of the situation to ascertain whether it is the intention of the British Financial Houses and Banks to resuscitate the system, under which Germans have been enabled to undermine the trade of British merchants in Hongkong and China by giving extended credit to Chinese, if and when these institutions resume their business relations with German firms after the War, or whether they are willing to come to an understanding amongst themselves to discontinue the financial facilities referred to with a view to re-establishing British trade with Hongkong and China on a sounder basis than has prevailed in recent years. My Committee venture to hope that it may be possible to have an arrangement of this kind arrived at, in view of the probability that after the War German firms in Hongkong and China will do everything in their power to injure British interests there, and it surely cannot be for the national welfare that facilities for so doing should be accorded to them by British institutions.
I have, etc.,
F. ANDERSON,
Chairman,
1.M. Under Secretary of State
for the Colonies,
Colonial Office,
Downing Street, S.W.
3568/15.
No. 3.
GOVERNMENT HOUSE,
No. 1.
Hongkono, 9th February, 19916,
S-I have the honour to acknowledge the receipt of your Contidential Despatch of the 24th December, 1915, enclosing a copy of correspondence relating to the financing of British and German trade in Hongkong anil China.
2. I am unable to confirm the correctness of the opinion quoted from British merchants in Hongkong that the German firms received from British banks and discount houses financial facilities which could not have been obtained by themselves. The degree of financial facility granted must always depend on the credit and standing of the particular applicant, but it seems to me impossible to believe that first class British firms could not have obtained facilities equal to those enjoyed by many of the German firms, and I have not heard of any instances in which the facilities of the London acceptance system were refused to such a firm.
3. It is not known locally whether any bills relating to shipments to the former German firms here are amongst those which are being carried till after the end of the war, but in any case the proceeds of shipments financed by London acceptances are being, and will be, remitted according as the course of the liquidations allows. Any proceeds of trust goods which are collected by the liquidators are of course being appropriated in strict accordance with the letters of lien, but where such proceeds were collected by the German firm and were mixed with the general moneys of the firm it is not always possible to remit. Even where the winding up will probably result in a surplus the cash is not always available, and where the local branch is insolvent a difficult legal position arises which is still under consideration.
4. It is difficult to see what action could be taken by this Government to mark disapproval of the failure of the German firms to observe the strict terms of the letters of lien. There are three objections to the institution of any criminal proceedings. One is a permanent reason, the second depends ou a fact which it may or may not be possible to ascertain, and the third may be only a temporary reason. The first reason is that it is very doubtful if any offence has been committed. The second is that it is not known whether the London