On September 1, 1901, The Qing Dynasty and a group of Western countries signed the Boxer Protocol. As one historian later called it, The Boxer Indemnity, one of the key features of the Boxer Protocol, with its “peculiar features, including complexity,” as well as “a self-defeating economic impact,” was “a continuing diplomatic and political nuisance” for over half a century.[i] It also created confusion and controversy soon after it was signed.
As the coalition of nations that provided forces for suppressing Boxer forces entered Beijing and the military conflict ended, discussion quickly moved to questions of financial settlement. How much of an indemnity could and should the Qing Dynasty pay? How much of the indemnity should each nation receive? During late 1900 and through 1901, various nations added up—often inflating—how much they believed they were owed due to military expenses, damages to property and the murder of individual citizens.
The final version of the Boxer Protocol specified the details of payment but also built the foundations of later controversy. Article VI of the Protocol stated that in an edict of May 29, 1901, the Emperor of China “ agreed to pay the Powers an indemnity of 450,000,000 of Haikwan (customs) taels.” This sum was greater than the combined amount of Qing indemnity payments between the first Opium War and the Boxer Rebellion. The stream of payments was divided as follows: Russia received the highest share at 28.97%, Germany 20.02%, France 15.75%, United Kingdom 11.25%, Japan 7.73%, United States 7.32%, Italy 7.32% Belgium 1.89%. Other nations received small percentages: Austria-Hungary 0.89%, Netherlands 0.17%, Spain, Portugal, Sweden, and Norway 0.025%.
Significantly, and the source of much later controversy, the English version of the treaty stated that the Boxer Indemnity was a “a gold debt calculated at the rate of the Haikwan tael to the gold currency of each country.” The protocol further fixed the rate of exchange between the Haikwan tael and the currencies of individual countries, creating a nominal entity known as a Boxer tael. One Boxer tael was equal to 3 British shillings or 0.742 American cents. This clause, as foreign nations, interpreted it, meant that the Qing government bore exchange rate risk. If the market value of silver in terms of gold fell, it would have to procure more silver to settle the debt; if the value of silver rose, it would have to procure less.
To meet these new obligations on top of existing international loan payments, the Qing dynasty shifted most of the payment burden on provincial governments. After the Boxer Protocol, new annual payments amounted to just over 20 million Chinese ounces (liang) of silver. The Board of Revenue recognized that although the payments would be would be very difficult to endure (kan 堪), they nonetheless had to be made.[ii] Some pre-existing revenue steams flowing from the provinces to center would be shifted to indemnity payments but the majority of the annual payments, some 18 million liang, was forced on provinces (tan pai 摊派).
With the central government putting so much of the payment burden on provincial officials, it is no surprise that objections to the clause stating the Boxer Indemnity was in fact a gold debt, originated from a provincial official, Liu Kunyi (刘坤一) , then the Governor-General of Liangjiang (Jiangsu, Anhui and Jiangxi provinces). Under the stipulation of the Board of Revenue, Jiangsu had been ordered to pay more than any other province; Jiangxi’s payment schedule was also one of the heaviest in the realm. Under conditions of depreciating silver, if the debt was indeed denominated in silver, China’s burden, and in turn the burdens on the provinces under Liu’s leadership would not be as great. If the Boxer Indemnity was in fact a debt denominated in gold, the provinces would have to procure more and more silver to purchase the same amount of gold. Over the next several years, it was provincial officials, that advocated a harder stance on the payment issue while the central government maintained a more accommodative position.[iii]
Throughout the first part of 1902, Liu Kunyi peppered the central government with memorials and telegrams, relying on several arguments to explain why he believed the Boxer Indemnity was, in fact, a debt in silver and not gold. First, Liu stood on precedent. All of China’s previous indemnities, he pointed out, were denominated in silver and not gold. How could the Boxer Indemnity be different? Next, he looked at the treaty itself. In the table listing the payment schedule there were only figures in silver liang and nothing about gold payments. If the payment schedule said the Qing had to provide that amount of silver, why should it suddenly have to pay more? Liu also made the argument that the Indemnity should be interpreted as a debt in silver and not gold because of the precarious state of Qing finances and its inability to pay the higher costs associated with a gold debt.[iv] In response to Liu’s arguments, the Ministry of Foreign Affairs (Waiwu bu 外务部) consulted Robert Hart, The Inspector General of Chinese Customs, who insisted that it was in fact a debt in gold, the exchange rates between silver and gold clearly established in the treaty.[v]
Discussion of the details of the treaty quickly moved from an argument about principles to a real payment problem in the summer of 1902. Yuan Shuxuan (遠樹勛), the Shanghai Daotai, and the official in charge of indemnity payments, said that the Qing could not make payments at the exchange rates established in the treaties. They made payments, but not as much as they should have in terms of Boxer Protocol. On June 10, the Chinese minister in the United States, Wu Tingfang (伍挺芳) cabled the Ministry of Foreign Affairs to say the U.S. government agreed that The Boxer Indemnity was a debt in silver and not gold. The next day in Beijing, the American Minister, E.H. Conger attended a meeting of foreign ministers on the indemnity question, and expressed his personal opinion that the debt was in silver and not gold. He did not receive notice of Washington’s stance until after the meeting, whereupon he informed the Chinese government of this position.[vi] The United States, however, was the only country to interpret the Boxer Protocol in this way. Despite the initial hard line on payments, there was some sympathy, particularly from Great Britain, with the Chinese predicament and discussion emerged about finding ways to lessen the burden on Qing, either buy having customs duties payable in gold or by lengthening the term of the payment.
As these discussions continued throughout the rest of 1902, the price of silver in terms of gold continued to fall and the “decline has been more rapid than anyone expected with the protocol was signed.”[vii] At the end of the year, The Economist thought that the silver market of late had been in a “panic-stricken condition.”[viii] Some observers attributed the fall in price of silver directly to the payment of the Boxer Indemnity, with The Washington Post noting that “as a result of collecting large sums of silver in the empire and throwing them on the open market to raise gold to pay for the indemnity, the price of silver has been depressed by nearly 25 per cent.”[ix] With this logic, and all other things being equal, the price of silver would continue to decline as the Qing continually collected silver and sold it on the market for gold, increasing its own debt burden by the simple action of replaying it.
For the next three years, debate on the nature of the Boxer Indemnity continued. At the same time various proposals emerged, from Robert Hart and the American government, advocating that the Qing government stabilize the rate of exchange between gold and silver by adopting the gold-exchange standard. Ultimately, though, in spring of 1905, the Qing agreed it was a debt denominated in gold and took out another loan to make up for the payments it had missed from 1902 to 1905, ending the first, but not the last, controversy in the very long, and now neglected, history of the Boxer Indemnity.
[i] Frank H.H King, “The Boxer Indemnity—‘Nothing but Bad’,” Modern Asian Studies, Volume 40 Issue 3 (July 2006): 664.
[ii] Yihetuan dangan shilia, xiace (Beijing: Zhonghua shuju, 1990), 1197-8.
[iii] Shen Xuefeng, Wanqing caizheng zhichu zhengce yanjiu 86; Wang Shuhuai, Gengzi peikuan (Taipei: Zhongyang Yanjiuyuan jindaishi yanjiu suo, 1974), 207.
[iv] For Liu Kunyi’s correspondence and arguments see Gengzi shibian qinggong dangan huibian, No. 11 (Beijing: Renmin Daxue Chubanshe, 2006), 20, 56, 65-67, 102, 107, 118.
[v][v] Discussion about the silver/gold nature of the Boxer Indemnity among historians breaks down according to nationality. Frank H.H. King holds that “Regardless of other considerations, China had accepted an advance and was being required to carry the exchange risk, a normal procedure. See King, 674. Wang Shuhuai stresses the real ambiguity in the language and form of the Boxer Protocol. See Wang Shuhuai, Gengzi peikuan , 192.
[vi] Wang Shuhuai, Gengzi peikuan, 193.
[vii] “The Chinese Indemnity,” The New York Times, April 10, 1903.
[viii] “Mexico and the Silver Problem,” The Economist, December 13, 1902, 1931.
[ix] “The Chinese Indemnity Will the Creditor Nations Break Concessions, or Force China Into Bankruptcy,” The Washington Post, January 8, 1903.