cilious air enveloping him, which at once put me on my guard. After stating in a summary way how the loan of $15,000,000 fell through, he did not state why the Peking government had declined to endorse his action in authorizing the loan, though I knew at the time that Sir Robert Hart, the inspector-general of the Chinese customs, put forward as an excuse that the custom dues were hardly enough to serve as collateral for the big loan that was about to be negotiated to satisfy the war indemnity demanded by the Japanese government. This was the diplomatic way of coating over a bitter pill for Chang Chi Tung to swallow, when the Peking government, through the influence of Li Hung Chang, was induced to ignore the loan. Chang and Li were not at the time on cordial terms, each having a divergent policy to follow in regard to the conduct of the war.
Dropping the subject of the loan as a dead issue, our next topic of conversation was the political state of the country in view of the humiliating defeat China had suffered through the incompetence and corruption of Li Hung Chang, whose defeat both on land and sea had stripped him of all official rank and title and came near costing him his life. I said that China,
