There was nothing exceptional in these practices, in the use of
which the old Chinese empire was merely following the precedent of
the Roman Empire. The vast polity that was formed before the time
of Christ by the military and commercial expansion of Rome in the
Mediterranean Basin, and among the wild tribes of Northern Europe,
depended very largely on the genius of Italian financiers and tax-
collectors to whom the revenues were either directly "farmed," or
who "assisted" precisely after the Chinese method in financing
officials and local administrations, and in replenishing a central
treasury which no wealth could satisfy. The Chinese phenomenon was
therefore in no sense new; the dearth of coined money and the
variety of local standards made the methods used economic
necessities. The system was not in itself a bad system: its fatal
quality lay in its woodenness, its lack of adaptability, and in
its growing weakness in the face of foreign competition which it
could never understand. Foreign competition--that was the enemy
destined to achieve an overwhelming triumph and dash to ruins a
hoary survival.

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.

[Footnote: (a) This loan was the so-called 7 per cent Silver loan
of 1894 for Shanghai Taels 10,000,000 negotiated by the Hongkong &
Shanghai Bank. It was followed in 1895 by a 3,000,000 pounds Gold
6 per cent Loan, then by two more 6 per cent loans for a million
each in the same year, making a total of 6,635,000 pounds sterling