330
Net import of treasure
into commercial area
(see page xv.)
***
14,810,102
Loans and indemnities 42,000,000
Invisible liabilities, es-
timate of 1903 ...
ASSETS.
Value of merchandise
exported in 1905 Invisible assets, está- mate of 1903 (less expenditure on Man-
churian railways and garrison of Port Arthur)
***
32,070,000
227,888,197
149,4 0,000
Difference to be accounted for
Hk. Tls...
This unprovided balance, Hk. Tls. 158,692,696, may be considered a possible estimate of what may be called "war remittances" which have during the year been covered by merchandise imported, subject, however, to some deduction for the balance of trans-frontier trade ontwards over that inwards (see page vii.), not included in this estimate.
THE HONGKONG WEEKLY PRESS AND
(May 6, 1906.
failure of the silk crop, or a smaller export of tea or other goods-then the silver required to be sent to the interior is less and the bills offered for sale against exports are less, and the foreign banks have no means of using the silver in their vaults and must export as much silver as they cannot use, except under con- ditions such as prevailed during the past year, when so much of importers' bills was covered : by credits based on war remittances. If, on the other band, there are native goods for export in large quantities, then the foreign banks will lead their silver to native banks, to be lent to native merchants to take to the interior to buy native produce, or will buy bills from foreign merchants who have to pay for native produce brought down from the interior.
Considering first the Chinese produce, Į merchants expect to make a profit on what they have bought, and to compel them to sell other wise than in the ordinary course of trade one of two things must happen: either the fluctus- tions in exchange referred to «bove will bring 535,980,893 | an increase in the silver value of their goods |
which will induce them to sell by increasing the profit; or an increase in the interest demanded by the banks will increase the cost of holding the goods, so that they will then be forced to sell with a small profit, or even with no profit at all. The merobants in the interior, having bought goods with the silver which they have borrowed from the native banks, will either themselves bring the goods to Shanghai or aa- 377,288,197 | other large Treaty port, or will sell to another merchant who brings them to the Treaty port.
The periodic payment of loans and indem- 158,692,696 After arrival at the port they hold the goods to
make a profit. If exchange alters in such a way nities has the effect of making the foreign that the foreign merchant can offer a large banks perpetual creditors receiving silver from the native banks, but it does not have the price, as shown before, then the owner will sell his goods because of the profit which he will direct effect of causing a flow of silver out of make. If the money market is tight and the the country. The movement of silver is affected foreign banks mast charge a high rate of by the movement of goods: when exports of interest, and must therefore demand a high goods are abundant silver will remain in the rate of interest, the native banks, if they country, and when they diminish in quantity or are unable to pay off the bebt, must then pay in value.silver will flow out. In other words, a higher interest, and must therefore de- the debts of a country are paid in goods, and silver is used only when goods are not exported mand a higher interest from the native mer-
in sufficient quantities. An increase in exports chants, until first one, then another, then more are forced to sell because they cannot obtain makes the rates of exchange favourable to the renewal of the loans or cannot pay the higher exporting country, and álso increases the supply When they have sold, either to of silver, so that the money market is easy. rate of interest. obtain the profit or because they are forced they The conclusion, therefore, is that every effort must be made to encourage the export trade, obtain payment either by order on native banks or
more probably by cheque on the since only in that way can the solvency of the foreign banks. Meantime the foreign mer-country be maintained. The money required is first in the pockets of chants who bought these goods have been sell- the people in copper cash: with this they buying foreign goods, with the proceeds from goods, both foreign and native, from the retail which they create a credit at the foreign banks, dealers, who must then convert this copper into and against this credit they draw their cheques. silver to pay for their purchases from the The cheques thus received by the sellers of wholesale merchants. These last must pay on native goods are then paid to the native banks to repay the loaue, and are used by the native their goods, silver for Customs duties, copper for general and salt Likin, and silver or copper banks to reduce their indebtedness to the for other taxes, and in this way the necessary foreign banks. funds come into the official treasuries; but what is received at the treasuries in copper must be converted into silver.
As some uncertainty is still found to exist in the Chinese mind as to the actual disposition of the silver which has to be paid by the govern ment of China to procure gold for its foreign loans and its indemnities to foreign Powers, I think it well to go more fully into the subject. The amount so payable is about £6,250,000 & year; at the average exchange of 19 2 this was equivalent to Hk. Tls. 48,000,00 ̊, and at the exchange of 1905 to Hk. Tĺs. 42,000,0 0.
When the supply of native goods sold for export to foreign countries is sufficient, the entire indebtedness of the native banks to the for.ign banks can be paid off in this way; but as this is not now the case, silver must be obtained from elsewhere to close accounts at the end of the year.
+
Remittances are made, usually by draft, from all the collecting treasuries to Shanghai, the principal commercial centre of Chius, where
While native goods for export have thus the money has to be paid to the banks by the Shanghai Taotai, who acts as financial agent contributed their share to steady the money for the Chinese government. On the due date market, foreign goods have been bought by the Taotai sends to the foreign banks cheques native merchants at Shangbai and elsewhere to be transported inland and sold. The native for the amount in silver which is due to each. This finishes the part to be performed by the merchant has borrowed from the native biaks Chinese government. The rest is to be done the money with which to pay the foreign by bankers and merchants, and is in two parts: importer, and when these foreign goods are (1) changing the silver paid by obeque in sold the money received for them is paid to the native banks' branches or agents in the interior. Shanghai for bills of gold exchange required to pay the loans and indemnities; (2) finding the In the cases of foreign oods also, a rise in silver required by the Chinese banks to pay the rate of interest forces the holder to sell, in the cheques sent by the Taotai to the foreign order that he may repay his loan; and a rise in banks, and getting that silver back into circula-exchange leads him to sell, either because he tion through all the provinces of China,
can replace the goods more cheaply or because For the silver transactions the cheques which he is competing with others who bought their the foreign banks have received from the stocks more cheaply at the high exchange. If Shanghai Taotai are presented to the native at Shanghai the foreign banks owed money to banks, and silver would be demanded if the the native banks, or if there were abundance foreign banks had a deficiency of silver and of silver in both foreign and nativo banks, required to replenish their stook; but in general the rate of exchange would be such that the the Chinese practice is followed, and accounts silver would remain inland and the proceeds are finally settled only at the end of the Chinese would be remitted to Shanghai by draft; but if year. On presentation of the cheque the deposit the Shanghai native banks are short of noney to credit of the Taotai is transferred to the then the expense of remitting hard silver must credit of the foreign bank, and becomes a debt be incurred, and the silver will be sent to Shang. due by the native bank to the foreign bank. hai to enable the native banks to liquidate their For this debt interest has to be paid, and the debt to the foreign banks; and in this way amount of interest will depend on the proportion the banking transactions of the year are closed. between all debts due to all banks and the actual From Chungking, to cite one example, it is silver available in the market and at the disposal reported that, during the latter half of the year, merchants were quite uuable to obtain drafts to of the debtor banks, and on the time still to run to settling day. This is the interest which pay for their goods imported, and were driven the native banks must pay to the foreign to incur the risk and expenses of shipping banks. Now the native banks, if they must bullion down river through the rapids, and that pay 5 per cent. or 10 per cent, for money which this imposed a serious restriction on trade
At the close of the year, then, the whole of they owe, must receive 7 per cent. or 12 to 15 per cent, for the money which is due to them: the payments due for loans and indemnities without profit they must shut their doors. They have been paid to the foreign banks in the are always lending to Chiness merchants, both course of ordinary banking business, and the in Shanghai, to which place the Taotai's remit payment for loans and indemnities are in no tances have come, and inland, whence the trea-way distinguished from payments for goods, suries' remittances were sent: and with this weather foreign goods imported or native goods If the quantity of native goods money the merchants buy Chinese and foreign' exported. produce.
exported is reduced-as, for example, "by a
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HOME AND CHINA AFFAIRS.
(FROM OUR LONDON CORRESPONDENT )
March 30th.
PRAISE FOR HONGKONG.
Contrary to expectation, the annual meeting of the China Association passed off without undue emphasis being laid upon the difference of opinion that had arisen between the Shanghai Branch and the parent Association over the question of policy. Mr. William Keswick, M.P.,
who
was presiding for the last time under his term of office as Chairman of the Committee, made a nice little speech, which was marked by a praiseworthy and diplomatic refer noe to "the little misunderstanding" with Shanghai. By taking this wise course, he obviated the nices- sity of further reference, and completely shut the months of any sympathisers with the Shang- hai attitude; and everybody was prepared to go away and do as he had suggested by laying aside all soreness and working amicably for the general good. It was a pity, therefore, that Mr. Gundry, the re-elected President, could not leave well alone. Instead of that, he very unnecessarily harked back to a remark by Mr. R. W. Little at one of the Shanghai meetings. It was quite uncalled for, and I feel sure that if he had thought of the effect his parting shot may have in Shanghai he would have refrained It is to be hoped from opening up the old sore. Shanghai will not retaliate. If Mr. Gundry seemed to show more heat than was called for, no one else gave the matter serious thought, and the remark was allowed to pass with a quiet laugh.
The meeting was well attended, and one may hope that this is a sign that there is to to an infusion of fresh vigour into thisrepresent- ative institution during the current year. It is highly ratisfactory to see from the report of Its business like action the Association that the Hongkong Branch is by no means “moribuad”. over the Canton-Kowloon Railway, and the threatened new port at Whampoa, reflectsthe greatest credit on the local Chairman, the Hon Secretary and the Committee, and we at this end feel that so long as this spirit of watchfulness is shown there is no fear of British interests Being overlooked or neglected—in Hongkong. There is not only scope but need for such an Association, and the wonder is that there are not more branches în a few of the more important ports. As the Chairman at Tuesday's meeting said, China is on the eve of enormous changes and it is difficult to foresee the outcome of the present impetus towards reform. Chins will need all the guidancè she can get, and
t