Chapter 28

It has hitherto been extremely difficult to obtain anything like trustworthy figures for the whole revenue of China, for the reason that no complete statistics are published by the central government at Peking.[41] The only available data are, first, the returns published by the imperial maritime customs for the duties levied on foreign trade; and, secondly, the memorials sent to Peking by the provincial authorities on revenue matters, certain of which are published from time to time in the _Peking Gazette_. These are usually fragmentary, being merely reports which the governor has received from his subordinates, detailing, as the case may be, the yield of the land tax or the likin for his particular district, with a dissertation on the causes which have made it more or less than for the previous period. Or the return may be one detailing the expenditure of such and such a department, or reporting the transmission of a sum in reply to a requisition of the board of revenue, with a statement of the source from which it has been met. It is only by collating these returns over a long period that anything like a complete statement can be made up. And even then these returns do not represent anything like the total of taxation paid by the people, but, as far as they go, they may be taken to represent the volume of taxation on which the Peking government can draw revenue.

The following table, taken from a memorandum by Sir Robert Hart, dated the 25th of March 1901, shows the latest official estimate (up to 1910) of the revenue and expenditure of China:--

_Revenue._ Taels.[42] Land tax 26,500,000 Provincial duties 1,600,000 " receipts (various) 1,000,000 Grain commutation 3,100,000 Salt gabelle 13,500,000 Li-kin 16,000,000 Native customs 2,700,000 Maritime customs:-- General cargo 17,000,000 Foreign opium 5,000,000 Native opium 1,800,000 ---------- Total 88,200,000

_Expenditure._ Taels. Provincial 20,000,000 Military and naval 35,000,000 Metropolitan 10,000,000 Bannermen (Manchu "soldiers") 1,380,000 Palace 1,100,000 Customs 3,600,000 Legations 1,000,000 River works 940,000 Railways 800,000 Loans 24,000,000 Contingent reserve 3,300,000 ----------- Total 101,120,000

A calculation of revenue from all sources published by the Shanghai _Shen Pao_ in 1908, apparently derived from official sources, gave a total revenue of 105,000,000 taels, or about 15 million sterling. This sum is obviously less than the actual figures. In 1907 Mr H.B. Morse, commissioner of customs and statistical secretary in the inspectorate general of customs, drew up the following table based on the amounts presumed to be paid by the tax payer:--

+-----------------------+------------+-------------+------------+ | | Imperial | Provincial | Local | | | Adminis- | Adminis- | Adminis- | | | tration. | tration. | tration. | +-----------------------+------------+-------------+------------+ | | Taels. | Taels. | Taels. | | I. Land Tax | 25,887,000 | 67,060,000 | 9,315,000 | | II. Tribute | 7,420,000 | 15,582,000 | 2,300,000 | | III. Native Customs | 3,790,000 | 1,290,000 | 249,000 | | IV. Salt Gabelle | 13,050,000 | 26,000,000 | 25,000,000 | | V. Miscellaneous | 3,856,000 | 5,998,000 | 985,000 | | VI. Foreign Customs | 31,169,000 | 3,942,000 | 1,230,000 | | VII. Li-kin | 13,890,060 | 22,502,000 | 3,639,000 | +-----------------------+------------+-------------+------------+ | Total | 99,062,000 | 142,374,000 | 42,718,000 | +-----------------------+------------+-------------+------------+

Mr Morse adds that the grand total shown, taels 284,150,000[43] "is an obviously insufficient sum on which to maintain the fabric of government in an empire like China, but it has been reached by calculations based on a few known facts and ... is offered as throwing some light on a subject veiled in obscurity."[44]

The service of the foreign debt, together with the pressure of other needs--such as the cost of education and the army--made more manifest than previously the chaos of the Chinese fiscal system. A scheme to reform the national finances was promulgated under an edict of the 11th of January 1909, but it did not appear to be of a practical character.

_Sources of Revenue_. I. _Land Tax_.--In China, as in most oriental countries, the land has from time immemorial been the mainstay of the revenue. In the early years of the present dynasty there was levied along with the land tax a poll tax on all adult males, but in 1712 the two were amalgamated, and the whole burden was thrown upon land, families not possessing land being thereafter exempted from taxation. At the same time it was decreed that the amount of the land tax as then fixed should be permanent and settled for all time coming. It would appear from the records that this promise has been kept as far as the central government has been concerned. In all its many financial difficulties it does not seem ever to have tried to increase the revenue by raising the land tax. The amount of tax leviable on each plot is entered on the title deed, and, once entered, it cannot be changed.[45] The tax on almost all lands is thus stated to be so much in silver and so much in rice, wheat or whatever the principal crop may be. Except in two provinces, however, the grain tax is now commuted and paid in silver. The exceptions are Kiang-su and Cheh-kiang, which still send forward their taxes in grain. The value of the grain forwarded (generally called tribute rice) is estimated at taels 6,500,000. The total collection in silver, as reported by the responsible officials, amounts in round numbers to taels 25,000,000. The total yield of the land tax, therefore, is taels 31,500,000, or say £4,725,000. It will readily be granted that for such a large country as China this is a very insignificant one. In India the land tax yields about £20,000,000, and China has undoubtedly a larger cultivated area, a larger population, and soil that is on the whole more fertile; but it is certain that this sum by no means represents the amounts actually paid by the cultivators. It is the sum which the various magistrates and collectors have to account for and remit in hard cash. But as nothing is allowed them for the costs of collection, they add on a percentage beforehand to cover the cost. This they usually do by declaring the taxes leviable not in silver, but in copper "cash", which indeed is the only currency that circulates in country places, and by fixing the rate of exchange to suit themselves. Thus while the market rate is, say, 1500 cash to the tael, they declare by general proclamation that for tax-paying purposes cash will be received at the rate of 3500 or 4000 to the tael. Thus while the nominal land tax in silver remains the same it is in effect doubled or trebled, and, what is worse, no return is made or account required of the extra sums thus levied. Each magistrate or collector is in effect a farmer. The sum standing opposite the name of his district is the sum which he is bound to return under penalty of dismissal, but all sums which he can scrape together over and above are the perquisites of office less his necessary expenses. Custom, no doubt, sets bounds to his rapacity. If he went too far he would provoke a riot; but one may safely say there never is any reduction, what change can be effected being in the upward direction. According to the best information obtainable a moderate estimate of the sums actually paid by the cultivators would give two shillings per acre. This on an estimate of the area under cultivation should give for the eighteen provinces £19,000,000 as being actually levied, or more than four times what is returned.

2. _The Salt Duty._--The trade in salt is a government monopoly. Only licensed merchants are allowed to deal in it, and the import of foreign salt is forbidden by the treaties. For the purpose of salt administration China is divided into seven or eight main circuits, each of which has its own sources of production. Each circuit has carefully defined boundaries, and salt produced in one circuit is not allowed to be consigned into or sold in another. There are great differences in price between the several circuits, but the consumer is not allowed to buy in the cheapest market. He can only buy from the licensed merchants in his own circuit, who in turn are debarred from procuring supplies except at the depot to which they belong. Conveyance from one circuit to another is deemed smuggling, and subjects the article to confiscation.

Duty is levied under two heads, the first being a duty proper, payable on the issue of salt from the depot, and the second being likin levied on transit or at the place of destination. The two together amount on an average to about taels 1.50 per picul of 133-1/2 lb or 3s. 9d. per cwt. The total collection returned by the various salt collectorates amounts to taels 13,500,000 (£2,025,000) per annum. The total consumption of salt for all China is estimated at 25 million piculs, or nearly 1-1/2 million tons, which is at the rate of 9 lb per annum per head of the population. If the above amount of taels 1.50 were uniformly levied and returned, the revenue would be 37-1/2 million taels instead of 13-1/2. In this calculation, however, no allowance is made for the cost of collection.

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 (£l,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 (£300,000). 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 (£825,000). 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 (£330,000). 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 corvée 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 (£18), 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 (£3,000,000), 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 (£225,000) 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 (£3,000,000), 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 (£34,500,000) which Japan exacted, forced China for the first time into the European market as a serious borrower. The sum of £6,635,000 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 (£15,820,000) was raised in Paris. Two Anglo-German loans, each of £16,000,000 (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 4½%. The foreign loans contracted up to 1900 amounted altogether to £54,455,000. The charges for interest and sinking fund, which amounted to over £3,000,000, 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 £3,400,000, which was amply sufficient.

Between 1899 and 1907 (both years inclusive) £12,200,000 was raised on loan for railway purposes. The charges on the first loan--for £2,300,000--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 £1,000,000 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 £67,500,000, the amount payable on these indemnities (at 4% interest) in 1907 being £2,824,425. 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 £140,000,000 and the interest called for the payment of £7,427,450 in gold.