Overcoming Backwardness: Huo-Hao Kuei-Kung on the Periphery

Unlike the flat, fertile north China plain where huo-hao kuei-kung was first conceived, China's southern and western frontiers were largely mountainous regions which, in the early eighteenth century, contributed little to the fiscal resources of the state. Large areas of the border provinces were occupied by aboriginal peoples whose integration into the mainstream of Chinese life had barely begun. Even Szechuan, which is now one of the most populous and agriculturally productive provinces in China, suffered in the early Ch'ing from the devastation of land and inhabitants that was the legacy of Chang Hsien-chung's war against the last rulers of the Ming. Only Kwangtung could boast a land- and head-tax quota comparable to those found in southeast and central China. However, poor inland communications made direct remittance of

huo-hao to the provincial treasury impractical.^[41] Elsewhere on the frontiers of the empire, inadequate revenues combined with rugged terrain to necessitate a completely new approach to the reforms mandated by huo-hao kuei-kung .

Szechuan was the only border province to attempt to follow the Honan model in implementing the rationalization of localgovernment finance. This was not an easy task. In YC 5 (1727), when Shensi-Szechuan Governor-general Yueh Chung-ch'i sought to apply the lessons learned in Shensi to his more southerly jurisdiction, he found that the latter yielded an annual regular tax quota of only 333,567 taels.^[42] In order to generate sufficient huo-hao to supply every official in the province with yang-lien , the rate of collection was set at an unprecedented 30 percent. In this manner, the taxpayers generated an extra 1000,070 taels for provincial use. However, because Szechuan's yang-lien quota consumed 99,414 taels (see table 4.5), little was left for expenses of a more general kind. To remedy this, Yueh and the Szechuan governor, Hsien Te, proposed the continuation of an informal levy known as pang-t'ieh kung-shih , formerly collected illegally from the villages to supplement the costs of running the local yamen.^[43]

Such a high rate of huo-hao was not desirable. Even the officials responsible for its introduction declared their intention to lower it as soon as land reclamation had sufficiently increased the tax base. The emperor himself expressed displeasure at the way huo-hao kuei-kung had been accomplished, but decided to grant approval pending a thorough survey of the taxable land in the province. In the meantime, Yueh once again turned to an informed public as a safeguard against further exactions. Signs were posted in all towns and at major crossroads notifying the public of the new rates and of their right to report any official guilty of exceeding them.

By the summer of 1729 the land survey was under way. Behind this investigation of taxable land in Szechuan was the assumption that far more land had been returned to cultivation than was indicated in existing county records. Indeed, as we have seen, as long ago as the K'ang-hsi reign, some officials had suspected the people of Szechuan of scheming to keep their land off the government's tax rolls. Therefore, it should have come as no surprise when the people of Wan hsien seized upon the arrival of the land-survey team in their vicinity to protest against the government's taxation policies. What had not been expected was that the heavy rates of pang-tieh now collected in concert with huo-hao would become the focus of popular discontent. Convinced that the real target was the land survey itself, Governor Hsien removed the inept censor heading the team in Wan hsien and dispatched a more-experienced investigator in his stead. The disturbance was quickly brought under control and the governor felt vindicated in his assessment of the crisis.^[44]

The connection between the land survey and anger over huo-hao and pang-tieh was not as tenuous as portrayed by Hsien Te. So long as a substantial portion of Szechuan's reclaimed land was hidden from government scrutiny, some segments of the population were probably quite willing to tolerate high levels of extra-quota fees. During the K'ang-hsi period, Nien Keng-yao had reported that Szechuanese taxpayers were supporting a level of surcharges as high as 50 percent of the regular tax. However, the prospect of accurate tax registration and high huo-hao was too much for the local inhabitants to bear. Soon after the Wan hsien protest, the taxpayers of Szechuan found an ally in the governor of neighboring Kweichow province. In an impassioned memorial to the emperor, Chang Kuang-ssu reported that whereas in his tax-poor province huo-hao was only 20 percent of the regular tax, in Sze-

chuan, the combination of huo-hao and pang-t'ieh raised the additional liability in some places to an outrageous 55 percent. Chang felt this could not be justified once the present land survey had augmented Szechuan's tax rolls, and he suggested that the huo-hao rate be lowered to match that in Kweichow. If this was insufficient to provide for all the province's needs, then magistrates could be authorized to collect a pang-t'ieh of no more than 5 Percent.^[45]

Governor Hsien was not averse to such a plan, but intended to await the completion of the land survey before making any adjustments in existing rates. However, Chang Kuang-ssu's plea on behalf of the Szechuan people was soon echoed in an imperial audience by a prefect newly arrived in the capital from a term in Szechuan. As a result, early in 1730 Hsien received notification from the Board of Revenue to lower Szechuan's huo-hao and eliminate pang-t'ieh .^[46]

The governor reluctantly complied with the order, but in subsequent communications with the Board he expressed concern that the levels of revenue generated by the new 25-percent huo-hao would be insufficient to meet Szechuan's administrative needs. Although the Board claimed that it had not meant huo-hao to be lowered until the new quotas for regular taxes were in effect, it could not sanction a rise in the rates so soon after a cut had been announced. Instead it recommended the temporary continuation of pang-t'ieh levies and proposed that discussions regarding further adjustments be held after the new land registers were compiled.^[47] For his part, the emperor attributed the mishandling of the affair to the incorrect referral of huo-hao matters to the Board of Revenue.^[48] The confusion created in Szechuan only strengthened Yung-cheng's conviction that provincial funding had to be kept independent of Board supervision.

The problems encountered in implementing huo-hao kuei-kung in Szechuan served to underscore the difficulties entailed in rationalizing local-government finance in provinces where land- and head-tax revenues were small. In the end it was commercial taxes, in the form of surplus duties on tea and salt, that salvaged the reforms in Szechuan and saved the populace from the reinstitution of pang-t'ieh .^[49]

The availability of surplus revenues from the taxation of commerce and government-run industries was the key to the successful implementation of the huo-hao kuei-kung reforms in each of the other provinces of the northern and southwestern frontier as well.

In Kansu, Governor Hsü Jung estimated that he would require 79,740 taels to pay for the yang-lien and public expenses of the officials in his province.^[50] Even at a rate of 30 percent, huo-hao would not yield sufficient revenues on the basis of the 254,000 or so taels Kansu collected annually in regular taxes.^[51] In order to supplement the income from huo-hao , Hsü incorporated into the provincial budget some 20,000 taels of surplus duties from the frontier trade (shui-hsien ) and 11,900 taels of customary fees sent to the governor each winter by merchants applying for licenses to do business.^[52] These additions to the provincial coffers were still insufficient to provide Kansu with the level of funding found elsewhere in the north. Therefore, in YC 7 (1729), the governor appealed to the emperor to allow some of Shensi's surplus huo-hao to be transferred to Kansu.^[53] Although the alienation of huo-hao from one province to another was generally not permitted, the fact that Shensi and Kansu had long been administered as a unit made an exception possible in this case.^[54]

Perched at the northern and southernmost extremes of China, Fengtien and Kwangsi were handicapped by the lowest huo-hao quotas in the realm. In Fengtien, a land and head tax of only 34,592 taels initially inhibited any efforts to institute huo-hao kuei-kung . However, in 1729 Yung-cheng ordered the provision of yang-lien for all officials not previously covered by the reforms. Even allowing for much lower levels of yang-lien than allocated elsewhere,^[55] the funds available from huo-hao were clearly insufficient to cover all expenses incurred by Fengtien's bureaucratic personnel. Extra revenues from the cart-license fee levied when merchants and commoners carried goods over the border into China proper helped augment the yang-lien of the metropolitan prefect and provided wages and stationery expenses for the clerks in several other yamen.^[56] However, annual income in Fengtien was still too small to permit the allocation of any funds for public expenses.

This problem was remedied by the emperor in YC 10 (1732). On the condition that it not interfere with the collection of the regular commercial-tax quota, Yung-cheng allowed Fengtien's officials to levy a 30 percent surcharge on goods carried by merchants through the Shan-hai pass separating China from Manchuria. It was calculated that this impost could yield between 30,000 and 36,000 taels annually. Revenues derived from this source were immediately applied to the costs of compiling the prefectural gazetteer, paying laborers at the customs stations and

guarding dikes, and repairing public ferries and roads leading to the Fengtien capital.^[57]

In Kwangsi a low regular-tax quota was exacerbated by the 2-percent rate of huo-hao established by Li Fu when he was governor of this remote province. Only 6,000 taels could be returned to the public coffers each year, all of which was set aside for emergencies affecting the whole province.^[58] Nevertheless, later governors were able to tap enough surplus revenues from maritime customs duties, excess commercial duties, and surplus income from government-owned copper mines to pay all officials yang-lien and kungfei and supplement the costs of suppressing an uprising by the province's Miao minority in the latter part of the Yung-cheng reign.^[59]

Yunnan and Kweichow provide the best evidence of the flexibility with which the reforms could be carried out in areas with unfavorable economic conditions. With their large, unassimilated aborigine populations and land- and head-tax quotas of only 172,525 taels and 66,661 taels respectively,^[60] neither could rely on huo-hao alone to meet the expenses of a developing border region. Nevertheless, by making use of income from commercial taxation and the rich mining resources within their jurisdiction, even these two remote provinces were able to show a fair level of success in joining the agricultural heartland in the task of fiscal reform.

Available data concerning the implementation of huo-hao kueikung is more complete for Kweichow than it is for Yunnan. We do know, however, that as early as YC 1 (1723), officials in Yunnan were considering ways to provide funds for provincial expenses. One of the richest sources was Yunnan's numerous copper mines. Although taxes on copper production were the sole property of the central government,^[61] provincial control over copper extraction and marketing yielded a sizable income for local use.

By the early part of the Yung-cheng reign, the Ch'ing government was beginning to look favorably upon private operation of mineral extraction.^[62] However, lack of capital and poor labor productivity still discouraged large-scale merchant investment in such enterprises.^[63] Miners were considered shiftless and unruly, and honest and efficient managers were also difficult to find. Transportation posed another problem. Ores had to be carried from the mines by teams of pack animals driven by aborigine tribesmen who alone had sufficient knowledge of Yunnan's rugged terrain. Risk of loss was great. If they were attacked by bandits or their

animals collapsed under their burden, the porters would simply abandon the copper and flee. Some no doubt themselves stole the load they were hired to carry. Even the disposal of this essential commodity posed problems. The market in copper was extremely erratic, necessitating the warehousing of bulky ores for several years at a time, only to see the entire stock sold out in a matter of months when demand suddenly increased.^[64] As a result, government still dominated the mining industry in the southwest.

Despite these difficulties, Yunnan was able to net a profit of 20,000 taels from its copper mines, all of which was used to supplement the province's meager income from huo-hao .^[65] Looking forward to the day when most mines would be privately run, provincial officials also proposed a fee of 20 percent of the output of such enterprises as an additional contribution to the provincial coffers.

Copper was not the only commercial source Yunnan tapped to enhance the funds available for public expenses. Salt fees traditionally sent by merchants to the governor and governor-general generated more than 64,000 taels for yang-lien and kung-fei . Government operation of the salt wells themselves yielded another 65,721 taels after remittance of imperial salt quotas and the payment of wages and expenses at the wells.^[66] Provincial officials also expressed hopes of considerable profits from the management of Yunnan's developing silver-mining industry.^[67]

Given the low land- and head-tax quota and the availability of such large sums of nonagricultural surplus income, it is not surprising that Yunnan's high officials first responded to the huo-hao kuei-kung reforms by instituting a system of limited remittance to the provincial treasury. Whereas revenues from salt and mining were used to pay for provincial-level projects and the yang-lien of high-ranking officials, the chou and hsien were allowed to retain their own huo-hao to cover local expenses. Middle-level officials, such as prefects, and some chou and hsien magistrates obtained the greater portion of their expenses from surplus commercial duties above the small quotas due the central government.^[68]

The emperor was not pleased with this system, perhaps because it amounted to little more than the legalization of existing patterns of funding under the informal network. In early YC 3 (1725) he issued an edict instructing the officials in both Yunnan and Kweichow to account for all revenues available from huo-hao , surplus duties, mining, and rents on imperial lands in preparation for their

remittance in full to the provincial coffers. Once the total resources available in each province were known, their high officials were to allocate yang-lien for every post from governor to magistrate, calculated on the basis of remoteness from the provincial capital and the level of official business involved.^[69]

We do not know how these funds were ultimately allocated in Yunnan, but we do have remarkably detailed accounts of how Kweichow's income was derived and the manner in which it was redistributed after the reforms. Table 4.6 shows that of the 60,894 taels returned to the provincial coffers in Kweichow, only 18 percent, or 10,792 taels, were derived directly from huo-hao on the land and head tax. Even if we include the income from surcharges on levies of rice and beans, the total revenues from traditional agricultural sources were only 33 percent of Kweichow's provincial funds under the new system.

The fact that most of Kweichow's provincial revenues were obtained from commercial sources and a grant of rents from imperial lands argues strongly against claims that the huo-hao kuei-kung reforms were a central-government ploy to extract an even greater portion of the extra-quota income collected by the provinces. By approving the accounts submitted by governors such as Shih-li-ha, the emperor was actually confirming the right of provinces to a

portion of the customs and salt revenues originating within their borders. It is clear that the emperor's concern was not to commandeer additional income for the central government, but to ensure that each province had the means to carry out the rational management of local finances with the same success that was possible in areas with reliable, high land-tax receipts. This is particularly striking when we realize that 64 percent of Kweichow's estimated annual income from salt and commercial taxes was now to be retained by the province for its own use.

Even with the addition of funds from imperial-lands, salt, and miscellaneous duties, Kweichow's provincial revenues were barely enough to meet all its fixed costs. (See table 4.8.) A comparison with yang-lien statistics for other provinces shows that an official in Kweichow received several hundred taels less than that of an average official of the same rank in other, wealthier provinces. (See table 4.9.) Moreover, only 1,190 taels remained to meet the elastic public expenses of the province, such as yamen and road repairs and water-conservancy projects.

Events of the next few years placed intolerable strains on Kweichow's already tight finances. Jurisdictional reorganization made Yung-ning hsien a part of Szechuan province, resulting in a loss of over 3,600 taels in duty surpluses. In addition, Tsun-i prefecture was transferred to Szechuan and five other hsien were made a part of Hunan province. At the same time, several new prefectures and chou were created in areas previously under aborigine rule, increasing the province's burden of yang-lien and public expenses.^[70] A further budgeting problem resulted from the fact that so much of Kweichow's income depended on surplus revenues from the salt and customs administration. Both of these sources were highly variable, depending on the volume of trade during a given year. The estimates of salt and duty surpluses used by Shih-li-ha in drawing up the Kweichow budget were those of the year before the reforms were implemented. Income in later years did not always reach the levels of the first few years of the Yung-cheng reign. During the intervening period it was often necessary to reduce the yang-lien of all officials by as much as 10 percent to make up for unforeseeable losses in revenues.^[71] As a result of all these circumstances, Kweichow province was faced with a shortage of approximately 20,000 taels by YC 8 (1730).

In order to solve this problem and provide yang-lien for newly created posts and for miscellaneous officials, Governor Chang Kuang-ssu devised a novel plan that would enable the province to profit from its rich mining resources, as Yunnan had done earlier in the dynasty.^[72] Within its borders Kweichow had mines at Nanlung fu and Wei-ning chou that produced a form of lead known as wo-ch'ien . Because Yunnan had opened a mint and needed lead for its smelting factory, these Kweichow mines had been placed under its jurisdiction. By 1730, the Lo-p'ing mines in Yunnan were producing sufficient lead for Yunnan's needs and the lead that had earlier been sent from Kweichow was lying idle. To remedy this, the officials in Yunnan had memorialized to borrow funds from their provincial treasury to buy up the surplus lead and ship it to Hangchow for sale. For every 100 chin of lead shipped north, they netted one tael, after deducting the purchase price and transportation costs. The profits were deposited in Yunnan's public-expense fund.

According to Governor Chang, Kweichow was now undertaking to establish its own smelting operation and requested that all produce from the mines within its territory be placed once again

under Kweichow's control. The province would use the lead to supply its own smelting facilities and dispose of any surplus after central-government production quotas were filled in the same manner as Yunnan. He estimated that Kweichow would be able to purchase the entire surplus from the lead mines, 4 to 5 million chin annually. In addition, 700,000 chin would be collected by the province in the form of taxes. Because the smelting factories would be able to handle only about 160,000 chin when they first opened, the remaining lead from taxes could also be sold. Calculating a net profit of 1.5 taels per 100 chin , Kweichow could obtain between 50,000 and 60,000 taels in additional income per year. Governor Chang requested the emperor's permission to keep this sum to make up the shortages in the current provincial budget and to provide 28,200 taels to increase the yang-lien granted to each official and allocate yang-lien for miscellaneous minor officials and newly created posts along the Miao border. This would leave as much as 11,800 taels for those cost-elastic projects previously neglected under the administration of Shih-li-ha.

Only one obstacle stood in the way of this plan. Whereas Yunnan had advanced the initial capital for its own merchandising experiment from surplus funds in the provincial treasury, Kweichow's treasury was already suffering a deficit. Therefore, Chang also requested to borrow from the 100,000 taels set aside by the central government for land-reclamation projects within Kweichow's border regions. Originally these funds had been designated to provide working capital for Han Chinese opening new land to cultivation. However, Chang claimed that most of the land was actually being reclaimed by Miao who were supplying their own tools and labor and had not requested public assistance. Chang proposed to borrow 60,000 taels from this fund. This could then be repaid over a period of three years out of the profits from the sale and shipment of lead. The emperor's only comment on Chang's memorial was to question whether educational officials would be provided with yang-lien , hence it may be assumed that this plan was indeed carried out.

The use of government entrepreneurship to increase provincial revenues in Yunnan and Kweichow was an extremely important step in the development of Chinese fiscal policy. Although the projects undertaken entailed merchandising endeavors and not manufacturing per se , they may have set a precedent for the provincial enterprises established during the nineteenth century. Although

government monopolies were as old as the imperial system itself, this was the first time that provinces engaged in profit-making projects for the sole purpose of providing funds for their own provincial coffers. The existence of surplus revenues in the Yunnan treasury with which the province could initiate its own leadmerchandising scheme indicates that the reforms in that province, aided by income from copper mining and salt production, were a success. With Kweichow's own leap into the arena of provincial entrepreneurship, that tax-poor province, too, was able to join the agriculturally rich provinces to the north in providing a steady and secure source of income for its officials and to carry out public works.

The absorption of surplus salt, customs, and miscellaneous commercial tax revenues into the budgets of these border provinces also demonstrates that what mattered most in the implementation of the huo-hao kuei-kung reforms was the changes that they made possible in the operation of local-government finance. Huo-hao as the vehicle for these changes was only secondary. Moreover, because most of these funds belonged by statute to the central government, it is clear that the emperor's commitment to fiscal rationalization outweighed even the desire to augment central-treasury reserves.

Commercial duties played an important part in the funding of provincial government in the provinces along China's eastern seaboard as well. However, here in the economic heartland of China, even more overt grants of aid from the central government were necessary to offset the obstacles presented by tax evasion and the heavy demands placed on provincial resources.