she can, on the other hand, procure drafts at the time the rate of exchange appears favorable to her, and it is known that the fluctuations of the rate of exchange are often greater than the rate of interest. Thus we see in Europe a rise in discount incites the bankers to furnish, unsecured, to their correspondents abroad long-dated bills of exchange, in order to profit by the difference between the rate of discount abroad and that of their own country. It was very difficult to make the Chinese ministers understand the meaning of the words "coefficient of charges." The rate of silver is telegraphed daily from London to Shanghai. It is increased by the price of sending, viz, the freight, insurance, and brokerage, or from 0.90 to 1 per cent. It may be observed also that the intrinsic par value of silver quoted at London is below that of the Shanghai tael and that the latter weighs more than a troy ounce. In order to determine the rate of exchange at Shanghai according to the price of silver at London, there is therefore a computation to be made. It consists in multiplying the value of an ounce of silver at London by 1.182. The reply of the Waiwu Pu dated from January 31. It did not yet appear acceptable. China did admit the drafts, the telegraph transfers, and the price of silver at London, but she did not say that the payments would be paid in the respective money of each country and directly into the hands of each power. Moreover, the Chinese Government raised the claim of proportioning the payment of the arrearages and was silent regarding the interest on these arrearages from January 1, 1905, up to the day of payment. Hence the necessity of proposing new modifications to the Waiwu Pu. Of this counter project, which I sent to the Waiwu Pu on February 1, the first part, referring to the manner of making the payments, was accepted, and the second part, relating to the interest, was rejected. After urgent pressure, the Waiwu Pu yielded also on this question of interest. These successive modifications led the Chinese Government to propose the method of settlement which formed the subject of the circular of February 6, No. 16. [Inclosure 2.-Translation.] Circular No. 16. IMPERIAL GERMAN EMBASSY, As a result of conferences which his excellency the minister of Belgium and other ministers have had with the Chinese ministers, the Waiwu Pu sent to Mr. de Gaiffier, officially, the draft of note and the inclosed table, which I have the honor to place in circulation with the French translation. As this draft did not yet appear acceptable, Mr. de Gaiffier began new conferences with the Waiwu Pu with a view to determining in a clearer manner the mode of payment and to cause the 8,000,000 of haikwan taels of the protocol to bear interest at the rate of 4 per cent from the 1st of January, 1905, until the day of liquidation. These conferences induced the Waiwu Pu to accept the draft of note hereto annexed with French translation. • In this project the offer of the Chinese Government for the past, which had been £1,032,405 8s. 10d., is brought up to 8,000,000 haikwan taels of the protocol (£1,200,000), which China declares herself ready to pay within a period of twenty-five days after the signature of the agreement, and which will bear interest at the rate of 4 per cent from January 1, 1905, until the day of payment. It results from this figure, compared with that of H. T. P. 9,412,349.70 (£1,411,852 9s. 1d.) which the bankers' commission of Shanghai indicated to us as representing the entire claim of the powers on January 1, 1905, that the acceptance of the Chinese proposal would involve for the whole of the powers a loss of H. T. P. 1,412,349.70 (£211,852 9s. 1d.). According to the new table which has just been addressed to us by the bankers' commission and which I submitted to the examination of my honored colleagues by circular No. 15 of the 4th last, this loss would be diminished by H. T. P. 374,968.59 (£56,245 8s. 9d.) if the calculation of the bankers were made on a gold basis, as the diplomatic corps had asked, as a matter of information, in the telegram of His Excellency Baron Czikann on December 14 last. As far as the future is concerned, China asks of the powers the authorization to make monthly installments and to deduct 4 per cent interest on these installments. These installments will be made at the option of the various powers, either on the basis of the price of silver at London or in drafts or in telegraphic transfers, which China may procure anywhere and in any manner, according to her best interests, and which she shall remit directly to the various powers in their currencies at the maturity periods. According to the oral statements of the ministers of the Waiwu Pu, each power shall make its choice as to the mode of payment once for all upon the conclusion of the new agreement. While requesting my honorable colleagues, as dean, to be pleased to express their opinions on the new Chinese proposition, I have the honor to add, in my capacity as minister of Germany, that, with a view to a definite settlement of the question of indemnity and in view of the recognition by China of the debt (payable) in gold, in her communication of October 14, 1904, I will recommend the acceptance of the Chinese proposition to my government. As soon as this circular is returned to me I shall place it in circulation a second time in order that copies may be taken of the annexes. A. v. MUMM. ANNEX 1. Due: Paid: July 1, 1902. Interest, 9,000,000 protocol haikwan taels; interest on arrearages of 9,000,000 protocol haikwan taels, 180,000 protocol haikwan taels=9,180,000 protocol haikwan taels; at the protocol rate of exchange 3s. Six monthly installments of 1,820,000 haikwan taels=10,920,000 haikwan taels=12,164,880 Shanghai taels; or at the rate of exchange of June 30 of 2s. 3.625d. Balance to China's credit.. Due: January 1, 1903. Paid: Amortization, 829,500 protocol haikwan taels; interest, 9,000,000 protocol haikwan taels; interest on the arrearage of 9,000,000 protocol haikwan taels, 180,000 protocol haikwan taels= 10,009,500 protocol haikwan taels; at the protocol rate of exchange 3s.. 1,501, 425 00 taels; or at the rate of exchange of De- Surplus of the last payment period. 23, 228 7 6 464 11 4 1,340, 287 15 4 Balance to the debit of China.... July 1, 1903. Interest on 8,983,410 protocol haikwan taels; interest on arrearage of 9,000,000 haikwan taels, 180,000 protocol haikwan taels=9,163,410 protocol haikwan taels; at the protocol rate of exchange 3s... Deficit of last payment period. Paid: Six monthly installments of 1,820,000 haikwan taels=10,920,000 haikwan taels=12,164,880 Shanghai taels; or at rate of exchange of June 30 of 2s. 3.875d... Balance to debit of China... Due: January 1, 1904. Amortization, 862,680 protocol haikwan taels; interest 8.983,410 protocol haikwan taels; interest of arrearage of 9,000,000 protocol haikwan taels, 180,000 protocol haikwan taels= 10,026,090 protocol haikwan taels; at protocol rate of exchange 3s.. Deficit of last payment period.. Interest on this deficit... 12,153,183 Shanghai taels; at the rate of exchange of Decem ber 31, 1903, of 2s. 5.25d.. Balance to debit of China. Due: Paid: Due: Paid: Interest, 8,966,156 protocol haikwan taels; interest on arrearage of 9,000,000 protocol haikwan taels, 180,000 protocol haikwan taels 9,146,156 protocol haikwan taels; at protocol rate of exchange 3s.. Deficit of last payment period. Interest on this deficit.. Six monthly installments of 1,820,000 haikwan taels=10,920,000 haikwan taels=12,164,880 Shanghai taels; or at rate of exchange of June 30 of 2s. 6.625d... Balance to China's credit..... January 1, 1905. Amortization, 897,188 protocol haikwan tael; interest 8,966,156 protocol haikwan taels; interest on arrearage of 9,000,000 protocol haikwan taels, 180,000 protocol haikwan taels=19,043,344 protocol haikwan taels, or at protocol rate of exchange 3s... 1,677, 392 8 11 ANNEX 2. [Translation.] Note. According to the computations made by the Waiwu Pu regarding the arrearages of the indemnity for the three preceding years, the total of China's debt to the powers amounted to £1,032,405 8s. 10d. On the other hand, it is found from a note which was sent us by Mr. de Gaiffier that the sum due in order to cover the deficit of the last three years is £1,419,443 8s. 8d. In the opinion of the ministers at Peking the ministers of finance of the various countries have counted on the sums paid for the past years and have long ago allotted them for expenses, and it appears impossible to modify the accounts. Consequently the three points proposed by the Waiwu Pu can not be applied to China as far as the past three years are concerned. We, ministers of the Waiwu Pu, have taken these considerations into account, but we must discuss anew the following two points, viz: 1. At each payment period the Shanghai bankers do not convert the silver into gold according to the current rate of exchange on the Shanghai market. It is impossible for us to approve this procedure. The daily rate of exchange of gold and silver is notified to us from time to time by the taot'ai of Shanghai. Herein below we reproduce for the five payment periods the rate of exchange fixed by the bankers and that which was notified to us by the taot'ai of Shanghai. From a comparison of the two rates it is seen that the bankers reserve to themselves too great advantages on the occasion of the payment of the indemnity. As regards the sixth payment period, the rate was fixed in the computation of Mr. de Gaiffier at 2.8. This was a rate which, having been fixed in advance, could not but be fictitious. We have since learned that on December 31 this rate was 2.91. 2. China's debt being a debt (payable) in gold, the account of the arrearages of each semiannual period should be drawn up in gold and not in Shanghai taels. According to the table which Mr. de Gaiffier sent us and which was prepared according to the mode of calculation adopted by the bankers, the arrearage up to June 30, 1904, amounted to 1,468,758.63 taels. The computation was made in Shanghai taels, and comprises the deficit of the preceding years. These amounts were converted into haikwan taels of the protocol at the rate of exchange of June 30 of last year, and give a total of 1,280,665.96. This operation can not be considered as correct and equitable. Thus, for instance, at the time of the arrearage of the second payment period the tael of Shanghai was worth 2.14. This arrearage was carried over to the fifth payment period, when, according to the rate of exchange of June 30, 1904, the Shanghai tael had a value of 2.5§. In this manner a profit of 4 pence is derived from every tael. It would not be fair to make the debtor sustain too great a loss when paying his debt. We know the feelings of justice with which the ministers of the powers are animated, and we are sure that they will not approve the methods of the bankers. Moreover, the two points set forth above enable the bankers to receive more white metal from China, without the government's benefiting, however, when they receive the amount in gold of the sums thus calculated. If the computations are corrected by taking into account the two points mentioned above, the deficit of the three past years will amount approximately to 8,000,000 haikwan taels, which China will pay in its entirety. As far as the future is concerned, if the powers consent to China's paying monthly installments and deducting 4 per cent interest on these installments, China will clear herself of her debt to them either by means of payments in gold or by drafts which she will purchase and remit on the date of the maturity or else by means of telegraphic transfers which she will procure and purchase by contract, according to her best interests and at the lowest price. If there are any among the powers which desire to receive telegraphic transfers expressed in the currency of their countries, China can purchase them as well in Europe as in Shanghai. If, on the contrary, the powers wish to be paid in gold on the basis of the value of silver on the London market, China consents to that also. As far as drafts and telegraphic transfers are concerned, China can buy them at all places, on all markets, and in any bank, provided the payments in gold or in the respective currency of each country be made directly into the hands of each power on the day of maturity. The 8,000,000 protocol taels in question shall be paid within a period of twenty-five days after the signature of the agreement, and they shall bear interest at the rate of 4 per cent from January 1, 1905, to the day of payment. The Secretary of State to Chargé Coolidge. [Telegram.- Paraphrase.] DEPARTMENT OF STATE, (Mr. Hay informs Mr. Coolidge that the Chinese proposal relating to the payment of the indemnity is acceptable to the Government of the United States.) Chargé Coolidge to the Secretary of State. [Telegram.-Paraphrase.] AMERICAN LEGATION, (Mr. Coolidge reports that the new arrangement for the payment of the Chinese indemnity will probably be signed very soon. Payments of arrears will be made directly to each government within fifteen days after signature by telegraphic transfer. Recommends adoption of such transfers on New York in American dollars. Requests instruction.) No. 8.] The Acting Secretary of State to Minister Rockhill. DEPARTMENT OF STATE, Washington, May 31, 1905. SIR: I have to acknowledge the receipt of Mr. Coolidge's telegram of the 22d of April last. In reply I inclose herewith for your information a copy of a letter from the Secretary of the Treasury expressing his views in the matter. I am, etc., [Inclosure.] FRANCIS B. LOOMIS. The Secretary of the Treasury to the Acting Secretary of State. TREASURY DEPARTMENT, Washington, May 12, 1905. SIR: In reply to your letter of the 24th ultimo, embodying a telegram dated the 22d ultimo from the chargé d'affaires ad interim at Peking, China, and requesting to be advised by this Department as to what answer should be telegraphed to the chargé d'affaires in reply to his recommendation that the payments of the Chinese indemnity should be by "telegraphic transfers" on New York, I have to state that the agreement of this government with the international banking corporation provides for the receipt by the bank of all payments due to the United States arising under the protocol fixing the amounts to be paid by the Chinese Government. The bank is to account to the United States Government for the amount of taels received from the Chinese Government at the value of the tacl in Shanghai at the time of payment, expressed in United States cents, and to deposit this amount to the credit of the United States Government in the United States without any charge for loss by exchange. It would therefore appear that it would not concern the United States Government in what way the bank might place their money in New York for the payments due the United States. In fact, it would appear that the bank is not obliged to make any actual transfer. The only obligation resting on the bank would be to deposit with the United States Treasurer the value of the taels received in accordance with the terms of their bond. If, however, there is a new arrangement between the Department of State and the Chinese Government, doing away with the provisions of the existing protocol relative to the method of payments and providing |