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Rh In your last communication Your Excellency is pleased to call our attention to the fact that the annual payments of fifteen millions of taels which we proposed only represent the capital, and you now call our attention to the question of interest.

As we, on our side, had already considered that besides the capital there also had to be taken into consideration the question of annual interest at 4 per cent, we had already, by telegram, submitted to the Throne proposals on this subject, and in reply we have received an Imperial Edict, stating that "the figure of four hundred and fifty millions of indemnities to be paid the Powers, with interest at 4 per cent, is approved," and we are commanded to take the necessary measures to carry out this decision.

We have, therefore, only to comply with the orders of the Throne.

Nevertheless this obliges us to recall to Your Excellency that the financial resources of China are so restricted that nothing more can possibly be taken from them beyond the fifteen millions of Taels which we have already proposed to Your Excellency to devote specially to the payment of indemnities, but as this sum must not only furnish payment of the capital, but also that of interest, we have no other alternative to propose than to prolong the term of payments, which we had in the first place fixed at 30 years, in such a way that the instalments paid during the first period of this term thus extended shall be considered as destined to extinguish the capital, while those made during the second period shall be applied to liquidating the interest account, after which all payments would cease through the extinction of the debt. The Imperial Maritime Customs, already entrusted as we suggested, with the payments of the capital, would likewise be entrusted with the payments on account of interest. As to the amount of the annual interest, it would be understood that it would decrease proportionately every year, according to the progressive reduction of the capital.

We have the honor to request Your Excellency to kindly inform us what you think of the plan we suggest above to pay off both capital and interest, or if in your opinion it would not be better to consider a portion of the fifteen millions paid annually as an instalment on the capital to be paid off, and the balance as an instalment on the interest. These details require a careful examination, and demand a previous and full understanding between the parties.

China having thus shown its good will in assenting to the demands of the Powers on the question of the indemnity, and in taking all the necessary steps to insure an integral payment of it, we hope to have soon the satisfaction of learning that the Powers are in a position to fix an early date for the evacuation.

We have the honor to request Your Excellency kindly to communicate the above to the Representatives of the Powers.