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'état_ 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