The technical right of the Legations to dispose of the Customs surplus as security for loans has been taken for granted in many circles ever singe criticism began to be focussed upon the domestic loan service, that is, since China first began to default on foreign interest payments more than a year ago. A week's: discussion of this in vari-cus quarters, involving as it has some searching of treaties, has revealed the fact that the only clearly stipulated right of the Diplomatic Body in the disposition of the surplus is the right to protect the service of the pre-Boxer loans and the indemnity loans. In the event of great trade depression or a radical drop in the exchange value of silver, when it might appear that Customs revenues were going to be inadequate for the service of the foreign loans secured on them, the Diplomatic Body could produce treaty clauses and clauses from the Bankers' Agreement of 1912, which would warrant it m refusing a release of surplus; but this is quite a different thing from disposing of the surplus: for the security of unsecured foreign loans. It is true that to a certain extent practice and precedent thave seemed to give the Diplomatic Body a larger voice in the disposition of the surplus than treaty stipulations would support. When the Chinese Government has in various seasons of stress attempt-to seize upon the funds put aside for the domestic loan service, the control of the Diplomatic Body over these securities has been purposely exaggerated for their protection.
The diplomats in sending in their recent Note were undoubtedly playing upon the impression made by these exaggerated representations of their authority in the hope of reviving a woefully decadent sense of responsibility among Chinese officials. It would seem disrespectful, perhaps, to accuse four great Powers of bluffing, but this is really what they have been doing. The authorities who control the domestic loan service were somewhat disconcerted at first but have recovered in part, at least, their assurance and equipoise, but not wholly. It would appear at the moment as though a compromise j were to be effected. In Chinese circles it is believed that the Government will respond to the in-Idignant gesture of the four Powers by suspending temporarily the amortization of the domestic bonds and will confine itself to paying interest, devoting whatever is left over to interest payments on foreign loans. The material returns upon the huge unsecured foreign debt will be insigmZcant, but the bankers say there will be a moral advantage gained. This again is doubtful.
Text read from the printed page and cleaned; old type leaves the occasional error.