El Paso herald. (El Paso, Tex.) 1901-1931, 1913-01-21
Foreign Audit For China
Bankers Making Big Loan to New
Republic Want to Know
Where the Money Goes.
by Frederic J. HasISin --
TASHINGTON. D. c., Jan. IL

EW TASHlNGION, D. T., Jan. IL
M Before replying to the pro-
posaI Of premier Tang Shao
VI, of China, to float a loan of 100000,
600, the six power group looked the
situation over carefully, for it must be
remembered that they are bankers and
business men. Despite the chaos that
prevailed in China, regardless of the
I nebulous form of its government, they
had been asked to lay a bond selling
! proposition before the world in the
/ first place, while prepared to advance
sums from their own strOngbOxes, IN
der certain conditions, they deemed it
1 very unWise to even attempt to sell new
! Chinese bonds at that time. They would
I have been sold so low that other Chi
( neSe bonds already on the market would
| have slumped.
$3O.OOO,OOO From Salt Tax.
If the group undertook to advance a
/ large amount of money Immediately
| they would have had to discount treas
/ Ury bills. These they would have been
] forced to keep, or try to sell to such few
| clients as would take them. AS to the
! salt gabelle. the bankers held that 1t
! would be safe security only when ad-
/ m1nlstered by foreigners. The annual
/ returns from this salt tax are estimated
/ at 10000 per annum, whereas under
| foreign control it could amount to at
] least twice as much.
After the relief of Pekin in 1898 a
provisional government of foreigners
+ was organized to direct the affairs OF
: the city of Tientsin until order should
( be restored The French consul general
was chairman Of the civil commission
and the secretary was Mr.. DENLY, the
American consul general Under this
foreign administration one station
/ turned in as much from the salt tax IN
six months as the whole district did IN
year when the Chinese were in control.
A similar experiment was tried at
/ TsingtaO, and the receipts were six
times as much as they had been before
in the same length of time. Conse-
quently, the six power group decided
that the huge loan Tang ShaO request
ed could be given only on the following
terms:
Foreign Audit Obligatory.
First, that the group should have the
right to satisfy as to the purposes for
which the funds were required
Second, that China should itself create
system of audit in which foreigners
should be employed with powers not
merely advisory. but also executive, so
as to ensure the effective expenditure
of funds borrowed for the purposes
specified
Third, that the salt taxes to be by
pOthecated for the service of this loan
should be administered either by the eX-
listing maritime customs organization
or by a separate Chinese service like
the customs, however, under foreign
direction, thus safeguarding the prop
er administration OF the security de-
spite the possible continuation or re-
currence of unsettled conditions in
China.
Fourth, that the group should take
the first series of the loan OF 100000
600 at a fixed price and should be as
sured an option on the subsequent Sc
rtes at price to be based on the mar
ket quotation Of the first isue, thus Civ
ing China the benefit of any improve
ment in her credit
Fifth, that to protect the quotation
OF bonds issued and to assure q sue
cessfuI marketing Of subsequent series
groups until after the entire loan of
S300,000,00O had been issued.
Sixth, that for period Of five years
China should appoint the group, its /
tration in its work Of reorganization"
Terms Rejeced at First.
On July 9 these terms were rejected /
on the ground that they were Unrea-
sonable from the Chinese point Of view.
but the crying need Tor cash did not
abate, and two weeks later, or therea-
bouts. the group was approached in re-
gard to the issuing Of a small $50
100000 loan, with immediate advances. |
DeeminS this sum entirely Inadequate |
for the ameliOratiOH of China, the bank I
ers refused In the meantime disaf- I
fected and unpaid troops continued to 1
desert riot, burn and loot in various /
parts of the country.
Probably the majority Of the high /
OFFICIALS IN the capital city OF Pekin /
honestly believed the demands of the /
six power group to be excessive. One !
member of the cabinet said: L would .
rather have my country die by slow
starvation than to be quickly stran-
sIed.'
This view was also held by the ma
iority of the members of the national
assembly, really the provisional con-
gress. They felt that the terms of
the group were tantamOunt to dire
bondage, and were deeply in /
suited over the stipulation that the salt /
5abelle be controlled by foreigners I
-orS and inspectors be picketed to
watch and direct the expenditure OF the !
money that the six power group would
ADVANCE from time to time. This infer
.nce OF incompetence, and ineXperience, /
wen possible dishonesty, wounded the
ride of enthusiastic, patriotic, and IN
many instances. extremely able young /
nen who found themselves in power
y virtue Of the successful revolution
American, Bankers Criticized.
The American section of the group,
md the United States government
which backed il up, acting in perfect |
ccOrd with Great Britain, France,
germany Russia and Japan, came in
or special criticism. They were lam
,ooned for cOnsenting to be part Of
MS great octopus of finance which |
would bind the new republic hand and
cot as they thought. 1t was pointed ]
ut, and many public spirited AmerI-
an citizens gave their endorsement, |
hat the United States itself was no /
model of financial regularity in its tod /
ling days and that but for indulgent |
france the baby republic would not
ave survived.
Premier Fled; Then Resigned (
a dramatic feature of the loan dead
ock was the political suicide of Tang
hao Vi the premier of China, whose / !
eallngs had been responsible for the
lrst break between the government and |
ne six power group After the Bel
nan loan was exposed, the matter was I
AIKEN out of his hands entirely and
to the minister Of finance. I
he situation became more intolerable {
o premier Tang as the lines tlghtened I
round him, and one day last August s
a dispute with the minister I
L finance in the presence of the cabl- 7
et, he left the meeting. sneaked TO the (
allway station in an ordinary street {
lcksha, and fled to the foreign con- &
essions in the city Of Tientsln, 80 miles
way. The pleas Of president yuan {
allied to bring him back to his duties, 7
nd his resignation" was soon &C
epted :
Bonds FIOated in London. c
The last attempt of the Chinese gov [
fnment to get money without appeal L
ng to the six power group was IN Sep {
ember, when c. Birch Crisp and com G
any, of London, undertook to float a c