No. 3.
90
accepting houses were entirely ignorant of the general practice of the German firms to ignore the strict terms of the trust receipts or whether they did not acquiesce in the practice. The third reason is that the persons concerned are now not amenable to the jurisdiction of our courts. No other means of marking disapproval of the practice has been suggested up to the present. It would be possible to legislate so as to make such a practice illegal, but such legislation. would be of little avail if the London acceptance houses were willing to accept a risk similar to that to which they have as a matter of fact been exposed all the time in dealing with the German firms. It appears therefore that a great deal must depend on the attitude which may be adopted by the London finance houses after the war towards the German firms.
5. I would therefore suggest that if any steps are taken with a view to securing any change of policy by these houses, they should be in the direc- tion of inducing them to insist on the strictest adherence to the terms of the letters of lien and to insert in the form of letter of lien an express condition that the goods must not be parted with until a sum sufficient to meet the acceptance has been earmarked for that purpose.
6. I am not aware of any other means of checking the long credit system other than a combination of all the importing firms such as has been formed. here since the internment and expulsion of the German merchants.
7. In conclusion, I may add that I would gladly consider any proposals for a policy which would tend to encourage the re-establishment of the local import trade on a permanent cash basis, and I need hardly say that any sound and reasonable movement which would assist British traders to maintain themselves against German competition would have the entire support of this Government.
The Right Honourable
The Secretary of State,
&c.,
HONGKONG.
I have, &c.,
F. H. MAY Governor.
&c.,
&c.
No. 4.
DOWNING STREET,
6th April, 1916,
SIR,I have the honour to acknowledge the receipt of your confidential despatch of the 9th February, regarding the financing of British and German trade in Hongkong and China, and to inform you that the suggestion made in paragraph 5 of your despatch will receive consideration.
2. I observe that in paragraph 6 you state that a combination of importing firms has been formed in the Colony since the internment and expulsion of the German merchants, and I shall be glad if you will furnish me with a full report on this movement.
Governor
Sir F. H. MAY, K.C.M.G.,
&c..
I have, etc.,
A. BONAR LAW.
&c..
&c.