The Four Power Note, referred to by the Shanghai Chamber of Commerce and the Shanghai Bankers in their telegram to the Inspector General, raises, as the Inspector General telegraphed in his reply, a large question of principle affecting China's national credit as a whole. National credit cannot be maintained by paying in full certain privileged foreign and Chinese crediters, and leaving other creditors, foreign and Chinese, unpaid, as is being done at present. The fact is that the Chinese Government has not at its command sufficient cash to meet all its obligations, and the foreign creditors contend that a process similar to that which is employed in civil bankruptey proceedings should now be_ set in motion. That is to say, that the Government's cash assets, _represented by the Customs Surplus, should be shared by the foreign creditors whose loans are in default instead of being devoted entirely to certain domestic loans. The Four Power Note appears to support this contention in that it apparently invites the Chinese Government to set aside the priority it has established in favour of the Consolidated Loan Service and the 96 million dollar loan.
But it does not appear that the Four Powers contemplate a general liquidation of China's indebtedness on the, analogy of civil bankruptcy proceedings, assuming that such a process could be applied to a sovereign state. The Four Powers insist on the priority of what are called the Customs secured foreign loans and the Indemnity and do not suggest that the revenue funds devoted to the service of these obligations should be placed in a pool of available assets: they merely suggest that the Customs surplus should be so treated. In other words they stand for the principle of prior-
Text read from the printed page and cleaned; old type leaves the occasional error.