United States. Bureau of Foreign and Domestic Comm.

Commercial handbook of China .. online

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selves.

In both crises — for loans or overdrafts granted on shares or
similar security, or on goods in general — ^the margin has to be kept
up by the firm. The bank reserves, therefore, the right to demand
a repayment of part of the loan or overdraft, or additional security,
whenever the market price of the security itself has depreciated and
has reduced the percentage of margin.

It must, however, be understood that a certain elasticity is allowed
and that the bank will not annoy a good customer every day in the
week for the keeping up of the value of the margins on securities.

Current accounts are kept with the foreign banks in taels and dol-
lars and with a few of them in gold currency. The majority of the
banks do not pay interest on dollar accounts, but some of them do,
while on tael accounts from 2 to 2J per cent is paid on the daily
balances.

Fixed deposits are accepted in taels and dollars and occasionally
in gold currency, and, while the question of interest is a matter
of arrangement, in general the following are the rates: Three
months, from 3 to 3^ per cent; 6 months, 4 per cent; 12 months, 5
per cent.



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200 COMltfERCIAI, HANDBOOK OF CHINA.

Witli regard to exchange transactions,- all the necessary details
have been given in another part of this article, and there is nothing,
therefore, to add on this subject.

The banks generally undertake the collection of bills drawn either
on other ports in China or abroad, and the commission charged
varies from i to 1 per cent.

Clean bills drawn on firms in China from abroad are collected,
the commission ranging from i to ^ per cent. For documentary
bills } per cent extra is generalljr added.

Many other details could be given regarding the work of the for-
eign banks in China, but as they do not differ from thbm in similar
transactions elsewhere they would have no special interest for the
reader.

It may be mentioned, before closing, that the Deutsch-Asiatische
Bank was seized by the Chinese Government on August 14, 1917.
The writer and the manager of the Shanghai branch of the Bank
of China were appointed official liquidators of the head office of the
German bank in Snanghai, for the purpose of winding up its business.



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CHINESE GOVERNMENT FINANCE.

By Trade Commissioner A. W. Ferrln.
INTRODUCTION.

Until the Mandiu conquest (1644) Chinese Government finance
was not miUke that of ai^ individual who gets what he can and spends
what he must and by some kindlj dispensation manages to make
botii ends meet without knowing just how he has done it. At the
beginning of the Manchu regime the total cash revenues of the
Imperial Government were less than 20,000,000 taels (30,000,000
silver dollars), or about half the 1917 receipts of the Maritime Cus-
toms alone; but the expenditures of the central Gsoyemment were
correspondinrfy modest, and in spite of costly wars and other ex-
traordinary drains the Imperial Treasury during the first half of
the second century of Manchu rule showed a steady cash balance
of 60,000,000 to 70,000,000 taels. From 1740 to 1790 revenues aver-
aged 40,000,000. taels and regular expenditures 30,000,000. Nothing
like a modem budget was toiown, and the system of taxation and
remittance of taxes to Peking was of an intricacy to encourage all
kinds of irregularities; but me Government at that time and for
60 years afterwards had little difficulty in finding either the funds
normally needed or those demanded by special events.

In 1850, however, came the great Taiping rebellion, which de-
stroyed nearly a third of the nation's population, devastated 12 of
the richest f'rovinces, strained the resources of the Government
to the breaking point, and initiated the series of calamities that
resulted in the expulsion of the Manchus from the throne in 1911.

Of these calamities the worst, after the Taiping rebellion, were
the war with Japan in 1894 and the Boxer rising of 1900, the first
of which saddled the country with a foreign debt of £48,000,000
sterling, the latter with the looxer indemnity of 450,000,000 taels.

The Manchu Dynasty failed under the repeated blows of adversity,
but an independent China survived, and with the advent of the
Bepublic a start was made in 1912 toward putting the Government
on a business basis. The reforms contemplated by the founders of
the Republic have been slow of realization, but since the second
year of the Republic a regular budget has been published in silver
ilollars, and it is now possible to Imow something of the financial
status of the Government and to forecast to a certain extent future
receipts and expenditures.

BUDGET DRAWN UP BY MINISTRY OF FINANCE.

Following is the budget as drawn up by the Ministry of Finance
for the second, third, fourth, and fifth years of the Republic; no
budget was made up for the sixth year (July 1, 1917, to June 30,
1918), the budget lor the previous year being continued by pro-
mulgation :

201



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202



COMMERCIAL HANDBOOK OF CHINA.
REVENUES.



Classes ol revenue.


July, 1913,

to
June, 1914.


July, 1914,

to
June, 1915.


Jan., 1916,

to
Dec., 1916.


July^l916.
June, 1917.


I. ORDINART.

1. I^and tax


<

d

78
6C
77
36
33
3
7
12


i

«0
141
173
;56
124
!81
183
•4
85
40


8

5
8
4
4
I
4
4
7


Ckhuu
doUan,
9C


2. Customs revenue


73


3. Salt revenue


96


4. Taxes on coninioditie««, including Ukin


42


6. Regular and miscellaneous taxes


34


6. Re^ilar and misp<*lJaneou."? duties


5


7. Income from Government investment


2


8. Miffcellaoemis In^vn^ of T'rovinceMT


5


9. Income of central administration


1


10. In'^m© directly rweived hy central Oovemment.




38








Total


317,900,577


351,064,937


426,237,145


388,000.660




n. EXTRAORDDJABY.

1. Tjind tax -,.,..,„-.,, ^ ,


3,322,889

1,254,280

6 054

132,829

634,093

10.115,8fiS

»230,308

< 164, 269


2,368,749

629,716

10,301


1,480,605

847,350

18.716

4,496.383

16,703

338,253

1,359,696

17,061,806


5,751,454

706.885

21,025

3,911.410

8.351

91,610

2,248,438

23,510,969

8,160,000

24,291,468

16,187,306


2 Custonw r<»v<»nue r


3. Taxes on commodities


4. Regular and miscellaneous duties


5. Income from (lovemmi^nt In vfMrt ment


364,021
1,575,024
1,406,077


6. Miscellaneous income of P^rovinees


7 Income of central administration


8. Income direotlv received by central Government.


9 Mlscellaneoiwfnc-ome of cf^i^trnl Government- , , ,




10, I/Oans T




25,062,398


20,000,000


11. Advances from bank« - - , . . ..


223,370,000








Total


239,130,590


31,436,376


45,609,565


84,828,925




Grand total of revenue


557,031,167


382,501,313


471,846,710


472,838,585





EXPENDITURES.



Classes of expenditure, by ministries.



July. 1913,

to
June, 1914.



I. ORDINART.



Chine9e
I dollars.

1. Foreign Affairs 3,293,115

2. Interior 1 39,618,149

3. Finance 210,345,180

136,864,494
7,665,881
14,671,825
5,207,215
5,083,386
934,877



4. War

5. Marine

6. Justice

7. Education

8. Agriculture and Commerce

9. Communications

10. Mongolian and Tibetan AiTairs.



Total..



n. EXTRAORDINARY.



1. Foreign Affairs

2. Interior

3. Finance

4. War

5. Marino

6. Justice

7. Education

8. Agriculture and Commerce

9. Communications

10. Mongolian and Tibetan Affairs.



Total

Orand total of expenditures.



423,684,122



1,013,223

4,263,860

171,568,614

26,910,518

1,307,014

370,312

1,701,635

959,735

457,843



208,552,754



632,236,876



July, 1914,

to
June, 1915.



ChineK

doUart.

4,229,529

42,672,290

/ 23,383,896

\ 29,960,079

134,061,795

4,802,560

7,258,459

3,276,904

2,276,537

1,935,560

1,065,344



254,922,955



98,564,793

3,526,282

10,000



102,101,075



357,024,030



Jan., 1916,

to
Dec., 1916.



Chinese
dollmrt.
8,276,677
49,653,982

^ 53,531,625

135,813,966
17,101,779
7,665,772
12,611,583
3,762,244
1,577,408
947,230



285,942,286



836,141

2,105,864

175,302,789

6,438,727

102,758

45,573

225,724

376,702

112,783

40,000



185,577,150



471.519,436



July, 1916,

to
June, 1917.



CWnete
dollarf.
4,446,548
42,570,100

61,792,970

156,606,047
7,304,135
9,337,156
4,433,893
2,734,790
1,533,606
1,014,216



291,803,470



1,846,786

3,117,770

162,397,633

10,711,333

847,434

28,610

594,943

1,279,496

116,833

94,276



181,035,114



473,838,584



i Contributions.



* Salt revenue.



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CHINESE GOVERNMENT FINANCE. 203

\

The figures in the above table, which was compiled by the Ministry
of Finance, are estimated, and the comparison of years is inexact,
because in 1915 Yuan Shih Kai changed the fiscal year to coincide
with the calendar year; but the table gives an approximation of actual
receipts and expenditures, and shows the relative importance of the
various taxes as income raisers.

TEN ORDINARY SOURCES OF REVENUE.

The history of the 10 ordinary sources of revenue, with some'
remarks as to the possibility of their expansion, follows :

1. LAND TAX.

The land tax is of the remotest antiquity and formerly produced
two-thirds of the cash revenues of the Imperial Government. It arose
from the fact that the Government was founded on conquest and all
the land was considered the Emperor's property. But in China this'
theory was never pushed to extremes, and the use of the land was
left to the occupants, with full rights of possession, the technical |
proprietorship of the Emperor being recognized by payment of an I
annual tax based on the rental value of the land.

In 1713 this rental value was fixed by the Emperor Kang-hsi in a'
decree which declared that it should stand for all time. Consequently !
the land tax of to-day, three- fourths tael per 6 mow (1 English acre),^
is, in theory at least, based on the assessments of lTl3, when about'
lOOjOOOjOOOEnglish acres were under cultivation. Authorized reduc-J
tions in the assessments have been made from time to time on account
of insurrections, floods, and other calamities, subject to restoration'
after the effects of the calamities had been repaired : but those reduc-
tions have been by no means canceled, and a vast amount of land,
particularly in the parts of China most ravaged by the Taipings
(Anhwei, Chekiang, Honan, Kiangsu, Kiangsi, Kweichow, Szech-
wan) is to-day undervalued on the basis of 1713. A complete re-
valuation of all lands in China under existing conditions would,
despite the recent effects of civil war, undoubtedly result in a vei-y
material increase in the proceeds of the land tax.

But the greatest evil of the present land tax is not the obsolete
assessment. It is the manner in which that assessment has been
evaded by the irregular exactions of tax gatherers.

While the land tax remains nominally as fixed in 1713 and the
proceeds that reach Peking are calculated on the old assessments,
the " increments " added to the nominal and legal tax by local and
provincial authorities have increased the actual amount collected
from the landholder by as much, in some instances, as 500 per cent.

2. CUSTOMS REVENUE.

HISTORICAL SUBN-EY.

The collection of duties on commodities crossing the water and'
land frontiers of China is of almost equal antiquity with the land'
tax, but the customs did not become an important source of revenue j
until the sixteenth and seventeenth centuries, with the development]
of maritime trade.



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204 COMMERCIAL HANDBOOK OF CHINA,

The same looseness of method that characterized the collection and
remittance of the land tax involved in obscurity the customs receipts
of old times, and it is probable that no official ever knew how much
was actually collected or how. But since 1854 the maritime customs
have been collected by a highly efficient force.

The reorganization of the maritime customs was due primarily to
the Taiping rebellion of 1850-1864. In September. 1853, tne Taipings,
who had marched out of Kwangsi and had maae their devastating
way down the Yangtze Valley, captured the native city of ShanghaL
The loyal Chinese officials flea to the foreign settlement, which was
under the gims of protecting warships, and the customhouse was
closed. The foreign merchants did not wish to pay duties to un-
authorized officials. So they decided to declare their goods at their
respective consulates, and deposit bonds to cover the duties until the
loyalist customhouse should be reopened.

This business proved rather more than the consular officials could
handle, and on June 29, 1854, an agreement was signed between Uie
Taotai of Shanghai and the British, French, and American consuls,
providing for a board of three foreign inspectors who should assume
the respK)nsibility of collecting duties for the time being and attempt
to build up a permanent and efficient corps for the future.

The first three inspectors were British, American, and French,
but as the British inspector was the only one who spoke Chinese, he
naturally took the lead, and the development of the service has con-
tinued under British inspectors general, with an understanding
(reached in 1898) that the chief inspector shall continue to be Britisn
as long as the British trade in China predominates* The district
inspectorships, and other positions in the service, are divided as
equally as possible amon^ citizens of the trading nations.

So well had the Maritime Customs service been organized by 1896
tliat when China needed foreign assistance in liquidating the obliga-
tions incurred in the war with Japan, including an indemnity. to
Japan of 230,000,000 taels, the foreign bankers were only too glad to
advance the money needed, in three loans of £16,000,000 sterling
each, and made the Maritime Customs receipts their security. Ana
^gain^ when in 1901 the powers imposed upon China the Boxer in-
demnity of 450,000,000 taels, they found acceptable security for its
payment in the Maritime Customs receipts, with the salt tax as a
secondary security.

It was agreed in the protocol of 1901, covering the Boxer indemnity,
that the tax of 5 per cent ad valorem on imports and exports which
had long been settled upon by international agreement, should be
convert^ into specific duties on the basis of merchandise valuations
of the years 1898, 1899^ and 1900, and that the ^schedules should be
revised every 10 years, m order to keep the specific duties as near iEis
possible to equivalents of 5 per cent ad valorem. No revision tock
place in 1911, on account of the revolution, but on January 5, 1918,
a tariff commission composed of representatives of the Chinese Gov-
ernment, the Maritime Customs Administration, and each of the
powers trading with China, met in Shanghai for the purpose of re-
vising the schedules so that they should yield an effective 5 per cent
on current values. It was expected that the work of this commis-
sion, which completed its labors in December, 1918, would result
in an increase or at least 25 per cent in China's Maritime CustomJ^
revenues, which were, in 1918, 36,345,045 taels.



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CHINESE GOVERNMENT FINANCE.
RECEIPTS FOB TWELVE YEABS.



206



For the 12 years ending with 1918 the receipts of the Maritime
Customs were as follows:





Years.


Import
duties.*


Export
duties.*


Coast
trade
duties.


Tonnage
dues.


Transit dues.>


Opium
ifkin.


Total.


Inward.


Outward.


1907

1908

1900

1910.:

1911.

1912

1913

m4

1W5

1946

1M7

1918


Haiktoan
1' 547

I m

I 36
1- 32

I ni
1( i02
It 160

II 41
1' !21
li )56
1( 39
L 158


HatJkioan

( 48
K 86
i: 75
:k 35
K 59
IJ 48
i; 15
IJ 70
U 09
1< 14
1( 63
U 24


in

] 82
] 05
: 06
: 98
: m

! «7

: 66

1 10
1 13
J 06

'. 40
i 12


B %n

1, 92
1, 115
1, 118
1, 124
1, 185
1, il4
1, f78
1, 49
1, 159
1, 190
31


Haikwan

taels.
1 flo, 183

1, 169
1, 192
1, 78
1, 191
1, !71
1, (95
1, H5
1, 107
1, »48
1, »1
1, m


Haiktoan
taels.
438,017
403,890
510,925
577,389
578,039
653,333
621,106
584,627
769,433
845,333
711,509
831,237


Haiktoan

taels.
/ - -'77
5 22
i 65
1 83
! 56
4 17
i 33

: 13

64

64
06


Haiktoan

taels.
33,864,346
32,901,895
35,539,917
35,571,879
36,179,825
39,950,612
43,969,853
38,887,525
36,747,706
37,774,311
38,189,449
36,346,045







* Inclusive of opium.

> Under this head are included export duties on Chinese produce for home consumption carried from
port to port in vessels of foreign type and junks licensed to trade under the treaty tariffT
9 Transit dues are explained on page 43> under the heading " Taxes on commodities.''

The Haikwan (customs) tael, which has been adopted at all treaty
poi-is for the payment of duties and to measure the value of foreign
impoFts and exports, is 581.77 grains troy of silver. Owing to the
continual fluctuation of silver as measured by gold, the exchange
value of the tael is fixed annually by the customs authorities. These
Auctuations create the anomaly that the actual silver receipts of the
customs, though giving a basis of comparison of actual trade year by
year, do not give a true picture of the trade situation. The receipts
for 1918, for instance, were 1,844,404 taels less than for 1917, but the
exchange, or gold, value of the receipts was greater than in 1917 by
$2,115,034.

UST OF TREATY PORTS.

Maritime Customs dues are collected at tlie following 48 " treaty
ports," which have been declared open by a series of treaties made be-
tween 1843 and 1918 :

Manchuria : Aigun, Sansing, ManchouH. Harbin, Suifenho, Hunchun, Lung-
cbingtsun, Antung, Tatungkow, Dairen, Newchwaug.
CJhIliH: Chinwangtao, Tientsin.
Shantung: T^ungltow, Chefoo, Kiaoohow.
Kiangsu: Shanghai, Soochow, Nanking, Chinkiang.

Kwangtung : Canton, Kowloon, KongmooD, Lappa, Pakhoi, Siimshui, Swatow.
Fukien : Anioy, Foochow, Santuao.
Chekiang: Hnngchow, Nlngpo, Shasi.
Hupeh : Hankow, Ichang, Shasi.
Kiangsl : Kiukiang, Lungchow, Nanning, Wuchow.
Hunan : Changsha, Yochow.
Anhwei : Wuhu.
Szechwan : Chungking.
Yunnan : Mengtsz, Szemao, Tengyueh.
Hainan: Kiungchow.

In addition to the treaty ports, 16 cities in Manchuria, 4 in Shan-
tung, 5 in North Chihli, 3 in Kwangtung, 3 in Tibet, 1 in Mongolia,
1 in Turkestan, 1 in Kiangsu, and 1 in Szechwan have been declared
^" open to trade."



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206



COMMEBGIAL HANDBOOK OF CHINA.



NAXn-E CUSTOMS.



At the treaty ports, as well as at all important stations on the coast
and alongside the maritime customhouses, are native customhouses,
which collect duties on goods carried by sailing junks not licensed to
trade by the tariff treaty. The receipts of the Native Customs for the
five years 1914-1918 have been as follows:



Ports.



1914



1915



1916



1917



1918



Newcfawang

Tientsin

Chefoo

Ichang

Hhasl

KiuklAng...

Wuhu

Shanghai

Ningpo

Wenchow...

Santuao

Foochow

Amoy

Swatow

Canton

Kongmoon. .

Wuchow

Kiunechow .
Paklioi

Total.



Haikwan

tads.

161,414

> 1,000, 412

65,628

66,415

17.656

386,695

429,762

217,888

101,742

32,357

70,489

196,730

82,278

76,339

261,868

94,342

95,106

2^,282

7,C93



Hafkwan

taeU,

171,702

11,100,345

72,661

61,560

16,713

407,932

637,054

228,155

104.553

38,802

76,098

179,051

81,765

111,596

261,757

94,975

98,503

25,051

7,185



Bafkwan

tads.

122,807

11,001,237

85,837

60,641

11,709

384,435

740,448

213,805

137,177

39,020

82,712

182,190

77,050

115,638

216,460

37,781

117,240

20,687

9,583



Uels.

144,845

1999,063

81,068

55,4(M

11,882

347,068

686,430

229,952

125,160

48,584

84,486

243,507

71,651

122,546

385,108

60,037

135,571

25,087

9,463



Haiktpan

tads,

116,882

11,121,991

88,016

39,116

8,127

343,793

702,587

232,400

121,016

51,578

83,439

236,198

84,729

121,719

299,645

56,911

177,350

19,601

10,052



3,389,102



3,784,648



3,746,646



3,775,284 3,974,035



1 Not including the outnrard transit dues collected on behalf of and remitted to the Maritime Customs.

By the Peace Protocol of 1901, the foregoing native customhouses,
being within 15 miles of a treaty port, have been placed under the
supervision of the foreign commissioner of customs of that port, witli
the result that a regular tariff has been substituted for the irregular
levies of native customhouses. At other points the Native Customs
continue to be administered by Chinese officials, and lack of proper
statistics prevents an accurate statement of their receipts. The
average amount of Native Customs receipts remitted to Peking in the
four years 1914-1917 was about $7,500,000. If administered simi-
larly to the Maritime Customs, the Native Customs revenues, which
have been pledged as security for a number of internal loans and as
part security for certain foreign loans, could undoubtedly be materi-
ally increased.

FOREIGN OBLIGATIONS SECURED UPON MARITIME CUSTOMS BECEIFTS.

The foreign obligations secured upon the Maritime Customs re-
ceipts are :



Loans.



Franco-Russian loan of 1895.

Angk>-Ocrman loan of 1896. .
Anglo-German loan of 1898. .

Boxer indomnity of 1901



Original



lFr.400,000,000
\ £15,830,900
£16,000,000
£16,000,000

fris450,000,000
i£68, 5000, 000



Ontstanding
June 30, 1917.



£9,408,900



£10,073,536
£12,660,946



£02,738,600



Rate.



Per cfltf,
4



5
4i



1 Includes a loan of £1,000.000 for adjustment of exchange.



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GHUffiSE GOVfiRNMEITT FINAVOfi. 207

In comsid^ring the payment of foreign obligations out of tlie
Maritime Customs receipts it must be remembered that the foreign
charges are payable in gold, while the customs receipts are in silver.
The recent sei^uitional advance in the value of silver as measured by
gold has been of very great advantage to China, as it has been able
to buy more and more gold with a given amount of silver. Thus
the customs receipts of 1917, 38,189,000 taels, had a j^old value of
£8,241,857, or more than ^fiOO^OOO above the annual foreign charge
on the Maritime Cui^ms, while the receipts of 1916, 37,764,496 taels,
was worth, at the average rate of exchange for that year, only
£6,264,496, or not very much more than was required to pay the
foreign charges for that year. Silver is not likely to decline mate-
rially while present conditions prevail, but it should not be forgotten,
in estimating China's financial future, that its favorable status at
this time is due somewhat to the abnormal value of silver.

BOXER PBOTOCOL.

By the terms of the Boxer, or Peace, Protocol, and those of the
Reorganization Txmn of 1913, the Maritime Customs receipts and
the salt tax were made interlocking securities; that is, if the Mari-
time Customs receipts fail to meet the charges on the customs (as
has happened in several years), the salt tax can be drawn upon;
converselv, if the customs receipts exceed requirements and the salt
receipts fall short, the customs surplus can be used to pay interest
on the Reorganization Loan, which is primarily a charge on the
Salt Administration.

The high relative value of silver in 1917, together with the fact that
China ceased to pay interest and installments to Germany and Aus-
tria after its entrance into the war, enabled China to pay, with the
£8,241,857 sterling receipts of the customs, not only the interest and
installment due on the Enrfish part of the loans of 1896 and 1898,
the Franco-Russian Loan of 1895, and the Boxer Ind^nnity, but, for
the last six months of the year, to pay all the interest on the Reor-
ganization Loan. And, after this, tne customs still had a surplus of
10,000,000 taels, of which 2,000,000 was released to the Chinese Gov-
ernment and the balance paid into the salt account as reimbursement
of contributions previously made by salt to the payment of the
Boxer Indemnity.

In January, 1918, as a result of the entrance of China into the
Great War, all the Entente Powers but Russia agreed to a postpone-
ment of Boxer payments for five years, and Russia agreed to a one-
third reduction, thus lightening China's annual financial burden by
about £2,000,000. This action was a postponement, not a remission
of payments, so it will not cause any reduction in the end in the



Online LibraryUnited States. Bureau of Foreign and Domestic CommCommercial handbook of China .. → online text (page 109 of 143)