ""o.gcs. month. In Shanghai, owing to the increasing number of factories, and the gradual rise in rents, and cost of living generally there is a tendency for wages to rise. As to the efficiency of the labour Mill_ hands' this wiU probably improve as time goes on. At present, so I was cl!ic,cncy. informed by a foreigner in the best position to form an opinion, the existing mills employ twice as many hands as similar mills iu England would require. M.uch has been written to prnve that the fall in the gold price Btl'ect of low of silver must tend to encourage mannfactures in silver using priced. silver countries for whereas it is arnnecl the rmrchasino power of silver 011 Chmese ' ' o' b 1nanufa1• .. in China being the same as before, wages and the prices of raw tures. material are unchanged, on the other hand, the laying down cost of the products of gold using countries increases pari passu with the increasing ratio between gold and silver. This argument is Siher not the based on the assumption that silver is the money of China, but it onl;r money of l 1 ' 1 I d 1 1 h 'l h Chmc~e. ms ueen over oo rn t iat copper mnc 1 more t an s1 ver 1s t e Price of currency of China, and that the relative value of -gold and copper copper n.n , is an importnnt factor in any calculation of this sort .. The tillers important f . l I 1 l f 11 l factor o t ie so1 , t 1e wor rnn m mmes am actoncs, are a pare 111 copper cash, and they insist on receiving their honest wage in this medium regardless of the exchange between silver and copper coin. Their daily food and other wants have to be paid for in copper cash, and the price of labour and of raw material must be measured in copper. If ,it now costs one tael of silver to turn out 1,200 cash, ,vhen formerly 1 tael \\ould lrny 1,500 cash, it is not that the eopper cash can now purchase more la l.,oui', bnt that silver can purchase less. vVhether Shanghai can compete with Manchester depends as much on copper as on silver. Prwt V.What 1nay be done tu JJ1'Unwte 1'1a11!1. To ask what steps can he taken to promote British trade in Chino.'e own China is almost the same thing as asking what steps can be taken rcsomces to improve the condition of the people, for China's capacity for must be b . l l 1 l t f 1 t 1 clcvelopecl. uymg progresses wit 1 t ie c eve oprnen o 1er ma errn resources, and this development is at present struggling against every obstacle that bad government can put in the way. The measures which we can of ourselves take to effect an improvement are confined within narrow limits, and I can bnt indicate certain directions in which something may Lie done with the pmspect cil' beneficial results.

PAGE 60

-58 CHINA. Cbiu11 al, The absolute poverty, amounting to destitution, of tlrn bulk presenL 0, rnry of the Chinese population reduces to less imposing figmes the poor countl'y. numbers of those whose needs it is the aspiration of the British Official clas; opposes nli dcrnlopment. manufacturers to supply ; and the improvement of the condition of the semi-starving millions must be worked out independently of any efforts of ours. Bnt without venturiug beyond legitimate limits, there still remains something to be clone. ,Ve have obtained a footing in China, but we move forward very slowly; and we are too tolerant of the "vis inertia" which Chinese officialdom ever opposes to us when we trv to advance in anv direction. "\Ve fail to perceive that the pe1~versity of the Chinese Government in continuing in its suicidal methods is clue to the utter selfishness and corruption of the ruling classes. ,Ve too readily assume that a spirit of conservatism, ignorance of the first principles of political economy, and a policy of China for the Chinese, are the true explanation of China's arrested development; and we console ourselves with the reflection that @lightenment will bring about a change. We devote our efforts to imparting that elementary kriowledge which once absorbed and assimilated will, we hope, work a change in the minds of China's rulers, and through them of China's millions. Meantime all progress is arrested, and in our tolerant mood we allow our grievances to go unredressed, and we fail to turn to account the opportunit,ies placed in our way by the commission of Chinese official misdeeds. I have more than once alluded to the antagonism existing between the provinces and the Central Government in matters of revenue. In accepting the obligations put upon it by the treaty the Chinese Govemment undertook, if not more than it could perform, certainly .1nore than it is disposed to carry out.. Disputes arising out of commercial questions necessarily have their origin in the provinces, and the attempt to settle them has in the lirst instance to be made there. The willingness of the provincial government to make redre~s for any injury done to British interests in the province is dependent on the local official's appreciation of the gravity of the situation. lf in declining to make any restitution he sees nothing worse ahead of him than a reference to the higher authorities at Peking his mind is at ease, reki~,g for Peking will always take the side of the province, and will Le conn~rc_s 111L most reluctant to disavow any action there taken. Even if unusual provmcrn . l C 1 G d . l shortcomings. pressure 1s put on tie entra overnment, an 1t can be broug 1t to admit that the claim is just, matters are uot necessarily much arlvanced, for the Chinese Government's orders are not always carried out. in the provinces even when earnestly meant, and much the Futility d Ee11cliuir compluib.ts lo Peking. less so when it is understood that they have been reluctantly given. The British Minister's most ul'gent expostulations may, indeed, nsult in orders from Peking being sent to a provincial governor; these are passed 011 to the authority at ti.ie port, but by the time they have reached their destination the momentum of the pressure is lost, with the result that the orders are obeyed in a pnrely formal wn.y with as bad grace as possible; but, meanwhile,

PAGE 61

CHINA. 59 the time for repairing the mischief has probably gone by, and the net result is that we are virtually defeated. To give one specific ca,e out of many such. A British merchant at a treaty port An in~tancc appoints a Chinese agent to sell coal for him. Some local revenue of Chinese ffi d . t tl Cl . 11 5 1 . contumncy. o cer ll'ec s le nnese agent to ac c per cent. to t le pnce, and to pay the money to his department. The Chinaman under instructions from his employer refuses, and he is seized and imprisoned. The u~ual reference to Peking is made and orders in due time arrive, but meantime the business has been injured and all Chinese concerned intimidated. The net result is that the purchasers are still surcharged the 5 per cent., and that the Chinese agent holds his tongue in future. _ When the Minister of a foreign Power in Peki11g has to make Chinese representations to the Chinese Government, he addresses himself Foreign Office to the Tsungli Y amen, or Board of Foreign Affairs. This Board ~~:1:~ity over has no direct authority over provincial governors; it can but provinces. address a communication suggesting or recommending that such and such a course be followed; but it has happened to me more than once, when pressing a provincial viceroy to carry out the instructions which the BritiEh Minister had been assured by the Board of Foreign Affairs had been sent, that the Viceroy has replied that he was responsible for the government of the province, and that the Board could not give him instructions. In important matters such as the promulgation of a new regulation, or the remoYal of a culpable official, the Board of Foreign Affairs would apply for an Imperial Decree which would ensure immediate compliance; but for everydti.y matters the Board's communications to provincial governors take the form which ofticial usage prescribes, and are by no means in the nature of an imperative command. The financial difficulties which now beset China may turn out. Ho~e~ b~scd to be more productive of reform than the severe lesson lately fion Ch~na1 8 f d h b J If eh. , d f . mancm. orce upon t e country y apan. mas nee o money 1s etrn,its. wisely utilised by foreign Powers she may be driven to husband her resources, and to adopt measures for still further adding to the national wealth . . From this time forward China will have to meet an extra call New dm:n on of something like 15,000,000 taels a year to pay the interest anrl Chiu"''s l f l f 1 1 Tl S • 1 t l reyen ue. sm nng unc o ier recent oans. us to a sate w 1ose na 10na budget is estimated at about 100,000,000 taelsis a serious matter, and imperatively calls for a reconsideration of her financial position. China's first thought is natmally of the foreign Foreign maritime customs as the only por~ion of mac;hinery in her complex c~stol!ls ofl'.er l . l I [ k' 1 d b t t d. s11nplest wny po 1t1ca system t rnt 1s m gooc wor rng ore er, an can e rus e of increasing to increase the production at a moment's notice. To double the the rHenue. foreign customs tariff is to nearly double the customs revenue ; to double the native customs duties or the likin tariff would probably mean no increase at all in the amounts remitted to the Treasury. The foreign maritime customs is the willing horse 1.hat must be worked to death. If the likin collection and not the maritime customs had been entrusted to foreigners then it would

PAGE 62

Use China's cliflicuky as a lever for forcina reforn~. 6.0 CHINA. l~a\,'e been to the foime1 that the Uhinese Govemment would have looked for aid in the time of neCll. If China can now obtain unconditionally the consent of foreign Powers to increase the tariff the Government will be relieved of its embarrassment without an effort, and no atte.n:1pt will be made to introduce tmy sort of order or honesty in the provincial fiuaucial system. It is only under the stress of necessity tha.t the Cential Government can be expected to nerve itself to tackle such an uncongenial task. How mnch an China comes to the foreign Powers with the proposal that increase of the treaty tariff shall be doubled. Taking the revenue of 1895 tariff would as a ha.sis, the duties on foreign imports, exclusive of opium, prodnre. amounted to :J,7.Sl,000 taels. Assuming that the increased duties Foreign ancl Chinese intere,ts id~nticnl. "iYoultl not restrict the trade, Chirnt can at most count 011 getting 4,000,000 taels additional. If the export duties are to be increased it cannot fail to affect the trade, and a doubled revenue cannot be expected. In 1895 the duties on exports to foreign comitries ninountecl to 5,940,000 taels. If it be assurnecr that aii iiicrease ii1 the export duties would add 3,000,000 tarls to the revenue the estimate is, perhaps, too i::angnine. At most, then, China might get 7,000,000 t.lels more than at present. Probably in nob more than three or fonr of her best p1'ovinces the money now collected under the name of likin and embezzled by office hold0rs amounts to this sum. It is for foreign Powers to name the terms on which they are ,villing to grant China's request. From these Powers who only desire to look upon China as a country possessing enormous latent wealth awaiting development for the benefit of mankind the terms which self-interest suggests are also those that will prove a so1uce of profit to China herself. . lf the Chinese Government is sincere, and is not merely striving to obtain what, with its confused ideas of economic questions, may well appear toitto be a cheap advantage over foreign nations,we may fairlyreq_uire it to give evidence of good faith by showing it$elf willing to entertain proposals designed to attain the ends it professes to have in view, and if after we have indicated a course which ,rill not only enrich the State hut bring prosperity to the people, the Chinese Government still persists in preferring measures which inust be i].ljnrious to the nation at large, we may well refuse to be a. party to the suicidal net, and \\'ithhold our consent to any ri1odificatiori of the treaty. II<:>w dome.tic To what extent the domestic trade is strangled. we can tr11.de is 01ily surmise; ioreign merchants are not interested in inters_:r.ingled. provincial commerce, and we have, therefore, but little infor mation on the subject. Along the coast domestic trade has some chance of subsisting, for fortunately likin stations cannot be established in mid-ocean, and sea-going craft can only be taxed at the start and finish, but when commerce has to follow inland routes it is soon taxed out of existence. It would be an interesting experiment for some one to start in any direction. with {1quantity of merchandise, selli11g, as it became necessary, a

PAGE 63

CHllsA. -61 BOrtion to pay the taxes imposed .en Toute. Like water poured 011 sandy. soil, it would all be absorbed before goiug far . . : : To what. extent purely tlomestic trade is t.axed, 1irny. be Paeu~o inferred from the . following. Under the trn,nsit pass rules trnnal~ p~sses '!' ' • b t f l b d , I . . . . nt Chmkrnug. 1ore1gners, u ore1gners on y, mny uy pro nee rn t 1e rntenor for exportation to a foreign country, and pay one transit duty in commutation of all inland taxes. This transit duty is 2t per cent. ad valoren'l. As the inland taxes are much heaviE:r than this, Chinese traders in collusion with foreigners hit upon the idea of escaping the crushing inland taxation by bringing prodrice from the interior to a prJrt under a transit pass, as if it was intended or exportation; having reached the port the produce which had only paid 2 ! per cent. would be sold locally aud 1i.ot be exported at all. Or again, foreigners would obtain transit passes, bring clown produce from the interior tc, the treaty port, and there ship it to another treaty port for 5ala there. This was usiug transit passes for a purpose which the treaty did 11ot contemplate. To check such rnrilpractices the precaution is 1iow taken at Chinkiang of l'CCLniring the merchant to deposit a certain suin at the time that he applies for his transit pass. The amount i_s equal to six times the tra1:.sit duty, that is 15 per cent. of the value of the goods. H in course of time the merchandise is duly exported to a foreign country, one tranflit, clnty is retained and the balance is returned to the merchant. If the produce is sold locally, or is sent to another port, then the whole amount is retained. This mod~ of bringing produce from the interior to the port is now considered legitimate, and foreign mercliants are relieved of the stigma of applying for transit passes on false pretehce3. A considerable amount of trade in native produce is Xntivo done in this way, and the fact that these pseudo transit passes merch~ndiac are_ in demand proves that the inland taxes from the interior to pnyts 11 . "1Pned,. . . . . cen. n n. Clnnkiang must mount up to more than 15 per cent. due~. This gives Rome idea of the burden of taxation which Inter-prodomestic trade has to bear. The result must be that the surpl_us vincinl . of one clistJ:ict cannot st'tnd transportation to a distant market, aHCl exchangd~ ? 1 d. l D' l • . l' . comma 1t1es proc u'.:t10n IS _t ms 1scomagcc . rntn:ts wit un certa~n 11111ts restricted by must 111 a great measure be self-snpportmg, each producrng sum-e~ccs~ive cient for its wants and no more. The channels through tn:mtwn. vvhich remote districts. r:an most freely exchange each others' products are those that exist l1etween the treaty ports; and this relief to domestic traclc is an indirect result ol' om treaties with ()hina. If th\?, Chinese Government needs money the way to obtain it A plan to is clear. Restore to life 1 . he cloinestic trade now in a state of susregulute pencled animation, and nurture wit-h care the goose that lays the 1tn1iint~ 1 J TI . . 1 1 1 b I , . nxa ion. go neil eggs. . 1m rn not t 1C p ace to .e a orate a sc 1eme for increasing the 1eyr.nHe of China, but her. good faith may be put to the proof hy offering to her an arrangement something like the following: China's revenue from foreign trade is known exactly, and the revenue from likin ancl other forms of inland taxation may be ro~lghly e;f.imatecl. Foreign PowQ.J:s will consent

PAGE 64

,. 62 ClIINA. to double the impol't tariff, and l'evise the export duties, on cmidi tion that the number, position, and tariff of the lilcin stations shall be a m.atter of international arrangement, and that the vresent likin collectorate shall be replaced by a foreign administration on the model of the foreign maritime customs ; that the likin taxes shall be paid to an agent of the provincial government, as the maritime duties are now paid to a Chinese agent of the Imperial Government, the function of the foreign staff being as in the Imperial Maritime Customs, confined to examining merchan dise, checking the dutie'>, and protecting the revenue. As a basis serving for futnre ::idjustment, the revenue from import duties would be taken at double the present collection; and the revenue from likin at whatever estimate could be arrived at. In the future, as trade revived and the revenue improved, a gradual reduction in the import tariff and the likin tariff would be made until that tariff was arrived at that yielded the largest amount of revenue, when it would remain fixed. No pla.n to As long as provincial governments retain the power of open-:egulo.tc ing new tax stations, and placing them in the hands of corrupt 111Iancl fti 1 d b f WI . I ta.xation will o. cia s, our goo s w1 never e sa e. 1atever pronuses t 1c work if left to Chinese Government may now make, there is no reason for natirn believing that it has the will or the power to abide by its new executive. engagements more faithfully than by the old. Any talk about refunding illegal imposts is vain; before restitution can be demanded there must be proof, and proof will never be forthcom ing, for no Chinese will venture to bear witness against his own offieials. It is the uncertainty as well as the burden of taxation that acts in restriction of trade. Chinese merchants complain that they are unable to base any estimate on the published tariffs of the likin stations, for these are enforced in a very loose way. Two merchants in the same line of business may fare very differently, and the less favoured may find that his venture results in a loss. There is one step which Her Majesty's Government can take in furtherance of trade. There appears to be wanting a link between the consular service and our merchants and manufacturers, which could be supplied by the appointment in China of an officer ,Yho could devote his sole attention to the development of trade. Consuls too '\Vhile in other countries a consul's attention is devoted chiefly muchoccllpiccl to commercial questions, and in the discharge of his duties in !? dette connection with these, he is assisted by the systematic way iu c~1:m~rciul which foreign governments and commercial bodies prepare statistics 1n11tters. aucl publish information; in China the ordinary duties of his oliice leave him but little time to devote to commercial matters in the abstract, and in the investigation of these he meets with dilficulties out of all proportion to the results attained. At the more important places, political matters, judicial cases, claims on behalf of his countrymen against Chinese snujects or officials, cases of nssa11lt or other form of outrage, questions

PAGE 65

CHINA. 63 connected with shipping, and many other affairs wbich could only occur in an oriental country, occupy a consul's time to the exclusion of other matters which are nevertheless deserving of attention. The time, labour, aml persistence that must be expended in disposing of any matter involving discussion and negotiation with Chinese oflicials, would seem incredible to anyone who has not had the personal experience, and the bulk of a consul's work is of this nature. Delay and evasion are the Chinese official's weapons, and whatever the question may be, a consul must choose whetlwr he will write reams, and spend hours in arguing in a strange tongue, or whether he shall confess himself tired out and retire from the contest. Under such conditions a consul cannot do justice to the com mercial interests of his country, he must attend to what is pressing and in!mediately before him, and leave alone what can wait. He can at best but devote intermittent attention to subjects of vital importance to our British industries. The remedy for this deficiency in our consular system in China Sugg_estccl lies in the appointment of a specially commissioned officer to apfpomtmen~ 1 t 1 1 -nrl l b h l , . o cornmercia s uc y commercrn quest1011s. n iatever rn1g 1t e t e c es1gnat1011 secretary. of the officer-" commercial secretary," or "attache," or "com-missioner "-the purpose of his appointment would be to combine in onn man specially qualified for the work the duties which are now but inadequately performed by 20 consuls all working independently of each other. Such a commercial secretary would still be largely dependent on the assistance of Her Majesty's consuls at the different ports, but he could also assist them by suggesting the sort of con:,mercial information that is desirable, and indicating the-direction in which their s~rvices can best be utilised. '.!'he scope of his duties may be inferred from the '.l'~e sco_pe of following remarks :-!us duties. 1. Chambers of commerce in England occasionally make suggestions to the Secretary of State for Foreign Affairs regarding the assistance which might be rendered. by Her Majesty's consuls abroad, and describe in detail the services they are in need of. It would be for the commercial secretary to consider to what extent in China the wishes of the chamber of commerce can be satisfied, and t.o frame directions for such of the ports as might come within the sphere of the inquiries set on foot. 2. At all the ports consuls receive many trade circulars and letters referring to manufactures of all kinds. Both in the despatching and the receiving of these, much time and money is wasted. As frequently happens, a consul has to answer that there is no opening for a business of the kind referred to. He can but speak with regard to his own district. Could all this correspondence be centralised in one office, the commercial secretary, having a bird's-eye view of the conditions of trade in all China, conld give a more complete.answer. Through his agency, also, firms in England desiring to be put in communi cation with houses in China could be directed in the right quarter, (2297)

PAGE 66

64 CHINA. and similarly Chinese business men could be put m touch with firms in England. 3. Of recent years many new products have been exported from China. There can be little doubt that there are still many products untouched and available, and the collection of samples of such products, with reports ther'3on, would be one of the duties of the commercial commissioner. 4. Some of our British products are being driven out by imports from other countries, or by articles of native manufacture. This requires careful watching. Samples and all possible infor mation regarding price, native taste, mode of packing, &c., should be sent to England, and this can only be done from some central oli.ce like that of a commercial secretary. 5. An important part of this officer's duty would be to obtain early information about projected public works, so that our people could be early in the field tu secure contracts. Much business is lost beP-ause local firms are not prepared to give estimates off-hand, or to supply all the information a Chinese official or company director requires of them. 6. He would specially study the conditions and requirements of trade in China; be on the look out for probable openings for British trade ; report on the growth of manufactures, and the imports of raw materials; and when necessary, suggest that an expert should be sent out by commercial associations in England to study any particular question. 7. In the compilation 0f commercial reports there is room for improvement. What is wanted is a comprehensive review of the trade and commerce of the country arranged under subjects. At present, a manufacturer or merchant in England wishing to know to what extent his goods are consumed, or are likely to find a market in China, has to refer to some 20 trade reports to arrive at the information he requires. In trade reports as they are now made up there is a want of uniformity in the collection of returns, weights and rne::i,sures are differently stated, and each consul in converting silver values into sterling fixes his own average rate of exchange. . 8. At each port some change in the course of trade or in the requirements of the people may be gradually taking place, but passes unnoticed because of not much local importance. In the aggregate throughout China the change may be of great signifi cance, and a commercial secretary having all China within his purview could study the cause and effect. 9. Some of our manufacturing centres in England ask that samples of goods be sent home, together with every information bearing upon tbe origin, price, import duties, quantities, &c. Such work cannot be properly performed by 20 consuls in different parts of China, this would merely result in useless multiplication and repetition. In the hands of a commercial secretary very complete information on all points desired could be supplied. 10. Much importance is attached to expedition in presenting reports. With a commercial secretary at Shanghai in touch with

PAGE 67

CHINA. 65 the general chamber of commerce and the statistical department of the r,ustom-house considerable delay which is now inevitable would be avoided. 11. A man in an official position in China can, without doubt, have acces:; to officials more easily than can a merchant, and as he is not pushing his own private business, he is listened to with less distrust. A commercial commissioner who gained the con fidence of the Chinese might be occasionally appealed to for advice, and if he could not achieve any more direct success, he might at least put them on their guard when about to fall into a trap. Tn the way of personally introducing agents from firms in Euland, or putting Chinese officials in communication with trustworthy firms he could do good service. The expression " Chinese official" is so often used because in China almost every large work or enterprise is under official direction. 12. The commissioner ought to be in direct communication with the chambers of conunerce in England so that they could have ready means of obtaining any information they desire. 13. Being on the staff of Her Majesty's Minister in China, such a commercial secretary could give valuable advice as to the effect of any change in the tariff, of fiscal innovations in the provinces, of opening new trade routes, and by means of well conceived memoranda place Her Majesty's Minister in a position to point out to the Chinese Government the advantage or the reverse of any proposed line of policy. What merchants and manufacturers can do to help themselves What is a question I approach with some diffidence for not only do men merchants b . I l . b . b . ] d a,ncl m11nureseni emg taug 1t t ien own usmess, ut to suggest any met 10 foeturers ca,n by which they may do more than at present may seem to presume clo to help a waut of energy, enterprise, and intelligence on their part. To themselves. merchants now in China nothing I could say would be of any value ; they have established a business on certain lines, and it is not now profitable for them to change their ways. They are satisfied that all that their own efforts can accomplish is now being done, and that they can do no more until new markets are created for them, existing obstructions are removed, and generally until China's material resources become more developed. And yet is it to be said that even with China in her present Further backwarcl state, our commerce has reached its utmost possible development limit? 1 think i:J.one will admit this. We have not yet bought 0t~::t on from the Chinaman all that we can profitably buy nor sold to him ~:ieign all that we can profitably sell, but the what and the where are enterprise. discovP.ries which we must make ourselves. Wlrnn the discovery has been made the Chinaman will do his utmost to reap the benefit, but he will not spend one dollar or move one yard to further the preliminary investigation. The great questions are:-1. What does China want that we can supply? 2. Wlrn,t do we make that China would buy if she saw it ? 3. What does China produce that we can use?

PAGE 68

66 CHINA. 4. How can we see and procure it ? No indncc-This is information to obtain which the local foreign merchants rncnt to cannot be expected to set on foot a systematic inquiry. The foreign research would take time and cost money, and the local merchant merclHmts in Ohipn, to cannot feel assured that the resulting profits would be his. exploit new There is doubtless much valuable information to be gained in gIIronnd. this direction; the question is at whose expense shall it be ome munub . 11 If' . . h 1 . . t b . l f b tl factnrers mn't, o tamec . it 1s wurt 1av1ng 1t mus e pa1c or y 1ose inifote who in the end will be chief gainers, and these are our English resc01rch into manufacturers. The prosecution of the inquiry calls for co-operaChinn,'s needs n,ud tion on a broad basis, for if the results are satisfactory, it is not resources. one or two manufacturers but a whole i;1dustry that will profit. Lit.tle is known of inland markets. Nothing to hope from enterprise of Chinese merchants. I believe that there are markets but ill supplied with our goods, whither they .have drifted by chance as it were, and where they are now offered for sale at prices far exceeding what they could be laid down for if a regular trade was established. Foreign goods of all kinds reach the furthest places accessible to steamers easily enough, dealers from an inland city come to a port to lay in their regular supplies and as an experiment take away a few novelties. Dealers still more remote coming to this inland city on other business by chance, catch sight of the new article and take a small quantity with them. At eaeh remove there is a great enhancement of the price, and in distant places it becomes prohibitive. Of markets in the interior, even those not very remote, we know next to nothing, the few travellers who visit the interior of Cltina. are not men who give their attention to details of trade, tliey have come for some special purpose and probably are not men versed in business matters. Our missionaries are the nrnn who are making us acquainted with what is passing in the interior of China, but naturally they have neither time, inclination, nor the aptitude to make trade questions a special study. Still in talking over such matters with our missionaries, and discussing with them the price of foreign goods in the interior, some one has sometimes remarked that if he was a merchant and not a missionary in such and such a city he would rapidly make a fortune. I do not believe he would, for as soon as he had established a trade, the Chinese ,voulcl come in anJ undersell him ; but if these potential markets exist they will remain potential until foreign enterprise has given them a start, aud the enterprise must come from that quarter that has most to gain from the result. The chief obstacle to the development of trade in China is the want of enterprise in a people of stagnant ideas. They will not advance towards foreigners to seek their trade until foreigners have pressed it on them. They will not, left to themselves, develop new wants like progressive nations; foreigners must create the wants they wish to supply, by offering their goods and introducing tltem to their customers. Commerce requires to be energetically pu::;lted to be successful, and this is particularly true of the trade in foreign manufactures in China. The spirit of enterprise is all on the side of foreigners, and the impetus of every forward movement in commerce must spring from them.

PAGE 69

CHINA. 67 In Shanghai several firms have sample-rooms, where are rlisShowrooms nl; played almost every foreign article that Uhinese can require. I Shanghai. have been astonished to learn that there was a demand for some uf the articles exhibited there ; I am sure that if a firm in En!.!land had written to enquire whether there was an opening for ~such articles, I should have said there was no chance for them whatever. But the sight of these things has creatr.tl a demand, and new articles are being int , rotlncecl in this way. Shanghai is well attended to now ; but the sa.me thing remains to be clone in many other parts of China, whiuh so far have only had offered to them what the conservative Uhinese trader has introduced. The large Scotch sewing-cotton manufacturers are furnishing Pushing the an example which should be more extensively followed. They sale of sewing have formed a trade association, and in China are making their cotton. cottons known throughout the empire. Their traveller is an Englishman, who speaks Chinese well; he travels all over the country to the principal cities introducing his cottons; where it is worth while he appoints a native agent, who receives a salary and a commission on sales ; and in all cases he gives full information to the shop people about prices, the best way to obtain new supplies, &c. ln China once a mark is well established and keeps up it'3 reputation, it is very difficult to supplant it. In the same way the sale of sugar made in the Hong-Kong refineries is being pushed. Chinese agents are appointed where the prospects are favourable. The question of profit is for the time neglected, the main object being to introduce and create a taste for the refined sugar. In these two instances the trade is in a few hands, and when the demand has been created, there is little danger of others securing the profits. Such direct results cannot be expected in every line of business. What I am recommending is co-operation on a broader basis, having as its object an extension of business, which will bring profit to a whole trade or industry. The experiment could be limited to certain districts or certain classes of goods, and the results would decide whether the method should be extended in other directions. So much as regards goods which are already known in the Chinese European trade ; but there must still Le a good many things in us e in China imitation of which we could make for them better than they can themselves. Ch!n 1 ese I . l t d b b . artic es. t 1s not many years ago t ia.t na 1ve-ma e rass asms were seen in every house and on every barber's stall; they are now being replaced by block-tin basins made in Europe, Quite recently the brass saucer that holds the Chinese teacup has begun to give way to a mettLl saucer made in Germany. English-made galoshes, patterned on the Chinese shoe, now find a large sale. These are the results of intelligent observation, for the exercise of which in a popul0us country like China there is P.lways ample scope. The point is, how to proceed on the lines indicated above . The Required_: a first step is to form an association where there is community of co-op_ert~tivef . l l f d b' b. cl associa1ono mterests, so t rnt t 1e necessary un s may e o tame . manu-Qualified men should visit the most important cities of China, focturers.

PAGE 70

China should be systemati cally exploited. 68 CHINA. and form some idea of what will meet with a sale; and having studied the ground, these places should be revisited with samples of everything likely to sell. A show-room should be opened for a few days at each place, and the local shopkeepers should be invited to visit the exhibition. Printed advertisements should be dis tributed, giving full information how to obtain supplies from the nearest port at which existing firms should be appointed as agents. Samples should be freely given away or sold at a sacrifice; and where there appeared to be a prospect of future bnfiness, arrangements should be made with one or more shops to receive goods for sale on commission. The object which is to be constantly kept in view being to introduce the goods in that locality even at a loss. Enlist the Reference has already been made to the presence of missionaries assistanne of in the interior. If we could enlist the co-operation of these men, inland mi.sional'iee. they might, once rightly directed, render much service to trade, without in any way detracting from their usefulness as missionaries, or endangering the success of their spiritual work. To the sceptical Chinese, the interest mai1ifested by a missionary in business affairs would go far towards dispelling the suspicions which now attach to the presence in their midst of men whose motives they are unable to appreciate, and therefore condemn as unholy. Both to the commercial association I am proposing, and to the commercial secretary, whose appointment I haYe suggested, the establishment of relations with the missionaries inland would be of value. They are, constantly coming in contact with Chinese traders, and men of consideration in their own localities, and they must often obtain useful information which now is wasted, but which might be turned to good purpose if it could be communi cated in the right quarter. Continental While on the subject of what British rnanufactt:.rers may do to m11nu-pm;h business, attention may be called to the greater efforts which facturersdmore continental manufacturers systematically make to meet Chinese accommo o.t. f' d' f c l inp; than reqmrements rn matters o taste, preJU ice, or ancy. ontmenta British. firms are more ready to make a present sacritice with a view to developing a business. Our ffWn people before consenting to change their sty le or methods wish to be assured large orders, and are unwilling to touch anything in a small way. My attention was directed to this on several occasions, and instances were cited to me of orders, which had been refused in England, being willingly accepted in Germany. More often than not it was not a case where cheapness of production came into the calculation, some change in the manner of packing or in the quality of the article was required, and the German proved himself more accom modating than the British manufacturer. It may well be that our people know their affairs best, and that the particular manu facturer concerned had more profitable business to attend to, but from small beginnings a large trade may grow, and this readiness on the part of the Germans to put themselves out to please is telling in their favour. .A knowledge of Chinese In another direction we have something to learn from German

PAGE 71

.. ..... .... .... (tJZS.S/97. /X.,!l'I) .... . . .... KANSU ...... . ...... ........ . .. :::: "-I {JJ __ . . :, ~ .... .. .... "'{.. 0 'Ii _,.,.; 1 -an., 1z '""'i -._HONAN . .... . .... . : .. ::. ..... :0 ;y,,.;_;, .. .. .. Lao Ho !t'ou '1' . . Knei F,,.. . SSU-CHUAN ___..._--. ,er ... Clwngking o ~\> {:-1,f • 'yc\:IV;)' . . .... . . : YUNNAN . .: : .... . TONG ING .. ; '?' ~;. "'.-. 0 Haiplwng Hoilww ....... Tak.ow . .. . .. < (! SKETCH MAP OF CHINA. Showing position of places mentioned in this report. ~gclww -=======~~~ :J.;rri.:;
PAGE 72

CHINA. 69 firms. In almost every G,3rman mercantile house there is at least Ja,nguage one German partne:c or clerk who speaks Chinese-this is seldom necessary. found in English houses. vVe seem to rely on Chinese learnino our language, which they do when it is to their own advantag; but there must occasionally be times when it is a distinct clisRdvantage to have to carry on negotiations through an interpreter whose good faith is not above suspicion. I shall conclude these remarks by transcribiug some notes Some . made for me by an intelligent and practical merchant, who has suggest:01115 by 1 l b " a, practwa muc 1 experience 111 "pus ung usmess. merchant. "Home agents are too frequently without actual perso1rnl knowledge of places they ship to. Consequently extension work can only be clone by the mau abroad. The home man buys to order and sees to financing and shipping, the man abroad has to create the demand. Knowledge of what can be got at home is absolutely a sine qna non, without it he can only take but not make orders. "More attention should be paid to the qualifications of men who are to manage a practical part of business, i.e. men who are to sell goods abroad. A wide business experience is necessary for abroad ; one has to know something of everything. There is no more valuable experience tlrn,n that of the traveller who hm; ' worked new ground' successfully at home ; no mere collector of orders, but a maker of business. Mercantile houses should follow tlie usual German rne~hoGl of giving a commission on profits or sales to salesman and manager in addition to salary. " Manufacturers in sending abroad should be content to let their representatives work up h1.1siness and pass it through merchant houses, otherwise the merchants will push other goods, and purposely avoid those of firms who work direct. If a merchant introduces and works up a trade for certain goods his interest should be protected by giving him the sole sale of a special brand, and selling to other firms only different brands, thus avoiding danger of absolute monopoly while giving the worker his reward. Otherwise one firm has all the work and drudgery, and another later reaps the reward. "Merchants should in their own interest insist on their managers and salesmen travelling occasionally in the country around the port, and thus get in touch with needs and ascertain what is likely to sell. But above all they should send such men home every four or five years to visit manufacturing centres and warehouses, see new lines, choose their own samples and get in touch with home markaets again. This can only be clone by the man who has to sell the goods and no one else. "Manufacturers should supply sample ranges of goods, if expensive, on the principle of so much business, such a value of new samples up to a point, say 200l. worth of samples sent on sale or return, but if business follows to the extent of 4,000l., the samples to become the merchant's property. Samples should be nrnrked and numbered, and accompanied by proper details giving . lowest cost, mode of packing, discounts, size and weight of cases,

PAGE 73

70 CHINA. :'30 that laying down cost can be calculated. Catalogues should be illustrated plainly and well, all details and prices being given with the item and in the same place, and posted direct to merchants not to London agents." LONDON: Printed or Her Majesty's Stationery Office, BY HARRISON .A.ND SONS, Printers in Ordinary to Her M11jesty. (1250 5 I 97-H & s 2297)