America, Australia, Mexico, Canada and wherever Chinese laborers are
not received free. He seldom dressed well; it did not do in those days
to look opulent in China, and besides American inspectors might suspect
a well-dressed dealer in contract slaves. His voice, unlike the usual
pliable voice of his race, was deep in his raucous throat. He would
not fear to take life if he had a chance in the lonely walks of his
province, if his opponent was a strong obstacle to his worship of his
two gods, money and power. He could not get in as many as he wanted
by the direct route, so he determined to institute the first Chinese
trans-Pacific steamship company, crossing the Pacific to Mexico. I
told him that he never could get the money, as Queen’s Road, Hongkong,
was a long way from Wall Street; that he would sink a million of the
money of his beloved countrymen. He got the money from the Chinese,
intensely conservative as they were, which proved the power of his
persuasion, and he sank it all in two years. He could not be drawn into
much expression by me, though he could speak English well. I heard him,
however, speaking like a Rooseveltian tornado of storm and lightning
unto his own, and once to two foreigners in whom he trusted, because
they had obeyed him at their risk, and he owned them by the bribes they
had accepted. His will was of iron, unyielding. His persistency was as
tireless as Napoleon’s, and his swift victories were many. He could
live without sleep when he planned his campaigns. He would go anywhere
and to anybody to accomplish his aims. He loved whispering. He cast
looks which wielded men. He swept like a vulture on lambs. He struck at
his opponents like a tiger. He was not a Manchu, but he was Manchuized
in his confidence that the Oriental was superior to the foreigner. I
shall never forget the time when he told me that he had “a white man
working for him.” That white man was descended in the third generation
from a brother of a president of America.
Chuk was not uncomfortable when he thus wore the crown. He ruled over
his subject races of the West with all the assurance which Xerxes or
Kublai Khan did. He could plot; he could bribe; he could threat; he
could spend with a lavish hand. One time he would travel in state at
home and abroad, and on another occasion incognito like a spy. He felt
he was abler than any white man because he added the easier conscience
of the Orient, which he called wisdom, to an ability equal to the white
man’s, and a will just as imperious. He despised all religions as he
said “conscience makes faint-hearts of us all.” He had no pity for his
dupes or victims. He was a Cantonese Tippo Tib. I never know, when I
am speaking to an American or Cuban Chinese, if he is not a slave of
Chuk’s, remitting to his old father in Kwangtung province, who will in
turn remit to Chuk or Chuk’s heirs, to pay off that $1,000 and usurious
interest added. Chuk is a Cantonese example of the power which may
come to a money lord who has decapitalized labor, which will never
catch up with the principal. His profits on the real cost were 1,500
per cent. Not even a surveillance of communications could probe Chuk’s
underground methods. Three insurmountable barriers interposed, the
extent of the territory, the Chinese language, and the changing codes
which he used. It would be as difficult as ferreting out a criminal
in the Trastevere section of Rome, if for one reason alone, because
the Trasteverans will not turn informers. Neither will the Chinese.
Therefore, with espionage of communications and informing for bribes
eliminated, a secret service on Chinese law breakers, as far as we are
concerned, is as yet in many respects ineffective.
IV
FINANCE AND BUDGET IN CHINA
With a reformed system of tax collection the following budget is quite
feasible, and will, without any greater pressure on the individual than
at present, lift China out of the slough of despond.
REVENUE GOLD DOLLARS
Land tax, 400,000,000 acres cultivated, at 50c
a year $200,000,000
Salt monopoly 10,000,000
Maritime customs 50,000,000
Railway surplus, nationalized trunk lines 10,000,000
Fisheries, tobacco, samshu, mining, steamship,
bank, incorporation, telegraph and
other fees 50,000,000
Income tax 10,000,000
------------
$330,000,000
EXPENDITURE
Interest on foreign loans,--past, $200,000,000;
and in prospect, $200,000,000; total,
$400,000,000, at 4 per cent. $16,000,000
Civil service salaries, etc. 30,000,000
Army, a full division for each province,
100,000 men at $100 a year 10,000,000
Conservation, public works, repairing national
architecture, famine relief, etc 50,000,000
Navy for revenue purposes mainly, with one
dreadnought a year added 24,000,000
Education and crafts schools 100,000,000
Canals, railways, steamships, telegraph,
telephone, etc., extensions 100,000,000
------------
$330,000,000
This proposes $330,000,000 a year for 400,000,000 people, against
Japan’s $350,000,000 a year for only 55,000,000 population. This plan
wipes out the obnoxious opium and likin taxes. The taxes proposed are
less than half per capita what poorer India is paying, and one-tenth of
what Japan is paying, and so China would remain the lowest taxed nation
on the earth. The outstanding government debt of China, even including
the proposed four-nation loans of $50,000,000 gold for currency reform,
and $50,000,000 for new Szechuen and Hunan province railways, is, as
I have detailed elsewhere in this article, only £113,000,000, whereas
the present government debt of Japan, with infinitely less resources
and population, is £300,000,000, not to speak of Japan’s private
industrial loans abroad, which would add another £60,000,000. India’s
debt is £170,000,000. The tax proposed in China is so small that room
is left for each province to charge a door and head tax of 25c each
a year, bringing in an additional $100,000,000 gold for provincial
revenues to take care of justice, provincial public works, etc.
Municipalities could then raise their ordinary taxes in the usual way.
All that is wanted in China is an honest audit, the end of nepotism,
and a cessation of “shaking the pagoda tree” by peculating officials.
The whole central and provincial tax would not amount to much over
$1 a head a year, and the municipal taxes would not be any larger
than $1 per capita. This would not be a burden to cause complaint or
revolution. With the immense sum collected China would almost at once
take her place as one of the mightiest of nations. Her credit would
be enormous, and her opportunity for good the greatest in the world
because of her wider ethnic connections. She would not need to raise
her customs much above the present five per cent. ad valorem, and thus
oppressive monopolies could not grow up in the land. Free trade would
flow to her with its riches, as it flowed to Britain, and every man
would have enough, and no man too much; certainly an ideal condition.
This budget would provide a splendid army of well-paid men ($8 gold
per man per month is abundant); 100,000 strong, able to throw back
any invasion at once, and always ready to keep down piracy. Riot and
strikes are not unpatriotic piracy; they are the localized suppuration
of an economic distress that can be cured or forestalled in a democracy
by other means than a soldiery, which we have found a failure in
America and Britain. The new Chinese navy could add a new dreadnought
battleship each year, and provide crews, yards, and a full revenue
marine. Above all, education and transportation would be taken care of
lavishly, and China would not need to beg at any one’s door for a loan.
She would be a land of peace, because a total tax of $2 gold a year per
capita can raise not the slightest discontent in any land.
The debt of the Chinese government, contracted before October 13, 1911,
which debt the republicans recognize, is as follows:
AMOUNT AMOUNT
LOANS in £ Interest in £ DUE
7% silver loan, ’94 £490,500 1924
6% gold loan, ’95 800,000 1924
6% gold loan, ’95 333,400 1915
5% gold loan, ’96, from
France and Russia
for Chinese-Eastern
Railway 12,397,425 1933
4½% gold, ’98, Britain
and Germany
for railways 14,022,625 1933
5% gold railway loan 1,955,000 1933
5% gold (Boxer
indemnities, etc.) 52,500,000 1940
5% Shanghai-Nanking
railway 2,900,000 1915
5% Canton-Kowloon
railway 1,500,000 1920
5% Tientsin-Pukow
railway (British) 1,850,000 1918
5% Tientsin-Pukow
railway (German) 1,100,000 1918
5% Shanghai-Ningpo
railway 1,500,000 1918
5% Hukuang railways 1,500,000 1921
----------
Total gov’t debts--
China £92,848,950 £4,642,000
Japan 300,000,000 12,000,000
India 170,000,000
Italy 1,000,000,000
France 1,200,000,000
Britain 1,000,000,000
United States 200,000,000
If Japan returned to China the £35,000,000 indemnity coerced from her
by the Shimonoseki treaty, the Chinese debt would be greatly reduced.
This is Japan’s moral duty, especially if she is allowed by the nations
to retain Formosa, Korea, and possibly part of Manchuria, all of which
she plans to retain. Several of the European nations should follow
America’s example and return the excess in the Boxer indemnities. The
banking nations, as long as America and Britain retain their present
high standard of altruism, will never again permit any power to wheedle
an indemnity out of China.
The foreign and local banks operating in China are the following. I use
gold dollars for the table:
CAPITAL
BANK PAID UP RESERVE
Hongkong and Shanghai Banking
Corporation $5,000,000 $15,000,000
International Banking Company
of America 3,250,000 3,250,000
Deutsche Asiatische Bank 5,500,000 3,000,000
Yokohama Specie Bank (Japan) 10,000,000 7,000,000
Lloyd’s Bank (British) 20,000,000 15,000,000
Chartered Bank of India, Australia
and China (British) 4,000,000 5,000,000
Netherlands Trading Society 18,000,000 2,000,000
Netherlands-India Commercial
Bank 6,000,000 700,000
Russo-Asiatic Bank (Russia-France) 19,000,000 4,000,000
National Bank of China 1,500,000 400,000
Banque L’Indo-Chine (French) 6,000,000 3,000,000
Bank of Taiwan (Formosan Japan) 1,800,000 300,000
Mercantile Bank of India (British) 5,500,000 800,000
Eastern Bank (British) 2,000,000
Chino-Belgian Bank (Belgian) 2,000,000
It will be noted that with one exception all of these banks are strong
institutions. The hoary patriarch among them, endowed with exhaustless
strength still, is the Hongkong and Shanghai Banking Corporation, which
has been operating in China since 1865.
There is a movement in Canton to establish an “Industrial Encouragement
Bank”. The merchants are anxious for currency reform throughout the
kingdom and the establishing of coins of fixed value on the American
decimal plan, but going to a lower decimal to accommodate small trade
and the lower values of China.
It is also proposed by prominent members of the Nanking Assembly to
establish a Sino-American bank, plans for which were laid just before
the October, 1911, revolution.
At the height of the revolution in November, 1911, the rebels did a
remarkable thing successfully at Shanghai. The loyalists at Peking were
unable either with their own imperial Ta-Ching bank, foreign loans, or
the immense ramifications of the Shansi Bank guilds, to uphold their
credit, and the chief fighter of the Manchus, General Chang Hsun Chung,
could not pay his troops. The republicans at Shanghai under Sheng
Wan Yung, minister of finance, and Wu Ting Fang, foreign secretary,
organized the “Chung Hua” Bank at Shanghai with a capital of 5,000,000
taels. The shops immediately took the money at a high premium,
doubtless to give an impetus to confidence. “Chung Hua” is the Chinese
name for China. It means “central glory”.
Nothing hampers China’s interprovincial trade more than the absence
of a national credit system and commercial paper. Treaty-port China
gets long enough loans from the foreign manufacturer. The trouble is
that the importer can not collect quickly from his customer, and when
he does, the medium is coin, bullion and barter, unnecessarily and
clumsily handled, whereas coin, bullion and barter should only be used
for the balances. China needs a modern currency system, and a modern
credit system as well.
It is in accord with manners and business accuracy when at a fair
you are informed that an article will cost you a thousand coins
(cash) to say: “I’ll pay you 500 _good_ coins.” If you had a thousand
counterfeits you could elect to pay with them, but never be so bucolic
as to pay a thousand good coins when a thousand coins are asked.
As suggested by America, China’s new coinage will have a silver
dollar, half, quarter, dime, nickel, two cents, cent, half a cent,
and one-tenth of a cent, all minted in government mints, and alone
accepted as legal tender in taxes, telegraph, railway, telephone,
customs, likin, stamp and other charges. Very slowly the old system of
using provincial coinage of debased value, bullion (sycee) exchange,
private bank notes, etc., will pass away. A central bank, like the Ta
Ching, helped by a four-nations foreign loan, backed 40 per cent. by
the government, and 60 per cent. by private subscriptions, with about
$6,000,000 capital, could make a good beginning in taking care of the
new system. Although a silver coinage, the government, like Japan’s,
stands to guarantee the fixed value of the coinage as equal to half
its face in gold; that is to say, the central bank will hold reserves
so as to redeem or guarantee a silver dollar at fifty cents gold. The
silver is to have a fixed purity standard, like the Philippine peso,
or the American dollar. Japan stepped into Korea and refused to accept
the old coinage. It immediately became copper bullion, and had no
other value. For safety’s sake, the Japanese insisted that the coins,
worth nominally one-tenth of a cent, should be broken at the square
hole in the center. The steamer _Seneca_, in 1912, brought 1,400 tons
of these broken Korean coins to New York, whence they were shipped to
Chrome, New Jersey, to be smelted. China can not be so rigid, as she
has not the police or army, but if she could safely be rigid, nothing
would clear up the coinage question better than copying this Japanese
example. Since the adoption of the gold standard in Mexico, the
government has to accept the old Mexican dollar as legal tender for one
dollar gold, which gives a profit of 100 per cent. to the lucky holders
of these silver dollars. There are many of them in China; indeed the
Mexican dollar was for many years the monetary standard in China, and
the thrifty Chinese are smuggling the unchopped coins into Mexico as
fast as they can be gathered up from the Shansi, Kwangtung and other
bankers. The Mexican government anticipated this move, and placed a
duty on Mexican dollars returned from abroad. The honors are even along
the Rio Grande boundary; Mexican dollars are smuggled southward, and
Mexican Chinese are smuggled northward! Most of the Mexican dollars
in China, however, have been chopped in the banks and fan-tan houses,
and the thrifty Chinese shroffs groan when they contemplate that by
egotistically sinking their chop into the face of the Aztec eagle and
the Texoco snake, they have now lost 100 per cent. profit. Moral: never
mutilate the coin of a realm, whether it is your own country or not.
As illustrating the irregularity of the currency, let us cite the
situation at Newchwang in 1912 for instance. National taxes are paid
in Kuping taels; provincial taxes in Manchurian dollars. Customs
duties are paid in the usual Haikwan taels; local octroi in small
silver. The national post-office will only accept Mexican dollars. The
national telegraph office will only accept Manchurian dollars. The
national Chinese railway cashiers must receive payment of freight
bills in either Peiyang or Kiauchou (German) dollars. The pursers of
the national China Merchants’ Steamship Company demand payment of fares
in either Mexican dollars or Newchwang taels. The Japanese, who run a
railway, a concession, public utility works and a hotel here, demand
payment of their bills in the Japanese silver yen (dollar). On their
railway line they demand payment in the Japanese gold yen. The Russian
demands payment in his paper ruble note. The Americans and the English
demand payment respectively in eagles and sovereigns. All of these
concerns will discount other moneys at a heavy profit, so that they,
and the money changers, in the multiplicity of standards, soon shave
the dollar down till its pride and distinction of stamp are humble and
thin enough! A tael, the old monetary system, is a Chinese ounce equal
to 1⅓ ounces avoirdupois. The Haikwan tael, the standard of fineness
accepted by the Custom House, is rated at 100, in comparison with which
are the Tientsin tael at 105; the Hankau and Newchwang at 108, and the
Shanghai at 111. When new silver arrived at the old provincial mints,
it was refined or adulterated to conform with these grades. The edict
of October 5, 1908, suggested that if the standardization of silver was
successful, a gold standard might be looked for. This would probably
slightly raise wages and costs in China, and slightly decrease them
elsewhere.
The national customs, heretofore called the “Imperial Customs”, managed
from Peking in succession by the British knights, Robert Hart, Bredon
and Aglen, continue to be the financial pillar of China, the basis of
foreign loans, the payer of the hated indemnities, the provider of
armies, pensions, and nearly all the machinery of government and even
“graft”. Until a reorganization of the taxes is effected, the customs
might be raised to double what they now are so as to get China on her
feet. The department has been honestly managed, and is a monument
to the late Sir Robert Hart, the sinologue. Where a missionary or a
Buddhist monk is not at hand to take care of a needy traveler, there
will be found a national customs cadet, generally a Briton, an American
or a German.
How China is neglected by London, the world’s banker, is illustrated
by the following investments of new capital in a normal year, 1910.
China was given only $3,500,000 in 1909, and $8,000,000 in 1910,
whereas to nearly a billion already loaned, Japan was given $30,000,000
more in 1910; Mexico a like amount; Argentine, $112,000,000; Russia,
$20,000,000; and even little Denmark, Greece, Turkey and Cuba each
received as much as dormantly opulent and vast China. The neglect of
China by America reveals a similarly regrettable situation. Trade
follows the loan as much as it follows the flag and the missionary, as
England’s trade relation with Argentine proves.
The famous Russo-Chinese Bank, which was the catspaw for the Russians
in securing from the Chinese the troublesome concession for the
Chinese-Eastern railway, which largely led to the war with Japan, was
absorbed in a new institution in October, 1910, called the Banque
Russo-Asiatique, which is largely financed by the Banque du Nord and
the _Société Générale_ of Paris. The old Russo-Chinese Bank had a
capitalization of 21,000,000 rubles, one-third of which was subscribed
by China. The capitalization of the new bank is double that of the old.
[Illustration:
Copyright, 1913, The Bobbs-Merrill Company.
The oldest and strongest bank operating in China; the Hongkong and
Shanghai Banking Corporation. It has branches throughout China,
on the British banking plan. The building in the background is
the Chartered Bank of India, Australia and China.
]
[Illustration:
Copyright, 1913, The Bobbs-Merrill Company.
The abundant use of street advertising by the new commercial China.]
[Illustration:
Copyright, 1913, The Bobbs-Merrill Company.
Court of the splendid Swatow guild house at Canton. These are their
chambers of commerce and clubs combined, and are a power in the
new commercial China, almost equal to the new assemblies. The
heir of a tea magnate rides the statue of a griffin.
]
China is suspicious regarding foreign loans, and many of the new China
party which precipitated the October, 1911, revolution are opposed
to even railway loans. Objection has been made to one American loan
that it included, besides proper interest, a bonus of millions to
take up bonds of a previous American syndicate which never performed
railway work in China for those bonds; that is, they were organization
paper, not property paper. Objection is also made that our loans
name as security the perpetuation of the odious likin system which
disjoints the trade, politics and transportation of the provinces. The
Chinese of the south have constructed many short railroads, which are
run at a profit without foreign loans, and it is this system which
the “states’ rights” people wish to spread. Political and economical
education in the provincial assemblies will in time teach them the
wisdom of the nationalization of trunk railways at least. There is
the same conflict in China between the states, or provinces, and the
federal power, as there is in other countries. In the matter of foreign
loans, the provincial papers complain that the central government has
sold the nation by paying bonuses and heavy interest. The trouble with
provincial loans for railways will be the mixed security offered, one
province providing for the continuation of the objectionable likin,
and another province withstanding it. It is a perfect curse along the
magnificent Shanghai-Nanking railway built by British contractors. The
strong desire of the provinces, in the first ebullition of patriotism,
is to build and operate their railways without foreign aid or federal
intervention.
In times of political trouble, the Chinese place vast sums in the
trust, not only of foreign banks at Tientsin, Shanghai and Hongkong,
but valuables and money are placed implicitly in the care of
missionaries, whose fiduciary honesty is esteemed by the Chinese, who,
if they do not understand the text, understand the living example!
The missionary is not only a tower of “doctrine”, to use the Chinese
idiom; he is a tower of finance also. It is a remarkable thing that
when the white man’s honesty at home in certain scandals exposed by
government prosecutions, is rocking like a wooden steeple in the grasp
of a tornado, the white man’s honesty in China is standing steadfast as
a rock, and unmoved in the typhoon of local and international distress,
and political, religious and educational change. It seems that it is a
wholesome time to send some of our monopolists to China, and bring some
of our missionaries back to reform things at home!
The licensed pawnshops are called Tang Po Tien and Chi Tien. The “Yah”
pawnshop corresponds to our “fence” shop, to which thieves bring their
plunder. The regular pawnshops are an embryo trust company. They loan
on land, crops, jewels, rent, bills receivable, possessions, houses.
They change money and sell notes of credit. The pawnshops of Mukden
and the north loan on crops, such as beans, millet, etc. The visible
grain, and not a warehouse receipt, is the security, and therefore the
pawnshops of the north have yards and sheds in connection with the
plant. The towering square pawnshops of Kwangtung province in the south
are higher than in the other provinces, showing that capital circulates
more among the active Cantonese merchants. The Chinese of America are
mainly Cantonese, or Kwangtungese; that is, if they are not of the
provincial capital, they are from the province.
Trained carrier pigeons are still used by the Shansi Bankers’ Guilds in
carrying secret code messages stating the exchange prices of silver.
This is quicker than the post, and more secret than the telegraph.
Regarding salaries that will be paid in China’s reconstruction, the
following may give some indication. The salary of advisers to the privy
council has been $90 per month in a nation of 400,000,000, compared to
the salary of an American attorney-general of $1,500 a month.
It is often said that the Chinese are absolutely honest, but when an
exception occurs it is as startling as a bolt from a clear sky. As an
aftermath of the rubber speculation at Shanghai, the taotai, Tsai Nai
Huong, absconded in August, 1911, owing several million dollars to the
government, which sum had been loaned him to assist the local banks.
Some of their proverbs hung up as texts in their guild houses are:
“Don’t wait till you are thirsty to dig your well.”
“Don’t wait for the battle before you sharpen your sword.”
“The higher up, the deeper down when the tumble comes.”
“Fish and fools are the same; neither sees the string on every bait.”
“The fish is measured by your bait.”
“He who buys luxuries soon sells his necessities.”
“A debtor never remembers as long as a creditor.”
“Conscience grows heavier as store weights grow secretly lighter.”
“Hot broth and a time loan both require deliberation.”
“If you are rich and live in a desert, it’s never too far for your poor
relatives to come.”
“If you have money, even your enemy will slave for you.”
“There’s such a thing as drawing the line somewhere; I don’t lend my
umbrella in the dog-days.”
“Some men’s faces are as good as a credit slip.”
It will be perceived that they had a Franklin in China!
The idiom for a lunar eclipse is: “The moon has suffered a deficit,”
but the other expression of the Chinese astronomers: “All round
again”, indicates that losses have been underwritten and solvency
reestablished! May the international financial astrologers in and out
of China soon bring in this happy state. Then a “cycle of Cathay” will
be as good as any other cycle, despite Tennyson’s dictum, and this will
redound to the good of every nation, particularly America and Britain.
V
BUSINESS METHODS OF FOREIGNERS IN CHINA