HSBC’s Taiwan Defense Loan and the formation of modern China’s foreign debt pattern

The eight-percent Taiwan Defense Loan of 1874 marked the first Chinese national debt underwritten by the Hongkong and Shanghai Banking Corporation. The Bank initially advanced a loan of two million taels and subsequently issued the “Imperial Chinese Government Loan” on the international financial market, thereby linking Chinese bonds to the international financial market. Utilizing its established procedures, the Bank successfully sold the bonds, securing profits for investors. Under the directives of the Zongli Yamen, the Imperial Maritime Customs Service provided guarantees for the repayment of the national debt, ensuring the timely repayment of both principal and interest, which laid the foundation for the credit of China’s national debt. To safeguard the interests of British banks, the British Minister to China became actively involved in China’s foreign debt negotiations. From that point on, the Hong Kong and Shanghai Banking Corporation, the Imperial Maritime Customs Service, and the British Minister to China all participated in the management of China’s national debt. The 1874 Taiwan Defense Loan thus established the basic model for foreign debt in late Qing China.