Rising Cost Of Government Should Be Studied A FAR FROM GLOOMY CHAIRMAN'S SPEECH
China Bond Service:
Stabilisation Fund
“I BELIEVE THAT MOST OF US CONCUR WITH THE REMARKS OF THE WAR REVENUE COMMITTEE ABOUT THE CONTINUOUS RISE IN THE COST OF GOVERNMENT AND SUPPORT THEIR RECOMMENDATION THAT AN OFFICIAL INVESTIGATION SHOULD BE HELD TO ASCERTAIN WHETHER ECONOMIES CANNOT BE EFFECTEDD," SAID THE HON. MR. A. L. SHIELDS, CHAIRMAN, AT THE ANNUAL MEETING OF SHAREHOLDERS OF THE HONG KONG AND SHANGHAI BANKING CORPORATION TO-DAY AT NOON.
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Mr. Shields warned that vexatious wartime restrictions, the recent in- creases in duties and the new taxation proposed to enable Hong Kong to share the burden of the war effort of the Empire, might have an in- direct effect upon the ordinary revenues of the Colony before long. The speech on the whole was far from gloomy, andį
sounded, determination to carry on and face with confidence whatever the future may have in store. In a brief reference to the effects of Sino-Japan- ese hostilities, Mr. Shields said that "the eco- nomic system in Japan is undergoing severe strains and it is by no means easy to judge how developments will work out in the present too has been decidedly helpful, al-
year.
Japan, he added, is certainly in a position to take ad- vantage of the opportunities now opening to the Far East as a result of the war (in Europe) but the many and increasing difficulties resulting from the con- flict with China are a serious handicap.
offects. In spite of dislocations some ports and the closure of cer tain-channels, now outlets have de- veloped and the general rise in the prices of commodities produced in the countries where we operate has in caused a welcome improvement recent months.
Stock markets in' the important cen- tres out East have also responded; this
though we are anxious that such rises should not be overdone.
I do not propose this year to refer
of the Government, have throughout the past year been regularly set aside in the Central Bank of China in na- tional currency reckoned at the of ficial rate of 1/2.1/4d.
CUSTOMS REVENUE
The total revenue collected by the Chinese Maritime Customs Adminis tration amounted to 331 million dol- lars in the year 1939. But in. fact `roughly 83% of this revenue was col- lected in ports under Japanese con- trol, and we estimate that at the end of the year some 380 million dollars of Customs funds should have been lying in the Yokohama Specie Bank
awaiting the outcome of the Sino-Ja- panese conflict.
It is clear, therefore, that respon- sibility for fallure to meet the sor- vica of the Customs Loans does not for the time being rest on the Chinese Government.
The Customs Foreign Trade figures for 1939 must again be interpreted with great caution owing to the fact that their method of presentation, the fluctuating exchange rates, trade con- trols and other complications, make How- comparisons very unreliable. ever, an examination of these figures makes it clear that, compared with any of the last three years, import values increased appreciably (and this omits war munitions), whilst export values were lower.
The growth in the adverse ba- lance of trade, which was particul- arly pronounced in the first half of the year, caused a strain which fall almost entirely on the Shanghai ex- change market.
to political events in the Far East ex- This was so, because trade through cept in so far as they affect certain the Chinese controlled ports was kept topics with which we are particularly fairly well balanced by the measures concerned. One of these topics re- of restriction adopted by the Chinese lates to the Chinese Government for Government, but in North and Cen- eign loans, in floating many of which tral China conditions were such, as I we took a leading part. During the will show later, as to encourage a de- On the other side past year these loans, as I am afraid mand for goods while exports suffer- The Hon. Mr. A. L. Shields said:- 18 million dollars. Ladies and Gentlemen,—After mak-of the book Cash is lower by 19 mil-some of you are painfully aware, haveed from the situation prevailing in the ing full provision for all known losses lion dollars and Securities by 29 mil-gone into complete default for rea-hinterland. Later on in the year the and contingencies and after writing lion dollars, against which Bills Re-sons beyond the control of the Chinese tall in exchange checked the import measures taken demand and the rise in prices conge- down investments, the net profits for ceivable have increased by about 35 Government. The
last Spring to set up a currency sta-quent on the European war resulted the year amount to $13,353,965.48, to million dollars..
it in an improvement in the export post bilisation fund led to hopes that which must be added. $3,400,634.26 In 1938
warned your Chairman
for the Govern- tion. brought forward from last year. shareholders that conditions in the would be possible
TRADE ACTIVITY The interim dividend of £400.000- Far East were more serious than they ment to come to a temporary arrange-
In connection with the movement paid at 1/2.3/4 and Directors' remun- had ever been in the history of the ment whereby during the period of
of trade, what stands out above eration has to be deducted. There then Bank. Last year your Chairman not-hostilities the transfer of funds abroad and
everything else is the fact that in remains available for distributioned how precarious and changeable the for the service of the Customs
spite of transportation difficulties, $10,165,111.06, which it is proposed to outlook must inevitably be whilst Salt secured loans would continue to
military interference and-other hin- allocate as follows: To pay a final China and Japan remained antagonis-be possible, even though`at a reduced
drances, goods continue to flow In- dividend of £2.10/- per share (sub-tic. Now we find ourselves in
LOAN NEGOTIATIONS
wards and outwards in an aston- ject to the deduction of income tax) third year of this Sino-Japanese con-
ishing volume considering the cir $6,453,781.51 Transfer to Bank Pres flict which has been taking place on Negotiations were in fact initiated
cumstances. .mises Account $300,000; Carry For-our very doorsteps and the end of by the Minister of Finance and dis- ward to New Account $8,411,329.55. which is not yet in sight. On top of cussions took place with the Chinese Your Directors regret that it has this our own country is involved in a Bondholders' Committee in London. A been necessary to recommend a re- war which may prove to be the most question which was raised at duction in the final dividend by 10/- serious in its long history.
time in the home press was that this year, but I am sure you will real-
the prior rights of certain loans. ise that the heavy decline in the value
was strongly represented, and of the Shanghai dollar necessarily means a decline in the Hong Kong dollar value of investments which such an institution as the Bank must have in Shanghal. I am glad to say that this loss has been met out of the year's earnings so that the resources of the Bank have not been impaired. I trust you will approve of this ace tion which is, I think, the only sound policy.
the rate.
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that
Justhakket Wical putlook that is de-: as a matter of principle. Unfortun-ing of the Yunnan Railway,
So long as crops are grown and es- sential manufactured goods are avail- able, so long will they keep moving of in China. The sheer persistence and It enterprise of individuals have been Considering this state of affairs
quite responsible for much of this, but the * well as our proposal to reduce the final dividend, shareholders justifiably in our opinion, that under Chinese Government have themselves would have justification for expect the terms of their contracts the var-taken a very active part in fostering .ing ⚫ gloomy report from their fous loans had claims on Customs, or the outflow of exports. Naturally the in Government's difficulties are now Board of Directors. But as a mat Salt Revenues, or both, ranking fer of fact the strength of our bal-order of date, and that this distinc-greater than ever before as a result is only too apparent. it tion should therefore be recognised of the loss of Nanning and the bomb.. ately before a final decision was reach- Shanghai merchants, both Chinese prom ed, the difficulties which arose in the and foreign, have also played a would remind you that several of Shanghat Exchange Market forced the minent part in keeping the wheels of our branches, such as Hankow, Can-Minister of Finance to suspend ac- trade moving, and last year they man- aged to overcome many of the “ob- REDUCED NOTE CIRCULATION. ton, Foochow and Swatow are. in tion.
He made it clear, however, that structions which existed in 1938. A With regard to our Balance Sheet. treaty ports which are virtually clos-
the Interruption of the Debt Ser remarkable fact is that the tonnage of there have been sundry changes, the ed to trade. From Hamburg we of
vide was only a temporary measure, vessels which cleared from Shanghai principal ones being a reduction in course have no information, but the
only our notes in circulation in excess of British members of the staff got home
and that the Chinese Government for foreign countries was in 1939-
had every intention of our authorised issue by 15 million safely. Other branches are in places
full service of thei ations at mal year, and the port of dollars, which is offset by a similar where trade is greatly handicapped by
the earliest possible moment. reduction in our holding of Govern- political difficulties, turrency experi- ment Certificates of Indebtedness.ments and trade controls,
pressing.
TREATY PORT CLOSURE
ssuming the 16% lower than in 1986, wal
thus shows that it will in due course As a gesture of good-faith, estimat-have no difficulty in recovering its Current Accounts are lower by some Yet we have weathered the Fared quotas of the shares due from Cus- position as one of the first half-dozen 38 million dollars, but on the other Eastern war for two and a half, toms and Salt offices, which still re- ports in the World. hand Bills Payable are higher by about years without
ffering any severe main under the direct administration