Chester Holcombe to The undersigned has the honor to inform His Imperial Highness the Prince Kung and their Excellencies the, April 29, 1882

No. 77. Mr. Holcombe to Mr. Frelinghuysen.

Sir: Referring to my dispatch, No. 36, of December 27th ultimo, I have now the honor to furnish the Department with copies of further correspondence which has passed between Mr. von Brandt, as the representative of the diplomatic body, and the foreign office, upon the general subject of native produce bought and manufactured at the ports.

The foreign office has taken substantially the position:

• That foreigners have no right to engage in manufacturing operations in China; and
• That if they do, goods so manufactured must invariably be exported, and cannot be sold in China.

In the opinion of the entire diplomatic body, there is no treaty stipulation which can furnish a just basis for either of these assumptions.

There is no present prospect of reaching a satisfactory arrangement upon the question at issue.

I have, &c.,

Correspondence between Mr. von Brandt and Foreign Office, March, 1882.

In the interview which the undersigned, by order of the minister of the German Empire, had with the members of the Yamên, on the 22d of October, 1881 (their excellencies Wang-wên-shao, Mao Sin shu, Chung Si, and Sia chia hao being present), the Chinese ministers repeated, with as much emphasis as ever their argument that “foreign merchants are obliged to export all native produce they may have purchased, and that they are not at liberty to dispose of it at the open ports.” Wang-wên-shao expressed this several times in these words, that “there are no native goods but must be exported,” adding that the trade with native produce at the Chinese ports is a branch of commerce reserved to Chinese merchants.

In the further course of the conversation Wang-wên-shao granted that at the present moment the question was one of little moment for the Chinese Government. But if for instance, in future, cotton goods were manufactured at the ports from Chinese cotton, and if foreign merchants were permitted to sell such goods at the ports, then, the Chinese Government would lose, either the export duty on the cotton or the import duty on the goods manufactured from it. And if these manufactories were in Chinese hands, also the foreign merchants would be losers, for the foreign article would of course not be able to compete with the article manufactured in China, as the latter one had paid no import duty.

The Chinese Government desiring as little to give to the Chinese merchants an undue advantage over the foreigner as vice versa, had therefore already given orders that if the Chinese cotton goods manufactory in Shanghai came into existence, the articles manufactured in it should have to pay an impost, equal to the tariff import duty on foreign cotton goods.

Wang-wên-shao therefore proposed that in section III, 2 of the provisional rules no distinction should be made with reference to the period within which native produce is to be exported, between produce procured under transit pass from the interior and produce bought at the port.

Failing this, he pretended that all the concession contained in section I of the provisional rules were without value to the Yamên.

At a second interview on the 27th of December, 1881, Wang-wên-shao, in the presence, and with the consent of very nearly the same ministers who had been there on the 22d of October, said very briefly that the stand-point of the Yamên with reference to this question was still the same as heretofore. He did not even on this occasion try to veil the absolute denial implied by his words, with the usual phrases of the readiness of the Yamên to come to an understanding, and of its hope that an arrangement might easily be arrived at.