t general
impoverishment to China, widespread financial stringency to the state,
and continuous financial crises and inflation. China had never had much
liquid capital, and she was soon compelled to take up foreign loans in
order to pay her debts. At that time internal loans were out of the
question (the first internal loan was floated in 1894): the population
did not even know what a state loan meant; consequently the loans had to
be issued abroad. This, however, entailed the giving of securities,
generally in the form of economic privileges. Under the Most Favoured
Nation clause, however, these privileges had then to be granted to other
states which had made no loans to China. Clearly a vicious spiral, which
in the end could only bring disaster.

The only exception to the general impoverishment, in which not only the
peasants but the old upper classes were involved, was a certain section
of the trading community and the middle class, which had grown rich
through its dealings with the Europeans. These people now accumulated
capital, became Europeanized with their staffs, acquired land from the
impoverished gentry, and sent their sons abroad to foreign universities.
They founded the first industrial undertakings, and learned European
capitalist methods. This class was, of course, to be found mainly in the
treaty ports in the south and in their environs. The south, as far north
as Shanghai, became more modern and more advanced; the north made no
advance. In the south, European ways of thought were learnt, and Chinese
and European theories were compared. Criticism began. The first
revolutionary societies were formed in this atmosphere in the south.

8 _Risings in Turkestan and within China: the T'ai P'ing Rebellion_

But the emperor Hsuean Tsung (reign name Tao-kuang), a man in poor health
though not without ability, had much graver anxieties than those
caused by the Europeans. He did not yet fully realize the seriousness of
the European peril.

[Illustration: 16 The imperial summer palace of the Manchu rulers, at
Jehol. _Photo H. Hammer-Morrisson._]

[Illustration: 17 Tower on the city wall of Peking. _Photo H.
Hammer-Morris son_.]

In Turkestan, where Turkish Mohammedans lived under Chinese rule,
conditions were far from being as the Chinese desired. The Chinese, a
fundamentally rationalistic people, regarded religion as a purely
political matter, and accordingly required every citizen to take part in
the offic