It is an ancient and well-recognized principle in China, that every inch of soil belongs to the sovereign; consequently, all land is held on consideration of a land-tax payable to the emperor, and so long as this tax is forthcoming, the land in question is practically freehold, and can be passed by sale from hand to hand for a small conveyancing fee to the local authorities who stamp the deeds.  Thus, the foreign concessions or settlements in China were not sold or parted with in any way by the Chinese; they were “leased in perpetuity” so long as the ground-rent is paid, and remain for all municipal and such purposes under the uncontrolled administration of the nation which leased them.  The land-tax may be regarded as the backbone of Chinese finance; but although nominally collected at a fixed rate, it is subject to fluctuations due to bad harvests and like visitations, in which cases the tax is accepted at a lower rate, in fact at any rate the people can afford to pay.

The salt and other monopolies, together with the customs, also contribute an important part of China’s revenue.  There is the old native customs service, with its stations and barriers all over the empire, and the foreign customs service, as established at the treaty ports only, in order to deal with shipments on foreign vessels trading with China.  The traditional and well-marked lines of taxation are freely accepted by the people; any attempt, however, to increase the amounts to be levied, or to introduce new charges of any kind, unless duly authorized by the people themselves, would be at once sternly resisted.  As a matter of fact, the authorities never run any such risks.  It is customary, when absolutely necessary, and possibly desirable, to increase old or to introduce new levies, for the local authorities to invite the leading merchants and others concerned to a private conference; and only when there is a general consent of all parties do the officials venture to put forth proclamations saying that such and such a tax will be increased or imposed, as the case may be.  Any other method may lead to disastrous results.  The people refuse to pay; and coercion is met at once by a general closing of shops and stoppage of trade, or, in more serious cases, by an attack on the official residence of the offending mandarin, who soon sees his house looted and levelled with the ground.  In other words, the Chinese people tax themselves.

The nominal form of government, speaking without reference to the new constitution which will be dealt with later on, is an irresponsible autocracy; its institutions are likewise autocratic in form, but democratic in operation.  The philosopher, Mencius (372-289 B.C.), placed the people first, the gods second, and the sovereign third, in the scale of national importance; and this classification has sunk deep into the minds of the Chinese during more than two thousand years past.  What the people in China will not stand is injustice; at the same time they will live contentedly under harsh laws which they have at one time or another imposed upon themselves.