HONGKONG.
C.
LONDON ACCEPTANCE SYSTEM.
No. 1.
DOWNING STREET,
24th December, 1915.
No. 2.
Sin,--I have the honour to transmit to you, for your consideration, a copy China Ass of the correspondence noted in the margin, relative to the financing of British
and German trade in Hongkong and China.
ciation,
23rd Nov.,
1915,
To China
Association,
23rd Dec..
1915.
To Treasury,
23rd Dec.,
1915.
2. I shall be glad to receive any observations that you may wish to offer on the subject.
I have, &c.,
A. BONAR LAW.
To Board of
Trade,
23rd Dec..
1915.
Governor
Copy.
Sir F. H. MAY, K.C.M.G.,
&c.,
&c.,
&c.
No. 2.
CHINA ASSOCIATION,
99, Cannon Street, London, E.C., 23rd November, 1915.
SIR,-In the Report on German Trading in Hongkong, No. C. 19835-1915, dated August, 1915, it is stated that practically the whole of the German Import and Export Trade has been financed in London, partly by the Eastern Exchange Banks, but principally by the large London Financing and Accepting Houses. The procedure is stated to have been that shippers of goods in England to German firms in Hongkong drew bills on the London Accepting Houses, handing over the documents to the latter in consideration of their acceptance of the bills. The Accepting House sent the documents, with a letter of lien attached, to the German firm in Hongkong either direct or through an Eastern Bank--usually direct. The German firm in Hongkong signed the letter of lien, returned it to London and took delivery of the goods on arrival. In most cases the German firm pledged itself in the letter of lien not only to meet the bill at maturity, but to keep the proceeds of the goods in trust, and separate from all other transactions and monies belonging to other persons.
Under the terms of these letters of lien the goods themselves were presum- ably to be held in trust until the proceeds were forthcoming.
The Report goes on to state that in the case of the German firms in Hong- kong this trust has been broken in almost every case. The goods were handed over to the Chinese buyer on 4-8 months credit, and as they were paid for, the monies were placed to general account and used for the carrying on of the business of the firin. Bills at maturity were met out of the general funds of the