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5. One remarkable feature of the China trade of late years has been the steadily increasing proportion of British-manufactured goods (notably textiles) which An opinion as to the have been distributed by German merchants. adequacy of the steps at present being taken by British merchants permanently to secure this business after the war, together with suggestions as to any measures which might be adopted by manufacturers and exporters in the United Kingdom in order to facilitate the attainment of this most desirable end, would be of great value.
The
This most important question has evoked several interesting replies. Tientsin and Hankow Chambers are in complete agreement on the subject, and they report that British merchants, considering the grave difficulties which they have to contend with, are doing all that is possible to secure and retain this business; they suggest that ILM. Government, by legislating against selling to German firms and employing them as agents after the war, would materially assist towards the attainment of this desirable end.
The Canton Chamber contribute some of the causes for this state of affairs. They state frankly that "British trade for many years has been seriously hampered by the conservatism of old-established firms, and in consequence British manu- "facturers have often found their businesses better looked after by the German firms, "who are comparatively newcomers, and are not bound by past precedent. The Germans, on their part, have been glad to take up the representation of reliable "British goods in order to increase their turnover, and as an adjunct to their own "German trade. No doubt they have thereby been able to acquire much information British The Chamber suggests that useful to German business as a whole." "manufacturers, unable to find any of the large British firms willing to take over "their agency, might well think of the many local British firms of smaller size, but almost equally reliable. Such firms are less likely to be hide-bound by tradition, and therefore are usually able and willing to do a good business in some new "article or product which the large firms might not care to interest themselves in, as "the goods will not sell themselves. Local Chambers of Commerce and local
consuls could often recommend firms of this description."
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The Shanghai Chamber of Commerce deals with the whole subject very fully, and as it puts forward both sides of this controversial question, it will be as well to give their reply in extenso. They state-
A large quantity of British goods, including fancy and dyed cotton goods, were distributed by German firms before the war. This was not unnatural, as any firm in general business with a reasonable capital and good credit found it almost essential to open a piece goods department. The Germans conducted their business in much the same way as their British competitors; they were perhaps a little more ready to take risks and to pursue an aggressive policy, but this was largely because they were the last in the field and had to make greater efforts to secure a place. The lines which were handled by Germans prior to the war are practically all being distributed now by British houses under new chops, and the Chinese appear to have accepted the new conditions without any difficulty. At the close of the war the German chops could probably be renewed if German firms could obtain the necessary goods. If they are unable to handle British cottons, they will no doubt make an effort to distribute American and Japanese cloths.
A large number of shippers of piece goods in the United Kingdom depended entirely upon German distributors before the war, and it is generally held that, unless post-bellum trade with such firms in the Far East is prohibited by legislation, it will certainly be re-opened. The merchant houses established here are strongly of opinion that British piece-goods firms in China are both able and willing to handle the whole of the piece-goods trade, and that it would be in the best interests of Lancashire if all trade with non-British distributors were restricted by legislation for a period of years. Whilst agreeing with this general view, the local representatives of Manchester and Bradford firms who are not attached to established houses, have expressed the opinion that the concentration of business in the hands of a limited number of honga is not conducive to the extension of British trade; they urge that-in order to replace the German distributors-the development of the present British firms, and une encouragement of new British firms to establish themselves, is essential to the development of the trade to the limit of its fullest possibilities in China,
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The recent willingness of established houses to deal with a number of home shippers, thus abandoning their pre-war policy of confining themselves to one shipper only, is regarded by all concerned as the first step forward towards sounder and more efficient methods of trade. It may be stated as a general principle that in the opinion of the Chamber it is unwise for any British firm or institution in the United Kingdom to place agencies with non-British firme in China. Information available since the war began has probably convinced most manufacturers that this is so.
I am disposed to agree with the view of the local representatives of Manchester and Bradford houses, and the following expression of opinion from Mr. N. J. Stabb, chief manager of the Hong Kong and Shanghai Banking Corporation, Hong Kong, throws clear light on the situation:-
As regards the increasing proportion of British cotton textiles handled by German firms in the East, the chief reason for this appears to be that most of the British firms here already have their connections at home, and are not inclined to make fresh ones for similar lines of business owing to a possible clash of interests. Consequently, smaller firms at home, wishing to place their goods on the Eastern market, have been driven to make arrangements with any firm they can find, and the Germans have always been ready to accommodate them. The remedy would appear to be that the home manufacturers, who are at present unable to obtain suitable representatives, should either open their own houses in China, or combine with other firms in the same position and establish and finance joint concerns to handle these goods. For many years past there have been practically no additions to the British firms established in China. There is no doubt that the German firms have always been very pushing, and the home firms shipping to them have probably been well served. The whole question is one of the most important which will call for a clearly- defined Government policy after the war, and I propose to deal with it under heading B of this section.
6. Observations with regard to the rexed questions of credit and finance. While it is generally recognised that a cash system is the soundest one for trade in China, the fact remains that our competitors in many places have successfully competed solely on account of their readiness to grant extended credit to Chinese dealers. An opinion as to how far British merchants' adherence to cash terms is likely to prejudice our trade in the future would be of interest.
This has been found a somewhat difficult question to answer. The Canton Chamber considers that the whole subject turns on the system of distribution adopted, and reserves its opinion. The Tientsin and Hankow Chambers are in practical agreement that it is a matter on which it is impossible to lay down a general proposition, depending, as it does, on the nature of the business, and the individual credit both of the merchant and the buyers. They agree that it is a matter for individual firms to consider and deal with on its merits when trade is again normal,
The Shanghai Chamber reports:-
The answer to this question depends upon two conditions: (a) the class of business, and (b) the credit of the buyer. Piece goods and sundries can be, aud generally are, sold on a caslı basis. Large contracts are generally on a credit basis, and this is unlikely to be changed so long as the Chinese continue to inhabit this country. As shareholders in any enterprise they require proof that they are getting value for their money before they will pay up the full value of their shares. It is very often contended that the Germans gave much longer credit than did the British. As a matter of fact it is proved beyond doubt that British manufacturers have always been far more ready to grant extended credit than the manufacturers of any other nation. It is true that the German distributors of British goods often reaped the advantage of this, but it was because they laid themselves out specially for this type of business and took the orders to the manufacturers. Even in the great electric-lighting contracts, obtained by such German institutions as Siemens-Schuckertwerke, a large part of the financial burden was borne by British manufacturers, who supplied engines, boilers, &c., leaving only a minor portion of the deferred payment scheme to be carried by the Germans,
Credit is generally a weapon for getting into a new business, and it is likely to continue to be used as such in China, where manufacturers trust their agents, and where the agents understand their business.
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