672 FRANK H.H.KING 450 million.This imaginary unit ofaccount could be translated at the fixed rate of HKTs100.00=ShTs111.4 into Shanghai taels for which rates of exchange were readily available,either directly or through the use of cross-rates.The stress on the tael,a silver unit of account, deceived some,including US Secretary of State John Hay and the Chinese authorities in Shanghai,into interpreting the Indemnity as a silver debt,thereby ignoring completely the clearly but briefly stated provision that the Indemnity was a gold debt;the tael value,based on a rate of three shillings sterling,had been provided for internal purposes only.13 Hart himself,when first writing on China's ability to pay,assumed that payment would be expressed in a silver unit of account,but he subsequently acknowledged that the Powers had determined otherwise.14Indeed,to avoid confusion the term Protocol Tael',defined as a gold unit of account equivalent to a Haikwan Tael at the fixed rate of three shillings per tael,came into use.15 Thus Protocol Taels 450 million were equivalent to f67.5 million,the real value of the Indemnity.16 Or was it? One could argue that,as the interest rate,set at 4%,was below mar- ket rate (especially since the advance would be made at 1o0),the real value to the Powers was slightly lower.Alternatively,one could argue that the Ts450 million constituted only the principal,contending that one had to add total interest payments to this sum to determine the real amount of the indemnity.Indeed,if local indemnities were also 12 For an explanation of the Chinese monetary system and the terms employed, see my summary in The Hongkong Bank in Late Imperial China,1864-19o2,The History of the Hongkong and Shanghai Banking Corporation,I,35-40. 13 John Hay to Ambassador Conger,U.S.Minister to China,cited in Confidential Correspondence,IV,461,note to letter 3122 (1903). 1+Hart to J.D.Campbell,letter 3068 dated 13 July 1902,in Confidential Correspondence,III,658-9. 15 The rate was not arbitrary'on the date of the Protocol;it was the effective market rate.However,the Protocol Tael/sterling rate remained fixed as the market fluctuated,which is why the Protocol Tael is a gold unit of account.This may be compared conceptually with the later Customs Gold Unit.Sir Robert Hart proposed a rate of exchange equivalent to that before the depreciation of silver,say 6s8d,but this would have been difficult to justify on any rational basis-except,perhaps,the economic health of China. 16 In perhaps his earliest estimate,Hart considered 5o million(but at the higher exchange rate)to be a practical maximum.Hart to Campbell,letter 2912,dated November 19oo,in Confidential Correspondence,I,513.672 FRANK H. H. KING 450 million.12 This imaginary unit of account could be translated at the fixed rate of HKTs100.00 = ShTs111.4 into Shanghai taels for which rates of exchange were readily available, either directly or through the use of cross-rates. The stress on the tael, a silver unit of account, deceived some, including US Secretary of State John Hay and the Chinese authorities in Shanghai, into interpreting the Indemnity as a silver debt, thereby ignoring completely the clearly but briefly stated provision that the Indemnity was a gold debt; the tael value, based on a rate of three shillings sterling, had been provided for internal purposes only.13 Hart himself, when first writing on China’s ability to pay, assumed that payment would be expressed in a silver unit of account, but he subsequently acknowledged that the Powers had determined otherwise.14 Indeed, to avoid confusion the term ‘Protocol Tael’, defined as a gold unit of account equivalent to a Haikwan Tael at the fixed rate of three shillings per tael, came into use.15 Thus Protocol Taels 450 million were equivalent to £67.5 million, the real value of the Indemnity.16 Or was it? One could argue that, as the interest rate, set at 4%, was below mar￾ket rate (especially since the advance would be made at 100), the real value to the Powers was slightly lower. Alternatively, one could argue that the Ts450 million constituted only the principal, contending that one had to add total interest payments to this sum to determine the real amount of the indemnity. Indeed, if local indemnities were also 12 For an explanation of the Chinese monetary system and the terms employed, see my summary in The Hongkong Bank in Late Imperial China, 1864–1902, The History of the Hongkong and Shanghai Banking Corporation, I, 35–40. 13 John Hay to Ambassador Conger, U. S. Minister to China, cited in Confidential Correspondence, IV, 461, note to letter 3122 (1903). 14 Hart to J. D. Campbell, letter 3068 dated 13 July 1902, in Confidential Correspondence, III, 658–9. 15 The rate was not ‘arbitrary’ on the date of the Protocol; it was the effective market rate. However, the Protocol Tael/sterling rate remained fixed as the market fluctuated, which is why the Protocol Tael is a gold unit of account. This may be compared conceptually with the later Customs Gold Unit. Sir Robert Hart proposed a rate of exchange equivalent to that before the depreciation of silver, say 6s8d, but this would have been difficult to justify on any rational basis—except, perhaps, the economic health of China. 16 In perhaps his earliest estimate, Hart considered £50 million (but at the higher exchange rate) to be a practical maximum. Hart to Campbell, letter 2912, dated 1 November 1900, in Confidential Correspondence, III, 513