THE CHINA MAIL, FEBRUARY 26, 1938
RECUPERATIVE POWER OF CHINA
(Continued from Page 1)
CHINA'S CURRENCY
lations of the members of the British Furthermore, the good work of set- powers. Nevertheless it is import- forces who lost their lives while tling up certain long outstanding ant that the Customs & Salt should serving at Shanghai, and to Sir advances and material debts to Gov- be treated on an equivalent basis, as of the utterances of General Hayashi, Hughe Knatchbull-Hugessen at his ernment departments proceeded the arguments used in the one case then the Japanese. Prime Minister, misfortune in being seriously wound- satisfactorily...
apply also in the other. The out- and of Mr. Sato, his Foreign Minis- ed when travelling from Nanking to
The conclusion of agreements re: Salt Revenues require a ter, caused a feeling of optimism in
standing foreign loans secured on the Shanghai on official duty.
compara- regard to the development of re-
garding the Chinese Government.
tively modest annual remittance of lations between the two countries.
loans in default and the improved
funds and the revenues collected In China itself there were signs of
outlook in China to which I have al- should continue to be ample for these stability and progress such as had
ready referred, had a favourable. not been apparent for many years.
requirements. At a time like the present for effect on Chinese bonds quoted on the The outlook was, in fact, hopeful obvious reasons it is impossible for London Stock Exchange and it was It is satisfactory to be able to note though we were aware that the those outside Government circles to thought, early in the year, that it that, in spite of the war, the Nation- cloud of Sino-Japanese distrust still make any reliable statement of the might shortly be possible to bridge al Government has continued re- hovered in an ill-omened way on the currency and financial position of the hiatus in the London issues of gularly to pay the foreign loan. horizon. It is doubtful if this cloud China, or for that matter of Japan. Chinese loans which had existed obligations secured on the Customs, could have been dissipated even with Wartime conditions prevail and must since the Reorganisation Loan of Salt and Railways. the best will in the world. An be faced with a realisation of the 1913. accumulation of aggravations made dislocations which they mean. How- it almest inevitable that a storm ever, due credit must be given to would have to take place before the those who have directed China's air could be cleared. But
I do not foreign exchange market during the propose to detain you with any com- year. ments about the causes and origins of the war (let us be frank and call
and in fact during the early part it war outright). Our Bank is in a delicate position because of its in- of the year, as threats of unortho- dox financial experiments were terests in all parts of the Far East, and at critical times like these the warded off, the new currency gain-
"least said
ed soonest
in old
and proverb
strength
merchants mended" proves its aptness.
showed increasing confidence.
REMARKABLE FIGURES
Stability has been
maintained,
There was, of course, valuable co-
on the
Moreover,
a
number
"
SHANGHAI STATUS
The Minister of Railway's first initiated discussions regarding the
Before I pass on to deal with other - possible flotation of loans for new railway construction in China. Sub- countries in which we operate, you sequently, when Dr. Kung was in will expect me to Bay something London for the Coronation cere- about Shanghai since its status is monies, negotiations for the build- likely to be a prominent subject once ing of a railway from Canton again in coming months. This is a Kwangtung to Meihsien matter which is of very great im- made progress.
portance to all foreign business in- terests in Shanghai. We have seen the neutrality of a part of the Inter- national Settlement violated during the recent fighting. This would pro-
across
NO AGREEMENT.
when the Sino-Japanese
•
If and when the Powers are pro- pared to negotiate and agree upon some new regime for Shanghai, then of course the situation will he altered, but in the meantime it seems to me and to your Directors 'that, as a result of the recent events at Shanghai, we have suf- ficient cause to call for a streng- thening rather than a weakening of the present · Municipal Council Administration..
The easy and rapid transmission of news from one end of the world operation
part of foreign At the same time Dr. H. H. Kung bably have been avoided if interven- of also broached the subject of a loan tion had taken place in the early to the other is sometimes a mixed banks, blessing. Too many
spokesmen factors assisted towards equilibrium to be used partly to provide addition- stages and thereby much loss of life are in fact quite as bad as too many in the balance of payments: com al assistance in the stabilisation of and property might have been saved. modity prices were still rising; there the Chinese currency and partly for The value of the existing Settlement cooks.
had been two years of bumper crops; the refunding of a portion of the regime cannot be questioned: one has internal conditions were quieter than domestic debt. We were consulted
only to visualise the situation had for some time; the opening-up of the about this matter but no agreement there been no Settlement at all to get
were, country was increasing the circula- was reached. We
and are, Let us turn from politics to trade. tion of banknotes; arrangements, for bound by the agreement of 1920 be- justification for its continuance in an
unimpaired form. You all know how promising the the formation on sound and modern tween the International Consortium situation was during the first half lines of a Central Reserve Bank were Group of banks, so we naturally of the year. Prices were rising, the well advanced, and a fresh attempt sought the views of the other groups improvement in communications by at budget control had been initiated. in regard to both these projects. rail, road and air was opening up the Such was the situation when in July They of course had to be left in country more and more, the standard the first signs of a serious conflict abevance of living was improving owing to were seen. In August. when the conflict commenced. good crop conditions in the interior fighting broke out at Shanghai and as well as the greater demand for bombs fell in the business centre of export produce: furthermore, ex- the Settlement. it was necessary to change, both internal and external, take stops to prevent a panic, so res- had never in our time remained for so trictions were placed on the with- 1937 amounted to no less than $342 long a period with such small varia- drawals of deposits in the Chinese tions. Proof of this satisfactory banks. state of affairs can be seen in the Chinese Customs returns. At the end of July exports had increased 45% and imports 36% as compared with the same period in 1936: Later imports and exports of course fell off, the former more than the latter, but it is remarkable that the end of
the the year
import and export figures together yet showed an in- crease of approximately 9% over 1936.
The political barometer is still too low to warrant a forecast of fine weather for merchants in the near future.
These ·measures were supple- menfed by what is known as the Wei-Wah or blocked currency Bys tem, which permitted the consti- tuents of the Chinese Banks to "transfer funds from one blocked-
CUSTOMS INTEGRITY
There
The Chinese Customa Revenue. in
millions, an increase of $18 millions over 1936, thanks to the excellent
"should," moreover, be start given in the first 7 months of
ensure the the year,
You are aware that guarantees which will to the Customs tariff and administraties of this Shanghai problem negotiations are proceeding in regard strict observance of neutrality in re- gard to its boundaries. The difficul- are tion in the areas controlled by the
immense, Japanese forces. It is hardly neces- attention of the Powers whose res- but they deserve the close account to another by means of sary for me to emphasise how im-
ponsibility it is to obtain at any rate portant it is that the Customs Wei-Wah cheques or orders.
Administration should remain as now a satisfactory modus vivendi if constituted, and continue to be the agreement on a permanent basis can- sole instrument controlling Customs not be found just yet. affairs throughout the whole country.
This proved effective in prevent ing any large-scale panic flight from the currency though it was subjected to pressure for some time. Gradual- ly the demand for foreign currencies declined appreciably and at the end of the year the problem was no longer so serious.
SILVER INTEREST
an
And now to turn away from China:
IN HONG KONG
The present administrative sys- tem has weathered political uphea- vals and civil strife over many Here in Hong Kong we have been years and the maintenance of its fortunate in that the misfortunes of existing status and credit is un China have not so far had any ill- In Central China the channels of
questionably to the advantage of effects on the Colony In fact, many foreign trade are now äffected as
both China and Japan, in order that of our local industries have made never before since the opening of the
in due course the refinancing and satisfactory progress during the treaty ports. Yet, may I be so bold
China's interest in silver remains
rehabilitation of the country may year. It is however certain that for as to suggest that for this very rea-
proceed smoothly.
real and lasting prosperity the son the catastrophe is perhaps mag- dependent on its conversion into a reserve fund in gold, or
Colony must rely upon normal and nified in the eves of many. If, as currency.
I am glad to say that repeated Thus, during the seems likely, the Yangtaze Valley foreign exchange.
assurances have been given by the sound trading conditions in China continues to suffer throughout the year, large amounts of silver were Japanese that the foreign loans will and the present struggle is therefore spring and summer. the effect on shipped from Hong Kong to foreign be respected. Sir Frederick Maze is being watched with much anxiety. trade in general will naturally be countries on account of China. Last in a difficult position. He ...is an
In Japan foreign trade has con- serious, but there will be adjust summer Dr. H. H. Kung made an official of the Chinese Government, tinued to increase in value. The ments. A loss here will become a arrangement with Mr. Morgenthau but as Custodian of the revenues. " e gain there. and I do not
think it for the earmarking of gold against earmarked for the service of import- unusually high, but the imposition of excess of imports was at one time Chinese silver. This was necessary to be too despondent.
supplé
ant foreign loans he has certain res- stricter import controls effected a re- mentary to the agreement of May ponsibilities which are of an inter- duction and the year ended, accord- 1936 under which the United States national nature. Bondholders of all ing to the published returns, with the Treasury had already arranged to
countries look to him to steer & adverse balance somewhat over Yen purchase regular and substantial
course between strongly conflicting 600 millions. The war has of course amounts of silver from China and to provide facilities in United States with his customary tact & political ditions in trade and finance and the currents. We are confident that brought in its train abnormal con- dollar exchange for currency stabili-- sation purposes.
sagacity he is, doing his utmost to future must be largely dependent ón preserve the integrity of this im- the outcome of events in China. portant administration.. As an inter- No. official figures are aval'able national trustee he deserves inter- to show what funds in gold or for national support. The foreign. elen exchange are held by the powers have in the past brought Chinese Government, and while ab- their influence to bear under similar trade figures has continued and there In Manchukuo the expansion of normal conditions prevail we can circumstances and they are, we hardly expect progress to he made understand, doing so now, particular of communications, coupled
are indications that the opening-up with in the publication of reliable sta ly as the retention of the "Open several years of normal trade, is in- tistics.
Door" in China dépends a good deal
RECUPERATIVE POWER
We shall have to wait a time for a real recovery, but the recuperative powers of both Japan and China are great, and will, in due course be Fure. Even now we see how China's misfortunes are “leading to dev-lon- ments in the Western provinces which might otherwise have been in= 5 attempted for decades. It is, how- ever, of the greatest importance that. peace on reasonable terms should not be long delayed. Otherwise, the dislocations will be legs easily, re- pired, there will be the danger of other count-les "becoming involved, while both combatants may be driven înto desperate 'expedients which will' deadlock all trade.
“OPEN DOOR” CLOSED
on the continued existence of an increasing the purchasing power of the State monopolies and ternationalised Customs Administra- People.
supervision or control of industries tion such as exists at the present and exchange are however making time.
SALT REVENUE
things. Increasingly difficult for for eign merchants and the "Open Door" is now almost a thing of the past. In the coming year the question of aterritoriality will have to bo the foreign powers with ther. Interests in the country. Salt
World over erpecially,
Salt Revenue in 1887 deal with such quar~ ~] orted to have been very mu
ice: same as in 1986 owing to.
taxation; but the tion chas o unfortunately
led the
LOAN SETTLEMENTS At the beginning of 1987 the Chi- nese Government was still negotiat- Meantime we extend our deepest ing for a readjustment of certain sympathy to the sufferers in the war foreign debts in arrears. In April areas where the conditions have not the London Bondholders Committee been paralleled since, the, Taiping Re- constituted bellion of some 80 years ago... Dis-tions, reco -tress -is also great in the foreign of ter commuitians The Lord Mayor's kuang Mansion Hönse; Fund gave help at a those most 2bpþortane moment, but further men help is needed and the Internationa Red Cross organisations at Shanghai Ioa and: Hankow also deserve liberal, sup- namely the 'port. I should further like to ex-the Pacifio press a word of sympathy to the re: Loan. both dating
ement of the Loan similar adonted in r lentsin-Buków Ra
United States. Tag-tut" on a now Chicago Bank Loan. Development Corporatio
from
1919, its 1081
Salt
This States,
the situa trade in all the
ngside: Whus's fairly%
and it has India are qu neglected by the state of world
international "the_
Itions, and United ying degres For the East. reports from doubts as to”
throughout rumours