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.

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:

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:

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 1? 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.

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.