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methods of trading in the factory days at Canton, extended and modified to meet changing conditions, and round it enormous vested interests, both British and Chinese, have been built up. All went well so long as British traders held the virtual monopoly of the traffic, which was the case until the end of the last century, but with the close of the Boxer troubles in 1900 the attention of industrial Europe, America and Japan was drawn to the enormous potentialities of an undeveloped market with a population of four hundred millions of industrious, commercially minded people, and the past fifteen years has marked a period of increasing competition, coinciding with a well- defined tendency towards decentralisation from the great centres of Hong Kong and Shanghai, and increased foreign activity in the interior of the country.
Our competitors entered the field with enormous disadvantages.
The British houses had mostly been established in China for several decades, a few of them dating back to the palmy days of John Company. They monopolised the soundest and wealthiest of the Chinese compradores and merchants, their chops had been established on the market for years, they held the cream of the British agencies, and the banking, shipping and insurance facilities on the coast were in their hands. Our competitors were forced to seek new avenues of trade and employ improved methods, but in this they were aided by the fact that they brought to bear on the task a free, untrammelled and progressive attitude, and, and above all, they were unfettered by "old custom vested Chinese interests, which the old-established houses have found, and are finding to-day, so difficult to break through.
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Our first and most formidable rivals were the German firms. They entered the lists of competition in the ordinary staple articles of trade, such as piece goods, metals, hardware and sundries. Prices were cut, margins were reduced, credit was granted to Chinese purchasers, sometimes with disastrous results, the greatest pains were taken to develop a trade in those miscellaneous goods which the British houses did not
care to take up so long as it was possible to obtain a satisfactory turnover on the standard and less trouble- some articles. Connections were opened up with London and Manchester houses for those products which it was not possible to obtain from the Fatherland, and the fullest possible advantage was taken of that great reservoir of capital which is always available in London for the finance of foreign trade. In fact, I have been astonished at the exceptional trading facilities accorded to our German competitors by certain merchants in this country, and the extent to which their operations were financed by British capital. Despite all these efforts, however, and despite the fact that grave risks were incurred, which should have been offset by increased margins, my investigations and experience lead me to believe that in the staple articles of import handled in Shanghai and Hong Kong our competitors were not able to secure a return on their capital at all commensurate with the amount of their turnover and the risks involved. So far, it may be argued, the British merchant has a good case for the maintenance of his existing system, but I propose now to deal with a much more serious issue of the past few years, and that is the increased activity of our competitors in the smaller ports such as Tientsin, Hankow, Canton and Tsingtao, and the development of direct business connections with Chinese in the interior, which has resulted in great inland provinces such as Hunan, Yünnan and Szechuan becoming strongholds of German trade and influence. The foreign commerce of the four ports mentioned has advanced enormously of recent years, and the lion's share of the net increase has been secured by our competitors. This has been mainly due to the determined effort of the Germans to secure a strong hold of the development of the export trade in China produce, in the realisation that the purchasing power of the district would be increased, and the demand for foreign goods stimulated, which demand has been met by direct importation to the ports, and has fallen largely into their own hands. It must be remembered that, although our direct shipments to China in 1913 were 97 million taels as against Germany's 28 million, in the year Germany imported direct from China
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