Chapter IV: Government and Administration (2)

3. _Likin on General Merchandise_.--By the term likin is meant a tax
on inland trade levied while in transit from one district to another.
It was originally a war tax imposed as a temporary measure to meet the
military expenditure required by the T'aip'ing and Mahommedan
rebellions of 1850-1870. It is now one of the permanent sources of
income, but at the same time it is in form as objectionable as a tax
can be, and is equally obnoxious to the native and to the foreign
merchant. Tolls or barriers are erected at frequent intervals along
all the principal routes of trade, whether by land or water, and a
small levy is made at each on every conceivable article of commerce.
The individual levy is small, but over a long transit it may amount to
15 or 20%. The objectionable feature is the frequent stoppages with
overhauling of cargo and consequent delays. By treaty, foreign goods
may commute all transit dues for a single payment of one-half the
import tariff duty, but this stipulation is but indifferently
observed. It must also be remembered, per contra, that dishonest
foreign merchants will take out passes to cover _native-owned_ goods.
The difficulty in securing due observance of treaty rights lies in the
fact that the likin revenue is claimed by the provincial authorities,
and the transit dues when commuted belong to the central government,
so that the former are interested in opposing the commutation by every
means in their power. As a further means of neutralizing the
commutation they have devised a new form of impost, viz. a terminal
tax which is levied on the goods after the termination of the transit.
The amount and frequency of likin taxation are fixed by provincial
legislation--that is, by a proclamation of the governor. The levy is
authorized in general terms by an imperial decree, but all details are
left to the local authorities. The yield of this tax is estimated at
taels 13,000,000 (Ll,950,000), a sum which probably represents
one-third of what is actually paid by the merchants, the balance being
costs of collection.

4. _Imperial Maritime Customs_.--The maritime customs is the one
department of finance in China which is managed with probity and
honesty, and this it owes to the fact that it is worked under foreign
control. It collects all the duties leviable under the treaties on the
foreign trade of China, and also all duties on the coasting trade so
far as carried on by vessels of foreign build, whether Chinese or
foreign owned. It does not control the trade in native craft, the
so-called junk trade, the duties on which are still levied by the
native custom-house officials. By arrangement between the British and
Chinese governments the foreign customs levy at the port of entry a
likin on Indian opium of taels 80 per chest, in addition to the tariff
duty of taels 30. This levy frees the opium from any further duty on
transit into the interior. The revenue of the maritime customs rose
from taels 8,200,000 in 1865 to taels 35,111,000 in 1905.

5. _Native Customs_,--The administration of the native customs
continues to be similar to what prevailed in the maritime customs
before the introduction of foreign supervision. Each collector is
constituted a farmer, bound to account for a fixed minimum sum, but
practically at liberty to retain all he may collect over and above. If
he returns more he may claim certain honorary rewards as for extra
diligence, but he generally manages to make out his accounts so as to
show a small surplus, and no more. Only imperfect and fragmentary
returns of the native collectorates have been published, but the total
revenue accruing to the Chinese government from this source did not
appear up to 1900 much to exceed two million taels (L300,000). In
November 1901 native customs offices within 15 m. of a treaty port
were placed under the control of the maritime customs, their revenues
having been hypothecated for the service of the Boxer indemnity. The
result was that the amount of the native customs collected by the
commissioners of customs increased from taels 2,206,000 in 1902 to
taels 3,699,000 in 1906.

6. _Duty on Native Opium_.--The collection of the duty on opium is in
the hands of the provincial officials, but they are required to
rendera separate account of duty and likin collected on the drug, and
to hold the sum at the disposal of the board of revenue at Peking. The
annual import into China of Indian opium used to amount to about
50,000 chests, the exact amount of opium imported in 1904 being 54,750
piculs, on which the Chinese government received from duty and likin
combined about 5-1/2 million taels (L825,000). The total amount of
native-grown opium was estimated in 1901 at about 400,000 chests
(53,000,000 lb), and if this were taxed at taels 60 per chest, which
in proportion to its price was a similar rate to that levied on Indian
opium, it should give a revenue of 24 million taels. Compared with
this the sums actually levied, or at least returned by the local
officials as levied, were insignificant. The returns gave a total levy
for all the eighteen provinces of only taels 2,200,000 (L330,000). The
anti-opium smoking campaign initiated by the Chinese government in
1905 affected the revenue both by the decreased importation of the
drug and the decrease in the area under poppy cultivation in China. In
1908 the opium likin revenue had fallen to taels 3,800,000.

7. _Miscellaneous_.--Besides the main and regular sources of income,
the provincial officials levy sums which must in the aggregate amount
to a very large figure, but which hardly find a place in the returns.
The principal are land transfer fees, pawnbrokers' and other licences,
duties on reed flats, commutation of corvee and personal services, &c.
The fee on land transfers is 3%, and it could be shown, from a
calculation based on the extent and value of the arable land and the
probable number of sales, that this item alone ought to yield an
annual return of between one and two millions sterling. Practically
the whole of this is absorbed in office expenses. Under this heading
should also be included certain items which though not deemed part of
the regular revenue, have been so often resorted to that they cannot
be left out of account. These are the sums derived from sale of office
or of brevet rank, and the subscriptions and benevolences which under
one plea or another the government succeeds in levying from the
wealthy. Excluding these, the government is always ready to receive
subscriptions, rewarding the donor with a grant of official rank
entitling him to wear the appropriate "button." The right is much
sought after, and indeed there are very few Chinamen of any standing
that are not thus decorated, for not only does the button confer
social standing, but it gives the wearer certain very substantial
advantages in case he should come into contact with the law courts.
The minimum price for the lowest grade is taels 120 (L18), and more of
course for higher grades. The proceeds of these sales go directly to
the Peking government, and do not as a rule figure in the provincial
returns. The total of the miscellaneous items accruing for the benefit
of the government is estimated at taels 5,500,000.

_Expenditure._--In regard to expenditure a distinction has to be drawn
between that portion of the revenue which is controlled by the central
government, and that controlled by the several provincial authorities.
As the provinces collect the revenue, and as the authorities there are
held responsible for the peace, order and good government of their
respective territories, it follows that the necessary expenses of the
provinces form a sort of first charge on the revenue. (As the tables
given show, the provinces spend the greater part of the revenue
collected.) The board of revenue at Peking, which is charged with a
general supervision of finance matters all over the empire, makes up
at the end of the year a general estimate of the funds that will be
required for imperial purposes during the ensuing year, and apportions
the amount among the several provinces and the several collectorates
in each province. The estimate is submitted to the emperor, and, when
sanctioned, instructions are sent to all the viceroys and governors in
that sense, who, in turn, pass them on to their subordinate officers.
In ordinary times these demands do not materially vary from year to
year, and long practice has created a sort of equilibrium between
imperial and provincial demands. The remittances to the capital are,
as a rule, forwarded with reasonable regularity, mostly in the form of
hard cash. There is, however, a constant pull going on between Peking
and the provinces--the former always asking for more, the latter
resisting and pleading impecuniosity, yet generally able to find the
amounts required. The expenses which the central government has to
meet are:--(1) Imperial household; (2) pay of the Manchu garrison in
and about Peking; (3) costs of the civil administration in the
capital; (4) cost of the army so far as the expenses are not borne by
the provinces; (5) naval expenses;[46] (6) foreign loans--interest and
sinking fund. To meet all these charges the Peking government for
several years up to 1900 drew on the provinces for about taels
20,000,000 (L3,000,000), including the value of the tribute rice,
which goes to the support of the Manchu bannermen.[47] No estimates
are furnished of the sums allowed under such heading. The imperial
household appears to receive in silver about taels 1,500,000
(L225,000) but it draws besides large supplies in kind from the
provinces, e.g. silks and satins from the imperial factories at
Su-chow and Hangchow, porcelain from the Kiang-si potteries, &c., the
cost of which is defrayed by the provinces. The imperial government
has also at its disposal the revenue of the foreign customs. Prior to
the Chino-Japanese war of 1894-95 this revenue, which, after allowing
for the costs of collection, amounted to about 20,000,000 taels
(L3,000,000), was nominally shared with the provinces in the
proportion of four-tenths and six-tenths. The whole of the customs
revenue is now pledged to foreign bondholders and absorbed by the
service of the several loans. Besides supplying its own wants the
imperial government has to provide for outlying portions of the empire
which are unable to maintain themselves--(1) Manchuria, (2) Kan-suh
and the central Asian dominion, (3) the south-western provinces of
Yun-nan, Kwei-chow and Kwang-si. Manchuria, or, as it is termed, the
north-east frontier defence, costs about taels 2,000,000 over and
above its own resources. The central Asian territories constitute a
drain on the imperial government of about taels 4,000,000 a year. This
is met by subsidies from Sze-ch'uen, Shan-si, Ho-nan and other wealthy
provinces. Yun-nan, Kwei-chow and Kwang-si require aids aggregating
taels 2,000,000 to keep things going.

_External Debt._--Prior to the war with Japan in 1894 the foreign debt
of China was almost nil. A few trifling loans had been contracted at 7
and 8%, but they had been punctually paid off, and only a fraction of
one remained. The expenses of the war, however, and the large
indemnity of taels 230,000,000 (L34,500,000) which Japan exacted,
forced China for the first time into the European market as a serious
borrower. The sum of L6,635,000 was raised in 1894-1895 in four small
loans at 6 or 7% interest. In 1895 a Franco-Russian loan of fr.
440,000,000 (L15,820,000) was raised in Paris. Two Anglo-German loans,
each of L16,000,000 (one in 1896, the other in 1898) were raised
through the Hong Kong and Shanghai Bank. The Franco-Russian loan bears
4% interest, the first Anglo-German 5%, the second 41/2%. The foreign
loans contracted up to 1900 amounted altogether to L54,455,000. The
charges for interest and sinking fund, which amounted to over
L3,000,000, were secured on the revenue of the maritime customs, and
on the likin taxes of certain specified provinces. The net income from
these two sources amounted to over taels 24,000,000, equivalent at
existing rate of exchange to L3,400,000, which was amply sufficient.

Between 1899 and 1907 (both years inclusive) L12,200,000 was raised on
loan for railway purposes. The charges on the first loan--for
L2,300,000--were secured on the revenue of the Imperial Northern
railway, the interest being 5%. The same interest was secured on the
other loans, save one for L1,000,000 in which the Hong Kong government
was concerned, which bears 4% interest.

The foreign debt also includes the indemnities exacted in 1901 by the
powers for the Boxer outrages. These indemnities, secured on imperial
revenue, are divided into five series amounting altogether to
L67,500,000, the amount payable on these indemnities (at 4% interest)
in 1907 being L2,824,425. The burden of meeting this amount was
apportioned between the eighteen provinces--the sums allocated ranging
from taels 2,500,000 for Kiang-su to taels 300,000 for Kwei-chow. In
1909 the grand total of China's indebtedness exceeded L140,000,000 and
the interest called for the payment of L7,427,450 in gold.

_Banks and Banking._--Native banks for purposes of inland exchange are
to be found in most large cities. They are private banks using their
own capital, and seldom receiving deposits from the public. The best
known are the Shan-si banks, which have branches all over the empire.
They work on a small capital, seldom over L50,000 each, and do a small
but profitable business by selling their drafts on distant places.
None of them issues notes, although they are not debarred from doing
so by law. They lend money on personal security, but do not advance
against shipments of goods. In some places there are small local
banks, usually called cash shops, which issue paper notes for small
sums and lend money out on personal security. The notes never reach
more than a very limited local circulation, and pass current merely on
the credit of the institution. There is no law regulating the
formation of banks or the issue of notes. _Pawnshops_ occupy a
prominent position in the internal economy of China. They lend on
deposit of personality at very high rates, 18 and 24%, and they
receive deposits of money from the public, usually allowing 6 to 10%.
They are the real banks of deposit of the country, and the better
class enjoy good credit. _Foreign Banks_ do a large business at
Shanghai and other treaty ports, and a _Government Bank_ has been
established at Peking.

_Currency._--In the commercial treaty between Great Britain and China
of 1902 China agreed to provide a uniform national coinage. An
imperial decree of October 1908 commanded the introduction of a
uniform tael currency; but another decree of May 1910 established a
standard currency dollar weighing 72 candareens (a candareen is the
100th part of the tael ounce) and subsidiary coins of fixed values in
decimal ratio. This decree properly enforced would introduce a much
needed stability into the monetary system of China.

The actual currency (1910) consists of (l) _Silver_, which may be
either uncoined ingots passing current by weight, or imported coins,
Mexican dollars and British dollars; and (2) _Copper_ "cash," which
has no fixed relation to silver. The standard is silver, the unit
being the Chinese ounce or tael, containing 565 grains. The tael is
not a coin, but a weight. Its value in sterling consequently
fluctuates with the value of silver; in 1870 it was worth about 6s.
8d., in 1907 it was worth 3s. 3d.[48] The name given in China to
uncoined silver in current use is "sycee." It is cast for convenience
sake into ingots weighing one to 50 taels. Its average fineness is
916.66 per 1000. When foreign silver is imported, say into Shanghai,
it can be converted into currency by a very simple process. The bars
of silver are sent to a quasi-public office termed the "Kung K'u," or
public valuers, and by them melted down and cast into ingots of the
customary size. The fineness is estimated, and the premium or
betterness, together with the exact weight, is marked in ink on each
ingot. The whole process only occupies a few hours, and the silver is
then ready to be put into use. The Kung K'u is simply a local office
appointed by the bankers of the place, and the weight and fineness are
only good for that locality. The government takes no responsibility in
the matter, but leaves merchants and bankers to adjust the currency as
they please. For purposes of taxation and payment of duties there is a
standard or treasury tael, which is about 10% heavier than the tael of
commerce in use at Shanghai. Every large commercial centre has its own
customary tael, the weight and therefore the value of which differ
from that of every other. Silver dollars coined in Mexico, and British
dollars coined in Bombay, also circulate freely at the open ports of
trade and for some distance inland, passing at a little above their
intrinsic value. Carolus dollars, introduced long ago and no longer
coined, are retained in current use in several parts of the interior,
chiefly the tea-growing districts. Being preferred by the people, and
as the supply cannot be added to, they have reached a considerable
premium above their intrinsic value. Provincial mints in Canton,
Wuchang, and other places have issued silver coins of the same weight
and touch as the Mexican dollar, but very few have gone into use. As
they possess no privilege in debt-paying power over imported Mexican
dollars there is no inducement for the people to take them up unless
they can be had at a cheaper rate than the latter, and these are laid
down at so small a cost above the intrinsic value that no profit is
left to the mint. The coinage has in consequence been almost
discontinued. Subsidiary coins, however, came largely into use, being
issued by the local mints. One coin "the hundredth part of a dollar"
proved very popular (the issue to the end of 1906 being computed at
12,500,000,000), but at rates corresponding closely to the intrinsic
value of the metal in it. The only coin officially issued by the
government--up to 1910--was the so-called copper _cash_. It is a small
coin which by regulation should weigh 1/16 of a tael, and should
contain 50 parts of copper, 40 of zinc, and 10 of lead or tin, and it
should bear a fixed ratio to silver of 1000 cash to one tael of
silver. In practice none of these conditions was observed. Being
issued from a number of mints, mostly provincial, the standard was
never uniform, and in many cases debased. Excessive issues lowered the
value of the coins, and for many years the average exchange was 1600
or more per tael. The rise in copper led to the melting down of all
the older and superior coins, and as for the same reason coining was
suspended, the result was an appreciation of the "cash," so that a
tael in 1909 exchanged for about 1220 cash or about 35 to a penny
English. Inasmuch as the "cash" bore no fixed relation to silver, and
was, moreover, of no uniform composition, it formed a sort of mongrel
standard of its own, varying with the volume in circulation.
(G.J.; X.)