There is also another system in China, chiefly inherited from the time of the Taiping rebellion, namely the erection of internal customs barriers at various important points. This plan is still adopted with the internal trade. But merchants dealing with the interior and sending goods to or from a Treaty Port can escape internal customs by the payment of half the duty charged under the external tariff. As this is generally less than the internal tariff charges, this provision favours foreign produce at the expense of that of China. Of course the system of internal customs is bad, but it is traditional, and is defended on the ground that revenue is indispensable. China offered to abolish internal customs in return for certain uniform increases in the import and export tariff, and Great Britain, Japan, and the United States consented. But there were ten other Powers whose consent was necessary, and not all could be induced to agree. So the old system remains in force, not chiefly through the fault of the Chinese central government. It should be added that internal customs are collected by the provincial authorities, who usually intercept them and use them for private armies and civil war. At the present time, the Central Government is not strong enough to stop these abuses.
The administration of the Customs is only partially in the hands of the Chinese. By treaty, the Inspector-General, who is at the head of the service, must be British so long as our trade with China exceeds that of any other treaty State; and the appointment of all subordinate officials is in his hands. In 1918 (the latest year for which I have the figures) there were 7,500 persons employed in the Customs, and of these 2,000 were non-Chinese. The first Inspector-General was Sir Robert Hart, who, by the unanimous testimony of all parties, fulfilled his duties exceedingly well. For the time being, there is much to be said for the present system. The Chinese have the appointment of the Inspector-General, and can therefore choose a man who is sympathetic to their country. Chinese officials are, as a rule, corrupt and indolent, so that control by foreigners is necessary in creating a modern bureaucracy. So long as the foreign officials are responsible to the Chinese Government, not to foreign States, they fulfil a useful educative function, and help to prepare the way for the creation of an efficient Chinese State. The problem for China is to secure practical and intellectual training from the white nations without becoming their slaves. In dealing with this problem, the system adopted in the Customs has much to recommend it during the early stages.[[30]]
At the same time, there are grave infringements of Chinese independence in the present position of the Customs, apart altogether from the fact that the tariff is fixed by treaty for ever. Much of the revenue derivable from customs is mortgaged for various loans and indemnities, so that the Customs cannot be dealt with from the point of view of Chinese interests alone. Moreover, in the present state of anarchy, the Customs administration can exercise considerable control over Chinese politics by recognizing or not recognizing a given de facto Government. (There is no Government de jure, at any rate in the North.) At present, the Customs Revenue is withheld in the South, and an artificial bankruptcy is being engineered. In view of the reactionary instincts of diplomats, this constitutes a terrible obstacle to internal reform. It means that no Government which is in earnest in attempting to introduce radical improvements can hope to enjoy the Customs revenue, which interposes a formidable fiscal barrier in the way of reconstruction.
There is a similar situation as regards the salt tax. This also was accepted as security for various foreign loans, and in order to make the security acceptable the foreign Powers concerned insisted upon the employment of foreigners in the principal posts. As in the case of the Customs, the foreign inspectors are appointed by the Chinese Government, and the situation is in all respects similar to that existing as regards the Customs.
The Customs and the salt tax form the security for various loans to China. This, together with foreign administration, gives opportunities of interference by the Powers which they show no inclination to neglect. The way in which the situation is utilized may be illustrated by three telegrams in The Times which appeared during January of this year.
On January 14, 1922, The Times published the following in a telegram from its Peking correspondent:
It is curious to reflect that this country (China) could be rendered completely solvent and the Government provided with a substantial income almost by a stroke of the foreigner's pen, while without that stroke there must be bankruptcy, pure and simple. Despite constant civil war and political chaos, the Customs revenue consistently grows, and last year exceeded all records by £1,000,000. The increased duties sanctioned by the Washington Conference will provide sufficient revenue to liquidate the whole foreign and domestic floating debt in a very few years, leaving the splendid salt surplus unencumbered for the Government. The difficulty is not to provide money, but to find a Government to which to entrust it. Nor is there any visible prospect of the removal of this difficulty.
I venture to think The Times would regard the difficulty as removed if the Manchu Empire were restored.
As to the "splendid salt surplus," there are two telegrams from the Peking correspondent to The Times (of January 12th and 23rd, respectively) showing what we gain by making the Peking Government artificially bankrupt. The first telegram (sent on January 10th) is as follows:—
Present conditions in China are aptly illustrated by what is happening in one of the great salt revenue stations on the Yangtsze, near Chinkiang. That portion of the Chinese fleet faithful to the Central Government—the better half went over to the Canton Government long ago—has dispatched a squadron of gunboats to the salt station and notified Peking that if $3,000,000 (about £400,000) arrears of pay were not immediately forthcoming the amount would be forcibly recovered from the revenue. Meanwhile the immense salt traffic on the Yangtsze has been suspended. The Legations concerned have now sent an Identic Note to the Government warning it of the necessity for immediately securing the removal of the obstruction to the traffic and to the operations of the foreign collectorate.