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These judges will be appointed and will be dismissable by
her, and their jurisdiction will be extended to cases between
foreigners of one or more nationalities and to mixed cases in
which the defendant is a foreigner, although the plaintiff is
Chinese, but it will not be extended to mixed cases in which
the defendant is Chinese. The employment of foreign judges
by China in her new courts will not only give foreigners
an adequate guarantee against any possible injustice from in-
experienced Chinese judges, but will also give the Chinese in
the judicial service a chance to learn more of the European
way of administering justice. Courts will then be a training
ground for Chinese judges.

In case any one of these experiments so far discussed is
adopted, it should be tried in places to be designated by the
Chinese Government in consultation with foreign diplo-
matists in Peking. As soon as new courts and prisons, with
well-trained judges and jailers, are opened in a district which
has so far not been provided with them, the experiment
should be extended to that locality. This procedure of
gradual extension is not new to China. It was tried in the

iQo Exterritoriality ; Concessions and Settlements

case of opium suppression, in which Great Britain agreed
to stop the import of Indian opium into a province as soon
as it was proved that it had stopped its own cultivation.

If the difference between China and the West in the
fundamental principles of law and its administration has
resulted in the immunity of foreigners from her jurisdiction,
the difference between them in the fundamental ideals of
local government has made it necessary to delimit areas in
which foreigners are to trade and reside under their own
municipal Government. These areas are of two kinds, the
Concessions and the Settlements. The difference between
the two is that the former is a piece of ground leased by
China to a foreign Government and sub-let to foreign
merchants ; and the latter is an area within which merchants
may lease land directly from Chinese owners. In the former,
the leases of all lots must be deposited in the Consulate of
the lessee Power, and all transfers of lots or portions of lots
under the said lease must be registered at the said Con-
sulate ; but in the latter the purchase of land will be
registered at the Consulate where the deeds are registered,
and also at that of the vendor or assignee. Further, in
a Settlement, if the land rented is the property of a Chinese
subject, his agreement or deed of sale must be sealed by the
local Chinese authority, before thepurchase money can be paid.
Over Concessions as well as over Settlements, China retains
her right of dominion. She remains the Lord of the Soil,
and collects land tax from owners, feuers, and lessees. She
exercises as much jurisdiction over her own subjects within
these areas as without, the only difference being that Chinese
subjects within them cannot be arrested without a previous
notification to the Consul or Consuls concerned. In time
of war between her and another State, she could convert

Exterritoriality ; Concessions and Settlements 19 1

them into military zones and make them liable to attack.^
On the other hand, if the State to which they are granted
is at war with a third State, they are exempted from any
military operation so long as China is not a party to it.
It is expressly stated in the Supplementary convention to
the Treaty of 1858 with the United States that ' no such
concession or grant shall be construed to give any power or
party which may be at war with, or hostile to, the United
States the right to attack the citizens of the United States
or their property within the said land or waters ' ; and
' that the United States, for themselves, hereby agree to
abstain from offensively attacking the citizens or subjects of
any power or party, or their property, with which they
may be at war on such tract of land or waters '.

The area of a Concession or Settlement is not necessarily
the same as that of a treaty port. In some ports like Canton
and Chinkiang, there is only one Concession, and in others
like Tientsin and Hankow, there are many. In either case,
it is open to controversy, and in fact undecided, whether
the area of the port. is equal to or larger than the area
leased to foreigners. The Chinese Government maintains
that the area of a treaty port does not extend beyond the
limits of a Concession or Settlement or of all the Concessions
or Settlements in it ; whereas the foreign Powers insist that
it covers the whole native city in which the Concessions or
Settlements are included, together with all the highways
leading to it. Evidently the attitude of the foreign Govern-
ments is dictated by the fact that an extension of the area
of a treaty port would enlarge the area in which goods are
exempted from inland taxation.

^ During the Chino- Japanese War of 1894 Shanghai was made
a temporary neutral zone by special arrangement.

192 Exterritoriality ; Concessions and Settlements

The Municipal Council in a Concession or Settlement is
elected by lessees and ratepayers and is entrusted with the
functions of local government. It makes and enforces by-
laws, maintains police, imposes taxes and rates, issues licences,
opens and maintains roads, and establishes various public
institutions. In a Concession leased to a certain Power, the
Council will largely consist of its own subjects, but in the
International Settlement of Shanghai, the Municipal Council
is in the hands of subjects of all the States whose commercial
interests are dominant. The public meetings held to elect
Councils in different Concessions are summoned by the
Consuls of the lessee States concerned, but in the inter-
national Settlement (of Shanghai), Consuls of different States
form a court, which is responsible for the summoning of
meetings of ratepayers and is also the channel of communica-
tion between the Council and the Chinese authorities. The
paradox of these Councils is that the bulk of ratepayers,
who are always Chinese, are not admitted to them or even
allowed to attend public meetings of ratepayers. It is pro-
vided that a few Chinese delegates elected by Chinese com-
mercial institutions should be consulted by the Municipal
Council, on questions affecting Chinese residents, but they
have no seat in the Council room, and the consultation does
not always take place even when it is needed by the nature
of the case. It was not anticipated that such disabilities
would be imposed on the Chinese when the leases of Con-
cessions was first granted.

Concessions and Settlements will be abolished when the
local government of China has been improved to such
a standard of efficiency as to be able to afford foreigners
the security and comfort which they enjoy in other modern
States. They will then be incorporated in the district

Exterritoriality ; Concessions and Settlements 193

Governments, and foreigners will be allowed to travel and
reside in any district of the country under the protection of
Chinese magistrates. It will take some time for China to
provide herself with all the requisites of local government,
such as a police force and sanitary appliances, though there
is little doubt that she will eventually execute these reforms
with perfection.

It will be well to consider some changes which should be
immediately introduced into the status and government of
Concessions and Settlements. First, it should be observed
that as the delimitation of a Concession or Settlement
confers on the Power concerned no territorial aggrandize-
ment, there is no reason why different Powers should
establish Concessions of their own in the same treaty port
so as to show their rivalry to each other. The ' appropriation
of any land or concessions to distinct nationalities is a source
of trouble and a grave disadvantage in the end to all, raising
questions of diverse jurisdiction for municipal purposes and
of distinct bodies of police, and tending to produce conflicts
of jurisdiction, besides perpetuating a mischievous error that
the interests of different nations in (Japan) are distinct and
may be promoted at each other's expense, whereas, in truth,
they are identical and are best promoted by union and
common action '. On the initiation of Sir R. Alcock, Con-
cessions held by different Powers in Japanese treaty ports
were all amalgamated into a common concern before their
final abolition in 1898, and it is now certainly time for the
Powers to accord to China the same favourable treatment
as they did to Japan. Moreover, government on the Euro-
pean model being the only reason for the maintenance of
these areas, it is useless to perpetuate the distinction between
a Concession and a Settlement, and all the Concessions in

1832.13 Q

194 Exterritoriality ; Concessions and Settlements

China should be reduced to Settlements with their municipal
government in the hands of ratepayers and leaseholders of
all nationalities, including the Chinese. To prevent the
outvoting of foreigners, it may be well to provide that the
number of Chinese members on the Municipal Council
should not constitute a majority.

Secondly, to afford Chinese officials more opportunities
of understanding Western principles and methods of local
government, and thus to expedite their reforms, the
magistrate of the district in which a Settlement is situated
should be made an ex officio member of the Council and be
invited to deliberate and to vote on all measures. The
chairman of the District Council in some towns where local
self-government has been introduced should also be invited
to attend the meetings of the Municipal Council, though
expediency may require a denial to him of the right of
voting. These steps, if taken, will at once rectify the present
anomaly of refusing the Chinese any representation on the
Municipal Council, and impress on them the efficiency and
honesty with which foreigners administer their local govern-
ment, qualities which are required of them before they can
expect an incorporation of Settlements into Chinese institu-
tions. They will at the same time promote the goodwill
and mutual understanding between the Chinese and the
foreign Communities in a treaty port.

Tariff and Tariff Administration

So long as China was commercially isolated from the rest
of the world, there were no imports or exports on which
she could impose a tariff. When Canton was opened to
Portuguese trade early in the seventeenth century, she was
paid an annual sum of 24,000 taels by the Portuguese in
lieu of any imposts. The British East India Company, who
had established regular commercial intercourse with the
Chinese at the beginning of the eighteenth century, were
less favourably treated than their predecessors. They were
subject to heavy taxes imposed by the Viceroy of Canton
on their ships and cargoes, and they were even more annoyed
by the vexatious way in which taxes were levied and collected
than by their excessive rates.

In the treaty of 1842, which closed the Opium War, it
was stated that China would establish at all open ports
a regular and fair tariff to be ' publicly notified and pro-
mulgated for general information '. It was then agreed that
the tariff should impose a duty of 5 per cent, ad valore7?i on
all imports and exports, and that the system of collection
should be uniform in all the ports. To the treaty of 1858
-with Great Britain is annexed a tariff schedule which is
revisable every ten years on the demand of either party and
in accordance with the current market prices. The first
revision, which took place in 1902, chose the average price
of different articles in the years 1897-99 as the basis of

o 2

196 Tariff and Tariff Administration

valuation, and the second revision, which did not occur till
1918, chose that in the years 1912-18.

It should be observed that the revision of the schedule
is a quite different thing from the revision of the tariff.
The tariff of China is fixed for an indefinite period and is
subject to no alteration so long as the treaty of 1858 remains
in force. In any Western State that adopts a Conventional
tariff the treaty fixing the rates to be imposed on import
from another country is only valid for a definite number of
years and terminable on due notice given by either side, but
China is refused the right to alter her tariff so long as she has
not the sanction of Great Britain. Moreover, the tariff, which
was primarily enacted in favour of British trade, has been
made binding on all the treaty States entitled to the most-
favoured-nation treatment in China, and the consequence is
that it cannot be altered without the unanimous consent
of thirteen States. The difference in temperament, in policy,
and in interest has so far made it impossible for them to
arrive at any unanimous conclusion, and China can do
nothing but content herself with the fulfilment of her treaty
obligations and with the loss of her fiscal independence.

In the Conventional tariff of most other States there are
maximum and minimum rates for every taxable article, and
some articles imported from a country that has received
"certain advantages and privileges are taxed at the minimum
rate or at a rate lower than the maximum ; the same rate
must then be imposed on goods of the same description
imported from countries entitled to the most-favoured-
nation treatment. In the tariff of China there is only one
uniform rate for all imports, and that rate is the maximum.
The maximum rate (5 per cent.) is so absurdly low that
a reduction of it in favour of another State offers nothing

Tarijf and Tariff Administration 197

attractive enough to make it reduce its imposts on com-
modities of Chinese origin. In fact, when the tariff agree-
ment of 1858 was concluded, there was no desire to give
China anything by which she could bargain with other
States. Stripped of all the characteristics of a Conventional
tariff, it can only be looked upon as a tariff imposed to
produce revenue for the Chinese Government, and yet the
rate is so low that its yield is much less than it would be
if only a few articles were taxed which would produce the
largest amount of revenue at a minimum cost of collection,
the bulk of foreign goods being imported duty-free.

An even greater anomaly is her duty on exports. While
it is true that she is bound by no treaty to tax exports, she
is nevertheless compelled to do it, and do it at the maximum
rate permitted by the treaty (5 per cent.), because she is
faced with the urgent necessity of increasing her immediate
revenue irrespective of the effects the taxation may produce
on the foreign trade of the country or the productive
capacity of the people. In other States there are instances
of taxing exports for the sake of preventing them from
leaving the country of production, but no State has ever
levied a uniform rate on all its exports as China does at
present. Her policy is indeed short-sighted, because the
revenue from export duties is so small that it does not balance
the loss to the nation suffered from the consequent impedi-
ment to its export trade. It is suggested that the duty is
defensible, because the export trade is mainly in the hands
of foreigners who have to pay it, but it is obvious that
the burden of taxation will always be shifted to the Chinese

In the interior of China, as distinguished from treaty
ports to which foreigners must confine themselves, foreign

igS Tariff and Tariff Administration

imports or native produce for export are exempted from
inland taxation, which is imposed on all commodities for
home consumption, on the payment of a transit duty at
the half-tariff rate. ' It is at the option of the British or
other foreign merchant to clear foreign imports to an inland
market, or native produce to a port of shipment, either by
payment of the different charges demanded by the inland
Custom Houses, or by one payment of a half-tariff duty',
but in practice, he always chooses the latter alternative so
as to get his goods exempted from further taxation, irre-
spective of the distance they may travel. It should be noted
that in the interior are included all towns, districts, and
villages not opened to foreign trade, and the distance from
the sea-coast or a treaty port makes no difference to their
status. On one point only China and other States have
been in frequent controversy ; the former maintains that
a transit pass only exempts goods from inland duty in a single
journey from a port to a place in the interior, or vice versa,
and that the further transport from one spot in the interior
to another subjects them to all internal charges ; whereas
the latter contend that it exempts the goods at all times,
no matter how much they may be conveyed between
different inland trading posts.

The inland charges are usually distinguished into li-kin
and other dues, and are leviable on all goods in transit at
a rate that varies at various times and in different localities.
They not only hinder the circulation of commodities, but
with the exemption granted to foreigners they actually put
a premium on their goods and encourage foreign competition
against native merchants. A consignment of native produce
not destined for export has to pay all the taxes and dues
when it passes through li-kin barriers and inland custom

Tariff and Tariff^ Administration 199

stations, which exist in almost every district (Hsien) in
China ; and the total sum paid may amount to as much
as 50 per cent., in contrast to 2^ per cent, for foreign goods.
The consequence is that in the interior of China, many
merchants export their produce intended for home con-
sumption to the nearest foreign port and then ship it back
to a treaty port and convey it to its destination as if it were
of foreign origin. The aggregate of the duties payable in
this transaction is only 15 per cent, (outward transit duty
2|- per cent., export duty 5 per cent., import duty 5 per
cent., and inward transit duty 2^ per cent.), and the differ-
ence between 15 per cent, and 50 per cent, would give the
merchant a handsome surplus after the deduction of the cost
of transport. The sugar produced in Fukien for the con-
sumption of Canton, or coal from Shantung intended for
Peking, is often first shipped to Hong Kong or Korea and
then imported into China as foreign commodities in ordtr
to evade inland taxes.

In view of these evasions and other objections, China
agreed with Great Britain, Japan, and the United States
in 1902-3 that she would abolish li-kin and other inland
dues on the condition that she was allowed to impose on
imports a surtax of one and a half times the tariff duty and
on exports a surtax of half the tariff rate. This new agree-
ment, though it was to come into force on January i, 1904,
has so far been prevented from being put into operation,
because it has not been possible to obtain the unanimous
consent of thirteen states to it вАФ a consent that is necessary
to its enforcement according to the terms of the treaties.
China, on her part, has also failed to abolish li-kin and
other internal taxes, owing to political disturbances and
to the inability of her Central Government to control

200 Tariff and Tariff Administration

provincial authorities, to whom these taxes are the principal
sources of revenue.
= In the coastal trade between the different treaty ports
foreigners are privileged to take part. If the merchandise
in transitu consists of imports from a foreign country, it is
exempted from li-kin and all other charges, except the
import duty paid at its port of entry. If, on the other
hand, it is made up of Chinese produce purchased by a
foreign subject at a treaty port, it is regarded as an export
and has to pay an export duty, but no other charges. On
arriving at its port of destination, it pays a coastal-trade
duty at the half-tariff rate. Should the produce be
re-exported to a third port within twelve months after its
landing, the coastal-trade duty paid on landing will be
refunded, and a new coastal-trade duty will be paid at the
third port. Produce brought from the interior to a port
for coastal trade will pay transit duty in addition to export
and coastal-trade duties.

In other countries the coastal-trade is reserved for their
own citizens and not opened to foreigners. China only
allows foreigners to enjoy this privilege because her own
subjects do not possess a sufficient number of ships to carry
on their coastal trade unaided. That it cannot be enjoyed
by foreigners much longer is hinted at in the Mexican
treaty of 1907, in which it is said that ' this concession (of
letting merchant ships of either contracting party frequent
the ports of another) does not extend to the coasting trade,
granted only to the national vessels in the territory of each
of the contracting parties ; but that if one of them should
permit it ... to any other nation, the other party shall
have the right to claim the same concession or favour for
its citizens . . . provided the said contracting party is willing

Tariff and Tariff Administration 201

on its part to grant reciprocity in all its claims on this

To resume what has been so far said in the way of making
suggestions to improve the existing tariff arrangements, it
should be emphatically stated that all the existing Commer-
cial treaties should be abrogated and that China should
be restored to her fiscal independence. To protect the
interests of foreigners, a Conventional tariff equitable to
both parties should be framed, and that tariff should be made
valid only for a number of years, and subject to its renun-
ciation either by China or by the other contracting party.
The only argument that has been advanced in favour of the
maintenance of the existing tariff is that, as the Customs
receipts have been mortgaged for indemnities and loans,
an alteration of it might produce a yield less than that
produced at the present time, and that the diminution
would endanger the security of foreign investors. But it
could be easily arranged that, while China is allowed to fix
her own tariff, she should give a guarantee that it will not
be so altered as to cause its total yield to fall below the
quota required to pay the principal and interest of the
debts and loans mortgaged on the Custom receipts.

To avoid the disadvantages of a uniform rate for all
imports mentioned above, it would be wise for the Govern-
ment of China not to grant the most-favoured-nation
treatment to many States. At present, when the industry
and commerce of foreigners in China are more developed
than those of the Chinese in other countries, the reciprocal
most-favoured-nation treatment will always bring more
advantages to foreigners than to the Chinese. This treat-
ment should only be accorded as a return for some privileges
or immunities granted by other countries in favour of the

202 Tariff and Tariff Administration

Chinese commodities exported to them and should on no
account be granted without a consideration. Moreover, it
should be made clear in all the treaties between China and
other Powers that this treatment is reciprocal, as it is at
present uncertain whether the Chinese who reside, trade,
or have commercial interests in the countries entitled to
the most-favoured-nation treatment in China, are accorded
the same treatment. In her treaties with the United
States, Japan, Austria, Brazil, Mexico, and Peru, it is stated
that the most-favoured-nation treatment shall be reciprocal,
but in those with other states, including Great Britain and
France, excepting their colonies in Burma and Annam, it
is not provided whether this shall be the case. Although they
have not, so far, discriminated against the Chinese, they
could do so without violating any treaty obligation.

Having confined the most-favoured-nation treatment to as
few States as possible, China should recast her import tariff
and substitute for the uniform tariff of 5 per cent, one
varying in rates for different articles.^ The luxuries imported
should be subject to high duties and the necessaries to
low ; raw materials for manufacture, and the machinery
required for theindustrial development of the country, should
be imported duty-free. The States which feel aggrieved
by the high duties imposed on some of their goods should
be compensated by a reduction of rates on other goods
which they also export to China in large quantities. As
an instance, France, though highly taxed on her wines,
may be accorded a specially low tariff for her finished silk

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Online LibrarySih-Gung ChengModern China, a political study → online text (page 15 of 28)