By Rooney Grane Jan, 22. China axe ostensibly borrowed Modern banking methods from the West and in a broad way adhere to Occidental practice but, in banking as in other things, the Chinese have added their own characteristic trimmings to cepted foreign practice, in much the same fashion as they adorn a "foreign-style" carriage for a wedding, converting it into a strange and startling hybrid. Nothing serves to illustrate this better than the manipulation and Juggling in domestic bonds in which the native bankers have been indulging for some years past; and, of all-the issues of native paper, which ride up and down on the native market without reference to financial conditions, none has had so spectacular a career as what is popularly known as "the 96-million." If someone had the time to give a complete history of the fluctuation of "the 96-million"" during the past four or five years, he could tell the general public almost all there is to be known about high finance in the Far East. The recent antics of these so-called "securities" form a diverting, chapter in the history of the loan.
A Worthless Pledge In the Auturin of 1921, when Sir Reginald Gamble was Chief. Inspector of the Salt Revenue Administration, he and his, assistants found that the Chinese Government had so recklessly hypothecated what was known as Salt Surplus (that is the amount over and above the sums required for the service of foreign loans) that, strictly speaking, the surplus had ceased to exist and should have been entirely devoted, though it was not, to the service of the various loans secured upon it. This seemed like bad business and, on the advice of Mr. Strickland, Sir Reginald Gamble entered into negotiations with the Chinese authorities with a view to putting a stop to the further hypothecati of the Salt revenues. As a bait he offered to secure an issue of treasury notes amounting to $14, 000,000 and, as a solution to the muddle into' which the Government had got itself by over-pledging Salt Surplus, he suggested that all outstanding loans upon the surplus should be consolidated and their regular service provided for. The foreign administration was ready to secure the $14,000,000 treasury note issue and the consolidated debts on the salt surplus on the single condition that the Government give some sort of a pledge that the surplus be not again hypothecated on any account. To this the Chinese readily agreed and President Hsu Shih-chang issued a mandate in January, 1922, in which the pledge was embodied. This Pledge was of course utterly worthless and the outstanding- loans, amounting to 96 millions, were no Sooner consolidated and oh paper traded for new, than the Government commenced to repledge the Out "of the new bond issue French and American creditors held trifling amounts, totalling less than a million, but' the Japanese had taken up about $25,000,000 out of a total of $96,000,000; 0, having control of a salt bank—namely the Yokohama Specie Bank-—they proceeded to pay themselves in terest upon this proportion of the Joan out of their salt revenue holdings before releasing any of it to the irresponsible Chinese financiers, which was a highly sensible procedure. 'The Chinese bankers, who, held nearly two thirds of the' total of the new consolidated issue, had no such recourse, however,' and when the Government showed strong disposition to ignore the presidential mandate and to devote the released surplus to frivolous Purposes the "96-million" bonds were gradually foisted upon the market for what they would bring and the original holders were glad to wash their hands of them.
Text read from the printed page and cleaned; old type leaves the occasional error.