The Boxer rising is one of the few Chinese events that all Europeans know about. After we had demonstrated our superior virtue by the sack of Peking, we exacted a huge indemnity, and turned the Legation Quarter of Peking into a fortified city. To this day, it is enclosed by a wall, filled with European, American, and Japanese troops, and surrounded by a bare space on which the Chinese are not allowed to build. It is administered by the diplomatic body, and the Chinese authorities have no powers over anyone within its gates. When some unusually corrupt and traitorous Government is overthrown, its members take refuge in the Japanese (or other) Legation and so escape the punishment of their crimes, while within the sacred precincts of the Legation Quarter the Americans erect a vast wireless station said to be capable of communicating directly with the United States. And so the refutation of Chien Lung is completed.

Out of the Boxer indemnity, however, one good thing has come. The Americans found that, after paying all just claims for damages, they still had a large surplus. This they returned to China to be spent on higher education, partly in colleges in China under American control, partly by sending advanced Chinese students to American universities. The gain to China has been enormous, and the benefit to America from the friendship of the Chinese (especially the most educated of them) is incalculable. This is obvious to everyone, yet England shows hardly any signs of following suit.

To understand the difficulties with which the Chinese Government is faced, it is necessary to realize the loss of fiscal independence which, China has suffered as the result of the various wars and treaties which have been forced upon her. In the early days, the Chinese had no experience of European diplomacy, and did not know what to avoid; in later days, they have not been allowed to treat old treaties as scraps of paper, since that is the prerogative of the Great Powers--a prerogative which every single one of them exercises.

The best example of this state of affairs is the Customs tariff.[27] At the end of our first war with China, in 1842, we concluded a treaty which provided for a duty at treaty ports of 5 per cent. on all imports and not more than 5 per cent on exports. This treaty is the basis of the whole Customs system. At the end of our next war, in 1858, we drew up a schedule of conventional prices on which the 5 per cent. was to be calculated. This was to be revised every ten years, but has in fact only been revised twice, once in 1902 and once in 1918.[28] Revision of the schedule is merely a change in the conventional prices, not a change in the tariff, which remains fixed at 5 per cent. Change in the tariff is practically impossible, since China has concluded commercial treaties involving a most-favoured-nation clause, and the same tariff, with twelve States besides Great Britain, and therefore any change in the tariff requires the unanimous consent of thirteen Powers.

When foreign Powers speak of the Open Door as a panacea for China, it must be remembered that the Open Door does nothing to give the Chinese the usual autonomy as regards Customs that is enjoyed by other sovereign States.[29] The treaty of 1842 on which the system rests, has no time-limit of provision for denunciation by either party, such as other commercial treaties contain. A low tariff suits the Powers that wish to find a market for their goods in China, and they have therefore no motive for consenting to any alteration. In the past, when we practised free trade, we could defend ourselves by saying that the policy we forced upon China was the same as that which we adopted ourselves. But no other nation could make this excuse, nor can we now that we have abandoned free trade by the Safeguarding of Industries Act.

The import tariff being so low, the Chinese Government is compelled, for the sake of revenue, to charge the maximum of 5 per cent, on all exports. This, of course, hinders the development of Chinese commerce, and is probably a mistake. But the need of sources of revenue is desperate, and it is not surprising that the Chinese authorities should consider the tax indispensable.

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.