HONG KONG DAILY PRESS, MONDAY, MARCH 1, 1937.
China's Natural Forces Of Supply And Demand
(Continued from Fage 1.)
Among those present at meeting were:-
the
The Hon. Mr. J. J. Paterson (Chairman), Mr. G. Miskin (De puty Chairman). Mr. J. K. Bous- held. Mr. A. 'H. Compton, Hon. Mr. 8. H Dodwell, Mr. M. T. Johnson, Mr. J. R. Masson, Mr. X.. 8. Morrison. Mr. T. E. Pearce, Mr. A. L Shields (Directors), and the following shadeholders: Messra. E. 8. Abraham, J. M. Alves, F. C. Barry, P. & Cassidy, Hon. Mr. T. N. Chau Messrs. Chua Seng-choo, Chun Wing-kew, 8. M. Churn. N. V. A. Croucher, D. H. Cooper, J. D. Danby, R. A. Dastur, Fung Kong- un, H. R. Forsyth, H. R. B Hancock, He Wing, A. W. Hughes, H. Owen Hughes, Lo Kai Wing, M C. A. Marsh, Messrs. M. J. B. Montargis, A. Morse, J. A. Plummer. 8. H. R053. F. Schreiber, J. H. Beth F. W. Sta- pleton, D. V. Steavenrori, H. R.
Summers,
J. H. Sturt, E. H Taggart, G. G. N. Tinson, S. T Williamson and Dr. F. H. Kew.
The meeting commenced at 11.30 a.m. when the Chief Manager, Mr. V. M. Grayburn. read the notice convening the meeting.
CHAIRMAN'S SPEECH The Chairman, the Hon. Mr. J. J. Paterson, "then addressed the meeting as follows:-
The Report and Statement of Accounts having been in your hands for some days I will, with your permission, take them as read.
After making full provision for Josses and contingencies, the net profits for the year amount to $15.107.175.19 to which must be added $3,327,060.03 brought forward from the previous year.
the interim After deducting "dividend of £400,000 paid at 1/3.5/16 and Directors' remunera- tion, there remains available for distribution $12,085,327.68 which it 15 proposed to deal with follows:-
To pay a final divi-
S
dend of 23 per share (subject to deduction of in- come Tax) .........$7.744.537.82 Transfer to Bank Premises Account Carry forward, to New Account ......
1,000,000.00
3,340,780,84
*$12,085,327,68
The figures of our Balance Sheet have been taken at 1/2.7/8 against 1/3.5/8 the previous year, so a comparison between the two is easier than it has been sometimes in the past.
Considering that part of the readjustment of 1935 had to take place during 1936, the difference in our figures is not so great as one might have expected and can roughly be stated to be as follows: On the labilities side Notes and Current Accounts are up some 36.1/2 and $80 millions respective ly, while Fixed Deposits are down 320 millions, and among our assets Investments and Loans show in- creases of $39 and $58 milions each as against a decline in Bills Re- ceivable of $20 millions.
DEPRESSION LIFTS
It is generally agreed that the trade depression which developed in 1929 has now moved away from the greater part of the world. In fact that almost l-omened word "boom" is again being used in Tegard to conditions in some coun- tries, particularly in England and the United States. Nevertheless. there is a wide realisation that the outlook is still obscure; that there !s an artificiality about the boom. if it can be called such; that in most countries the word is applied "with very little real basis; and that it is able to disappear like a pricked balloon if steps are not quickly taken to put right certain basic economic factors which are known to be awry. But apart from economic factors there is also the political situation in Europe which gives rise to hesitation if not alarm. Our Honde Government are facing a very dificult task in struggling to preserve Europe from getting embroiled in a general conflict, and the many political and economic problems which they are facing are appalling in their complexity.
It is a rellef that my task to-day is not to review the situation as It has existed in Europe during the past year. What I am called upon to do is to direct your minda to the countries in which we operate and particularly to China, where conditions have at any rate not been so depressingly ténae as in Europe.
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❘
rate declined to 1/23/4 but re- covered to 1/27/8 at the end of the year.
IN MANCHURIA
settlement of the the good fortune to point to record again been one of changes, bright
stilla, a potential danger to the future. A
I have referred to the good crops periods and periods of gloom,
Customs Revenue. We understand Vickers-Marconi debt has also been earnings on those two very impor marchings and counter-marchinga"
that the Government is taking in negotiated by another, Committee tant lines, the Peiping-Hankow in China during the past year and and Tientsin-Pukow Railways. to the improved position of the Nevertheless the bright moments After a full year's trial we may hand the essential measures of and at the present moment it
Some of the agreements made by export trade, hut when we turn to have definitely had the best of it say that our new currency has reform which were in fact promis- seems that all Chinese loans fosted and, although there will almost worked most satisfactorily, with a ed by Dr. H H Kyng on Novem-in London excepting the Huruang the Ministry during the year for Manchuria China's figures lose by. Up there exporta. certainly be bad patches from time minimum or Яuctuations, which ber 3, 1935; and while progress have been readjusted as satisfac- railway construction have been on comparison.
and have increased to less than 42 pèr to time, yet we feel fairly confident has been a great help to
Mer- may seem to be slow it is realised torly as can be expected. In the comparatively short term
that Governments have that in due course, as the stability chants.
many first few years the resultant char- somewhat uneconomic basis, but cent compared with the previous we understand that the Chinese year, and the total exports from and authority of the "Chinese As you all know, China is no
difficulties which are unknown to ges on the Ministries of Finance
the a free silver currency those outside
Inper circle. and Raliways are Government become consolidated, longer on
quite small, Government argue that it is essen-Manchuria are within 20 per cent the outlook will still further im-] standard. Her currency Bystem We trust, however, that it will not and this gives time for the Govern- tial to press forward on whatever of those of China. This improve~". prove. It must not be forgotten may perhaps fairly be termed a be long before some announcement ment to complete their plans for terms they can best obtain credits, ment is mainly due to the better how immense is the task of unity- | managed foreign exchange stan- will be made of the action taken the rehabilitation of the finances Their view is that many of their prices obtained for Beans and Bean ing and governing such a great | dard although her currency re- Managed currencles are able to of the country, which we see no most serious problems will be products which actually provide reason to doubt can be done if automatically solved if means of not far short of half of the total country as, China. It has often serves are in fact partly in foreign be a serious danger to merchanta
political stability is assured,
communication can be developed exports. Imports Improved by 14 been pointed out that the proper exchange, partly in gold and partly and bankers if the management"
rapidly. It stands to reason of per cent and the foreign trade comparison is between China and
in silver. But the connection with is not founded on à Arm and solid
SMUGGLING IN NORTH CHINA
course that the Government will Europe rather than between China silver is a precarious one in spite basis such as is implied when there
Improved returns have been re-gladly avail themselves of sounder and a single country. This th of the declaration of the Governi- is an independent Central Reserve
ported by the Salt and Internal dicates that patience is needed and
Bank and a well-regulated bud- ment on May 17 last that 25 per
Revenue Administrations, while the too much must not yet be expected.
cent of the reserve held against getary system. Without such
increase of $9 millions in the the note issue would be maintain- basib, "management" ke mono-
Customs Revenue for 1938, came ed in silver. It is true that silver poltes, tends to become the play-
as a considerable surprise in view dollars of the old type, still circu- thing of politics instead of follow-
of the smuggling in North Ching late as a medium of payment in ing natural values-Morcover, one
which was known to hayé seriously some of the more distant parts of kind of "management" leads to
The
Relations with Japan have again dominated the political scene, and the outstanding feature of the year is that China has maintained the status quo. In spite of dificult
а
and more economical finance as soon as it is available.
TRE EXPORT TRADE
total of about M.Y. 1289 million is an easy all-time record. The ad- verse trade balance was last year reduced considerably, but it is clear that Japan which is responsible for about two-third of Manchukun's trade is still furnishing extéristve credits to that country, Internal éonditions have improved, but no noticeable benet has yet accrued $706
to European or American exporters. This is 22 per cent and a foreign exchange control law
At regards the trade situation in China, the most significant change is that to be noted in the Customs
last year amounted millions.
periods she, has shown that she is China, and fair quantities are another. It becomes a kind of affected the collections in Tentsingures of the export trade which
more than
ever determined to stand her ground. In North China, at any rate outwardly, there is The ttle change to be seen. Hopel-Charhar Political Csünch re- mains under the control of General Sung Che-yuan, and the auto- nomous regime of Eastern Hopel still exists under Yin Ju-keng.
SINO-JAPANESE RELATIONS
at any rate Negotiations, or conversations, between the Chinese Foreign Office and the Japanese Ambassador, with à view to d fundamental readjustment of the relations between the two coun- tries, have been proceeding in an intermittent way. The Chinese at- titude has if anything stiffened up during the year, but there were occasions when compromise seemed possible. However, both sides were responsible for set-backs;
there
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certainly hoarded, but it is prob- able that in time these will be melted down or come into the hands of the authorities in due course the Government is expect ed to issue silver token coins, but none of these have as yet been minted.
whirpool drawing into its control Industries, import, exports and so
to
on until rigid state control reigns whole successfully prevented the higher than the year before and,Has Increased traders' disculties.
supreme.
We of course realise that there are few countries with a completely independent Central Bank system
that consequently politics often play a permanent part in currency matters. For this reason it will be obvious to you that very great importance attaches to the actual terms of the new Central Reserve Bank Act which will be keenly scrutinized by all who are interested in China's currency and finance.
and The arrangements with the United States made by the K. P. Chen Mission last summer. full particulars of which have not been revealed, provided, so far as 's known, for the purchase by the United States of regular and sub- stantial amounts of al ver at the average monthly world prices, while China on her side agreed to enlarge the use of silver and main- ta'n
an independent currency system unlinked to any foreign monetary unit. Thus it will be seen that silver has not yet been entirely cast off, though its future influence in China seems likely to
be small. The foreign banks, with the exception of the Japanese, handed over all their silver against
notes early in the year, but no information is avail- able us to the actual stocks now held by the Chinese Government. Considerable
were unfortunate Incidenta in- volving death or injury to Japanese on various occasions in different parts of China, and there were also set-backs caused by the at-icgal tender
Finally titude of the other side. the seizure of Chiang Kai-shek at Blan and the subsequent develop ments in Shensi se pre-occupied the Government that discussions were held up and the negotiations between the two countries remain for the moment in suspense.
CHIANG KAI SHER
The seizure of the Generalissimo at Slan on December 12, which the Chinese now refer to as the Double Twelfth affair, came as a great shock to China, and although he was released within a fortnight, a tragedy was at one time feared. I believe that the. Generalissimo has repudiated the title of Dictator.
amounts have
of course teen disposed of. The legal tender note issue at the end of the year was about 81,100,000,000
which excludes the issues of the commercial banks whose notes have not yet been entirely recall- ed, and of the Farmers' Bank the position of which is somewhat obscure. According to the reports of the Currency Reserve Board. fully 60 per cent, cover against the nctes of the Government, Barks is held in "cash," which term in- cludes foreign currencies. These
SIGNS OF RECOVERY APPARENT
If conditions in China keep up, the steady Improvement which has been made recently and if unifica- ou of the country is maintained
is avoided. and internal akife
perhaps China will be more willing to allow free play to the natural forces of supply and demand. The signs of recovery are clearly ap parent and the excellent crops throughout the country have teen a great boon, coming as they did
time at a
when exchange had just been fixed at a reasonably low level, and when the demand for China produce was improving abroad. As a few instances we may mention the improvement in Chinese commodity prices, the rise in yarn, the demand for plece goods which has resulted in the re-opening of closed cotton-mills, and encouraging progress reported by utility companies.
Shangha is however still faced with one serious handicap to en- tire recovery in the deadlock that
and the Northern parts Customs authorities have on the
transportation of smuggled goods southwards, but in the East Hopel district there has been practically no eating of the situation except
as and when the saturation of suppiles has caused a temporary slow-down in the smugglers actl-
Whatever vities.
measures the Customs take can only be pallia- tives, and no real solution will be possible until the political status of the East Hopel Autonomous area is settled by diplomatic negotiations. It is recognised that the Customa Administration have throughout the year been confronted with un-. precedented dificulties in North China, and the integrity of the service has from been seriously threatened. But by the exercise of great
time
to time
resolution
coupled with tact, Sir Frederick Maze has succeeded in maintain ing the authority of the Custom Inspectorate in the midst of much political confusion and unwarrant- ed interference with its legitimate functions. The Customs Service have a fine record and again and again have they remained practi- cally the only outward and visible sign of the prestige and sovereignty of the Central Government in regions where otherwise indepen- dent regimes existed. This record has considerable significance from a financial "standpoint and has contributed very largely to the confidence placed abroad in loans secured on the Chinese Mafitime Cristoms.
GLOOMY FORECASTS
excluding Marchúria. the best result shown since 1931, Imports
The situation in Japan does not increased . $22 millions in..... value, but this improvement was entirely on the face of it make for optimism due to the higher rate of the and persons trified in economics. G.GU. in terms of Chinese donara, fe making the gloomiest of fore- which averaged $2.26 in 1936 as casts as to the outcome of the financial and trade against $1.88 in 1935. In terms of political, C.G.D. imports actually show a situation as it exists at present. It reduction of 65 militons of ở.0. is impossibile to foretell how the The adverse trace balance was political situation will develop, but just under $238 milions, which is. We hope for the best. As regards the the lowest figure since 1919 when budget. we must confess to mis- China exchange was almost at its Kivings. But as fegards trade, the position hardly seems to warrant peak and it compares surprisingly with the figure of $1,087 millions pessimistic conclusions. Last year's expansion and compare very in 1931 when exchange was at its Agures again showed considerable lowest point. Any estimate of the favourably with those of many international balance of paymen's other countries. Exports have in- must, in view of the continued
creased about 8
in per cent. lack of reliable statistics, remain
spite of the handicap of tariffs
highly uncertain, but the improved the N. E. Indies are likely to affect remittances from overseas Chinese favourably, and the balance may well prove to be in China's favour. During the early part of the
conditions in Malaya, the PI's and
year
trade conditions did
not
and quotas, while the visible ad-
to have been covered by invisible receipts. Shipping has been very prosperous and the tourist trade reater than ever. The drastic
verse balance of trade is believed
exchange
control measures
1-
appear to warrant any optimism stituted on January 8 of this year except as regards certain export almed at dealing with the nervous- ness in the exchange market commodities in which America was
caused by the unbalanced budget interest, particularly and the prospects of heavy buying taking an wood-oll, but towards the autumn a definite change became apparent abroad to cover Army and Navy requirements. These measures The demand for Chinese produce should result in a better balance remained stendy and added to between imports and exports, but this, the effect of the good crop, to which I have already referred.
began to make itself felt.
GOOD CROPS
there are no indications of any serious check in the expansion of trade throughout the present year.
All the same his influence is felt legal tender notes are now current exists in regard to its mortgage port of the Chirlese. Government tionally good and have been esti- better demand for the two chief
everywhere in China, and either directly or indirectly his hand can be traced behind most of the pro- gressive schemes of development which have been initiated during the last few years. He has done much for China, and nls removal would be a serious blow to the progress recently made. Prior to
in every province throughout China in varying degrees of popularity and they are steadily replacing other forms of currency. CHINESE MONETARY REFORMS
Sir Frederick Lelih-Ross has stated that the Chinese Monetary reforms have been justified by their results. Everyone will agree that so far there has been no hitch, but rather there has been
the Sian incident the country seemed to be reasonably quiet and the Central Government firmly | every sign of skilful management installed, but since then there has by the Central Bank. Occasional again been uncertainty, though the political scares have caused specu- Plenary Session of the Central Executive Committee just conclud- ed has we trust cleared the alr
STATUS OF KWANGTUNG
I must before passing on men- tion the change which has taken place in the status of Kwangtung. Here in Hong Kong we are parti- cularly affected by the transfer of control, and it has been a matter of considerable interest and im- portance to us. We were glad to see how firmly and yet adroitly the Generalissimo dealt with the situa- tion prevalling last summer, and while we do not expect, and indeed do not want, very rapid changes the situation is still too imper- manent for that we look forward to close collaboration between Hong Kong and Canton in all inter- connected matters and trust that the good foundation laid by His Excellency Sir Andrew Caldecott, when he visited Canton last year, will be productive of benent to both sides.
"
REGRET AT GOVERNOR'S TRANSFER
Your Board of Directors fully associate themselves with the many public expressions of regret at the transfer of Bir Andrew to Ceylon after so short period as the Governor of this Colony. Our loss is their gain. We feel sure that he Will win the couûdence and esteem of Ceylon as quickly as he did of Hong Kong.
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and
FINANCIAL SITUATION The last published Ariandal re-
real estate problem, with related to the fiscal year which which is bound up the question of ended on June 30, 1935. The the right of land'ord -videfielt for that year was $188 tenant. There are anomalies in millona. As regards the year the laws governing these matters 1935/36. an official statement has which require to be straightened out Chinese property owners are just as much affected as foreigners and we trust that the Legislative Authorities will deal with these points shortly as we believe they are being urged to do.
DOMESTIC BONDS Early last year an Internal Debt
Prices
TIN AND RUBBER In many parts there were in fact
In Malaya, as in China, trade bumper crops. In the Yangtze began to look up in the second half Valley the rice yields were excep-
of 1936, mainly because of the mated as 30 to 40 per cent. above products tin and rubber, the normal average. The wheat have been at remunerative levels crop, said to be about 500 million for producers, and the prospects plculs was fair, though not up to for the present year are promising. the best records. The cotton crop In the Philippine Islands political passed all records by a good mar conditions have been normal, and sin. The production is estimated the business community, feel con- fident that they will be able to operate without legislative Inter- ference. The boom in gold mining has been coupled with higher prices for the main local com- modities, such as sugar, copra, and
to have reached about 14.1/3; million piculs of 133 lbs. which is over 3 million piculs higher than ever recorded in the past. The acreage under production is fur ther estimated to have increased at least 12 per cent. over the
Agares have increased considerably, prévious high mark. Much of the hemp, and as a result the export credit for the good cotton crop while thie financial position of the must be given to the National Government has also improved. Economic Council, a tribute to
Increased taxation on the pro- whose work was paid by your auction of mines and on corporate Chairman two years ago.
The improved demand for wood-
incomes may affect the importation
declared that the déflekt WES larger than the previous year; nevertheless the budget for the year 1936/37 only provided for $125 milions as
proceeds from loans without official Agures it 18 Impossible to say more, but the recent improvement in the pur- chasing power of the people should lative manipulations, but the affl-Consolidation scheme was present-receipts both of the Internal have a favourable effect on revenue cisl rate has nevertheless been ed to and accepted by bondholders,
Revenue Administration and the maintained without wavering, and whereby the interest rate on
Customs, through ап increased the resources. at the disposal of domestic bonds was reduced to 6
demand for Internal consumption the Government Banks have prov- per cent and amortisation sche- ed adequate. During the whole of dules were considerably extended goods, as well as for imports. 1938 the rates in Shanghai-for the About the same time a Recovery DEVELOPMENT OF pound have ·remaʼned
between Loan of $340000,000 was placed? SUE, COMMUNICATIONS
the Government Banks. References have in past years 1/2-1/4d. and 1/2.18/32d., a differ- with ence of only 11/32d., while the US. Since then the Government have been made by my predecessors to Dollar rate has ranged from 28.1/2 had no recourse to the domestic the great progress in the develop to 30.1/4. These differences can be bond market but have covered xnent of communications in China. attributed in part to fluctuations their requirements by other means. The cumulative effect of these developments is now making itself in the London/New York cross rate. I will deal with the trade number of provincial and Railway felt, and the country being gures later on, but it is obvious bond issues, some of which have opened up in a remarkable way. that the lowered rate of exchange been secured on revenues of the It is now possible to cross China has encouraged exports, and al- Centra! Government. Excellent by railway, by motor or by alz. though imports have been adverse-progress has been made through-It is possible to telephone or radio
nevertheless the out the year in the settlement of phone direct from here to Shang- steadiness of exchange has to some foreign debts in arrears. Apart hat and from Shanghai to Japan. extent ofset this disadvantage. I
from the steps taken to clear off Nanking, Hankow or any one of cannot do better than quote Bir
numerous commercial debts due by nine adjacent provinces. Radio Frederick Leith-Ross' opinion of
Government departments, the in-broadcasting stations are almost last June when he said:
tiative taken by the Governor of excessive in their number, but their "All things considered there
the Bank of England in forming a influence is being widely felt, for would appear to be every reason chinese
Rallway. Bondholders' Instance in the broadcasting of so far as economic factors are committee in London has proved market prices to up-country concerned for confidence in the
to be of great value and assistance. } farmers who are thus less and lese analysis shows that in many casesxelves, our diffre and our duty 15 present currency scheme, pre As a result of negotiations initiated under the thumb of the middle- vided that the Chinese Govern- by the Ministers of Finance and ment complete and carry through Railways, terms of readjustment. efficiently the programme of in- of the T.. P. R. Loans, the Honan
ly
affected,
There
have, however. been
ally the reorganisation of the way Loans and the
man
oil has made that commodity the of foreign capital, but the outlook leading one in the list of Chinese, generally speaking, good
PRESTIGE OF BRITISH exports, beating all records, both
BANKING in value and quantity. Other ex- port commodities show improve" | In conclusion, may I, Just remind ments, especially tin, but one you that in times of dificulty wide feature of the year is the trend differences, of opinion are to be towards monopolies and state con- expected in business circles, and trol in the export trade, which is more especially do bankers and partly due to the conclusion of their constituents find points of barter agreements with foreign disagreement. It must be remem countries. The economic wisdom bered that the last few years have of this policy is of course very been an exceptionally trying and doubtful, especially in China where | uncertain period. The world 18 administrative experience is lack now emerging from its dificulties.. ing and other internal dimenities Some countries have come through abound.
IMPORT FIGURES
better than others, and the Fai East has come through better than The import figures which I have many parts On the whole the given might not seem to warrant outlook is reasonably bright, but it is not safe to prophesy what the much optimism, especially as an future holds in store. For our
where progress can be traced it
was due to purchases on account by collaboration with those of like mind, whether in China or in the of the Chinese Government
other countries in which we KAILWAY PROGRESS
Nevertheless it is clear that far the From the Bank's point of view larger part of the drop in imports operate, to work for a steady ex- ternal reforms including expectRailway-Loan, the Lung Hai Hail- the progress in railway construc- was in those goods which: Ching { pansion of international trade, and Canton- tion is of special interest. Since a well able to, and now 18. promote especially of Britton frade, Central Bank and the reform of Kowloon Hallway roan have been the present Minister of Railways: dyeing herself in larger quantities while continually atmirig Fat up- the budget."
recommended by the Committee took office in December, 1835, many namely rice and wheat, raw, cotton holding the world-wide prestige of
British Banking, junk UNIFICATION IN NOTE ISSUE for the acceptance of British very important and extensive pro-
and cheap cotton goods (imporis
With these remarks, ladies and There was much more in Sir Boudholders. These offers have injects have been put under way, of the latter are incidentally at Frederick's admirable statement every case been well received in His ambition is, to complete 6,000
their lowest point for a great gentlemen, I beg to propose the which still applies with great force. London as being the best obtain miles of new railways within five many years). The exect of the adoption of the Report and Ac I will now turn to currency He referred to the necessity of able in the circumstances A years, and thus practically to improvement in the internal situs counts as presented, and after questiona In Hong Kong we unification of the note issue, to settlement of the Hukuang Rall-double the existing system within
tion was only just begining to be they have been seconded I shall be started the year with exchange at the dependence of the currency on ways Loan has been complicated that period. At the same time he felt, at the end of the year, but pleased to answer any question Let us start off with China. The 1/3.1/2, rising to 1/3.5/8 where it internal stability and to a settle by the international nature of the has been bringing his business import merchants are generally that may be asked to the best of
remained until the middle of Mayment of the special situation infotation, but an announcement training to bear on the problems agreed that the outlook is now
in the near of the existing lines and he has more promising.
(Continued on Fare 12) By the middle of September the North China which has been, and may be expected
CHANGES IN CHINA
Year 1938 has in some ways been typical of recent years. It has
CURRENCY QUESTIONS
my ability.