War with Japan sounded the first trumpet-blast which should have been heeded.  In the year 1894, being faced with the necessity of finding immediately a large sum of specie for purpose of war, the native bankers proclaimed their total inability to do so, and the first great foreign loan contract was signed.[4] Little attention was attracted to what is a turning-point in Chinese history.  There cannot be the slightest doubt that in 1894 the Manchus wrote the first sentences of an abdication which was only formally pronounced in 1912:  they had inaugurated the financial thraldom under which China still languishes.  Within a period of forty months, in order to settle the disastrous Japanese war, foreign loans amounting to nearly fifty-five million pounds were completed.  This indebtedness, amounting to nearly three times the “visible” annual revenues of the country—­that is, the revenues actually accounted for to Peking—­was unparalleled in Chinese history.  It was a gold indebtedness subject to all sorts of manipulations which no Chinese properly understood.  It had special political meaning and special political consequences because the loans were virtually guaranteed by the Powers.  It was a long-drawn coup d’etat of a nature that all foreigners understood because it forged external chains.

The internal significance was even greater than the external.  The loans were secured on the most important “direct” revenues reaching Peking—­the Customs receipts, which were concerned with the most vital function in the new economic life springing up, the steam-borne coasting and river-trade as well as the purely foreign trade.  That most vital function tended consequently to become more and more hall-marked as foreign; it no longer depended in any direct sense on Peking for protection.  The hypothecation of these revenues to foreigners for periods running into decades—­coupled with their administration by foreigners—­was such a distinct restriction of the rights of eminent domain as to amount to a partial abrogation of sovereignty.

That this was vaguely understood by the masses is now quite certain.  The Boxer movement of 1900, like the great proletarian risings which occurred in Italy in the pre-Christian era as a result of the impoverishment and moral disorder brought about by Roman misgovernment, was simply a socio-economic catastrophe exhibiting itself in an unexpected form.  The dying Manchu dynasty, at last in open despair, turned the revolt, insanely enough, against the foreigner—­that is against those who already held the really vital portion of their sovereignty.  So far from saving itself by this act, the dynasty wrote another sentence in its death-warrant.  Economically the Manchus had been for years almost lost; the Boxer indemnities were the last straw.  By more than doubling the burden of foreign commitments, and by placing the operation of the indemnities directly in the hands of foreign bankers by the method of monthly quotas, payable in Shanghai, the Peking Government as far back as fifteen years ago was reduced to being a government at thirty days’ sight, at the mercy of any shock of events which could be protracted over a few monthly settlements.  There is no denying this signal fact, which is probably the most remarkable illustration of the restrictive power of money which has ever been afforded in the history of Asia.