On the evening of March 1st, Xu Xing, accompanied by Shou Peng, Deputy Minister Tong, and Zhou Fangbo, visited the French Minister Mr. Bi, the German Minister Mr. Mu, the British Minister Mr. Sa, and the Japanese Minister Mr. Xiaocun at the De Guan, with Mr. Lian Fang helping with the communication.
Mr. Bi said, "The reason for inviting you today is to discuss the compensation issue. May I ask how much China can repay each year?"
Xu Xing asked, "How much is the total compensation claimed by all countries?" Mr. Bi replied, "As of the first day of July, the total is forty-five million taels of silver."
Xu Xing said, "China is facing financial difficulties; since the countries are considering friendship, we should sincerely ask for a reduction in the compensation."
Mr. Bi said, "This amount has already been minimized by the countries, but the losses need to be compensated. In the future, the days may vary, and careful calculations are needed; this figure is just an estimate. Today, we primarily want to understand how much China has available to offset the debt?"
Xu Xing said, "In recent years, China's treasury income has been insufficient. You must be aware of this. I believe that the customs duties on imported goods, if calculated based on the original tax regulations, have an increased portion compared to the current prices, and merchants can still add the surplus to the product price, which won’t hurt foreign merchants and will significantly help China with its repayment."
Mr. Bi said, "We have also discussed this issue, and it seems feasible. Calculating this way, China could collect about ten million more taels of silver each year. How much silver can China collect in total from regular customs duties each year?"
Xu Xing said, "If collected by the tax department, it could collect about four to five million taels of silver each year." Mr. Bi asked, "Can it actually be handed over to the tax department for collection?"
Xu Xing said, "Most regular customs duties are overseen by the customs department and are linked to it, so they can be entrusted to the tax department for collection." Mr. Bi said, "Both the additional tax on imported goods and regular customs duties will be collected by the tax department to help cover the debt; we all agree. But it is still far from enough."
Xu Xing asked, "May I ask the countries' intentions, can the repayment period be extended for a few years?"
Mr. Bi said, "Regarding the repayment period, let’s hold off on that discussion for now; we need to see what other funds can be used to offset the debt. I have heard that China's salt tax revenue is quite significant, and if the methods can be improved, it can collect even more, is that right?"
Xu Xing said, "Reforming the salt tax is quite challenging."
Mr. Bi asked, "How much does the salt tax bring in each year?"
Xu replied: "The salt tax and salt duty collect about thirteen million taels each year. The amounts from the banks in Yichang, Hubei, and Anhui have already been used to repay foreign debts, which should total one hundred eighty thousand taels to be deducted. Additionally, Changlu sells five hundred thousand piculs of salt each year. Since last year's turmoil, foreign soldiers have been transporting salt indiscriminately, and it is reported that this number has exceeded two million piculs. In the next three years, there will be no way to sell the salt from Changlu, so where will the national tax revenue come from? Therefore, currently, the salt tax and salt duty can only account for one hundred million taels per year."
Bi said: "Then this amount can offset one hundred million taels."
Xu said: "That's not right. Our country has many expenses that require this money; we can only set aside four million taels to repay the debt."
Bi said: "I’ve heard that after the grain transport reform, we can save seven million taels of silver each year."
Xu said: "The so-called reform is merely a change in the method of grain transport. Even if it is changed to collect in cash, it definitely cannot save as much as seven million taels."
Bi asked: "How much grain is transported each year?"
Xu replied: "Around one hundred twenty-three thousand piculs."
Bi asked: "What is the rice price in the southern provinces? What are the transportation costs?"
Xu replied: "One picul of rice is about four taels of silver, and the transportation costs are about two taels. If changed to cash collection, only the transportation costs would be saved; at most, two million taels would be left. Merchants transporting rice to the capital will also certainly earn less; it is impossible to sell at the original price of the southern provinces."
Bi asked: "How much rice is transported by river? What are the transportation costs?"
Xu replied: "In recent years, river transport of rice has been only around one hundred thousand piculs. The transportation costs aren't high compared to sea transport."
Sa said: "China's method of transporting rice is incorrect, so most of the rice transported to the capital becomes moldy and spoiled, worth just one tael of silver per picul. If entrusted to foreign ships for transport, the costs aren't high, and the rice won't spoil, which can save on transport costs and help cover the compensation."
Mr. Xu said: "Changing the grain transport to pay taxes in cash is not a problem. But if it’s just by ship from Shanghai to Tianjin, we’d still need to set up a currency exchange office in Shanghai and Tianjin. If using barges, we’d need to conduct checks and inspections along the way, and finally, it must be delivered to the grain depot in the capital. Considering all this, how could we possibly gather enough for the compensation?"
Mr. Sa asked: "If all grain transport is changed to cash, how much extra money can we make?"
Master Xu replied, "I previously calculated that at most it would only be an additional two million taels. Moreover, switching to cash payments is very difficult, because along the grain transport routes, the local people in the counties would use watered-down rice or inferior grains to pass off as good rice when paying their taxes, cheating the system. The grain in the granaries spoils not only due to mold during transportation and storage. If we switch to cash payments, the common people will definitely suffer and complain, and that’s not a viable solution."
Master Sa then asked, "What’s the annual tax revenue from goods coming in and out of the capital?"
Master Xu said, "Chongwenmen used to only collect taxes on goods entering the city, with no taxes on goods leaving. The annual collection is around seven hundred thousand taels, which is not a large amount. Customs at various ports are planning to hand over tax collection to the tax authorities, leaving only Chongwenmen, which is also a way to save face for China, so this money does not need to be included in the reparations."
Master Sa said, "If customs increase import taxes, we could bring in an additional six million taels each year."
Master Xu replied, "If foreign goods can agree to the tax increase, we’d really appreciate it."
Master Bi said, "The funding for the Tongwen Institute established by the Prime Minister's Office and for the envoys sent to various countries comes from customs tax revenue, with no other sources. Shouldn’t we think about getting funds from somewhere else?"
Master Xu said, "The funding for the Tongwen Institute doesn’t have a source, and the expenses for sending envoys to various countries also have no other source. We absolutely cannot withdraw embassies just because the reparations are insufficient!"
Master Bi said, "Since the Tongwen Institute has already been established, if personnel sent abroad are reduced due to the reparations issue, other countries wouldn’t want to see that happen, so we can set that aside for now. If we reduce the military salaries, we could save about three million taels each year."
Master Xu said, "It is very difficult to reduce military spending. Even if it can be reduced, we still have to pay reparations each year, so the gap is very large. The money we save would just cover our own losses."
Master Bi asked, "How much can we save on those things each year?"
Master Xu replied, "We can save some on both naval and land military expenses, but it’s tough to pin down a specific amount ahead of time. Moreover... those... are all nominal expenses anyway, so it seems unnecessary to list specific amounts; we can just calculate how much is repaid each year. Aside from salt tax, regular tax, and increased taxes on foreign goods, any shortfall can be resolved by China itself."
Master Bi asked, "How much can we repay each year, after all?"
Master Xu said, "We can manage a maximum of fifteen million taels."
Bi took out his pen and started calculating. He looked around and said to the British and German envoys, "If that's the case, it will take sixty years; that's too long. It would be better to pay it off in thirty years." Xu replied, "Three million taels a year is utterly impossible to achieve." Bi asked, "If we raise the foreign tax to ten percent, how much more can we expect to collect each year?" Xu said, "It should exceed ten million taels." Bi replied, "In that case, raising three million taels a year wouldn’t be too hard." Xu said, "Although the foreign tax is estimated to increase to ten million taels, the sales of goods are inherently unstable. If the estimated amount is too high and we fall short later, what should we do? It’s better to calculate only six or seven million taels each year. If we end up collecting more than that, we could pay the next installment early, which would be easier." Bi asked, "Is a head tax feasible? If we collect five cents in silver per person each year, we could get twenty million taels." Xu replied, "There used to be a head tax, but it was later merged into the land tax, so the land tax is actually referred to as 'land and head tax.' If we collect taxes based on headcount again, it would be double taxation." Sa said, "We could also increase the land tax." Xu responded, "Many provinces have barren areas where the revenue is already low. If we raise taxes again, the poor might end up suffering even more, making it harder for local areas to stay stable." Sa asked, "What about a property tax?" Lao Xu said, "There were previous attempts to collect a property tax, but they all failed. Once the tax is imposed, shopkeepers tend to shut down their businesses, residents complain, and local officials have no way to handle it. So this is very difficult to manage." Lao Sa said, "I heard that domestic medicine is three times more expensive than foreign medicine. If we collect sixty taels of silver per load, we could raise over ten million!" Lao Xu replied, "The production sites of domestic medicine are scattered in the interior, making it inconvenient to collect taxes. If the tax burden is too heavy, we’ll see more tax evasion, and we might not collect much money." Lao Sa said, "Stamp tax seems feasible." Lao Xu said, "We've thought about this, but it looks like we can only test it out at trading ports. Because trading ports have a relatively open atmosphere, merchants might be willing to comply, but inland residents are used to their ways and think stamps are useless. If we send people to check everywhere, it’ll just give local officials a chance to squeeze out money, which will probably bring no benefit to national tax revenue." Lao Bi asked, "How should we go about repaying the indemnity? Should it be paid in installments over the years, or should it be settled in one lump sum through borrowing?"
Old Xu said, "It's difficult to borrow money. It would be ideal to extend the repayment period and allow for installment payments. If one or two countries urgently need cash and it creates difficulties for everyone, we can help guarantee the loan; there's nothing wrong with that. Please consider it."
Old Bi asked, "Are we asking those countries willing to extend the terms to help us borrow money?"
Old Xu replied, "I can't insist that we rely on countries willing to extend the terms to help us borrow money. I believe that countries in urgent need of cash will definitely not help us borrow money. Moreover, the countries currently facing huge payments are all wealthy, so they aren't likely to be in urgent need of cash. Therefore, it's better to extend the terms a bit, allowing China to repay in installments."
Old Bi asked, "Why are they willing to repay in installments but unwilling to lend money?"
Mr. Xu said, "I want to repay the money and have no desire to borrow again. Because all countries value friendship, there's no need to play favorites with one or two countries just to secure a loan. Furthermore, if we borrow a large sum from just one country, they certainly won't provide a long repayment period, so it’s better to distribute it among various countries."
By this time, it was getting late. The host served tea and snacks to treat the guests. After the snacks, everyone said their goodbyes and went home.
According to reports, the envoys from different countries chose the French envoy to speak first, so the French envoy spoke quite a bit. The two gentlemen, as all the envoys had Mr. Xu take the top seat, although everyone contributed to the important discussions, ultimately, it was Mr. Xu who responded.
