284
Philippines and F.M.S.
THE HONG KONG WEEKLY PRESS &
The Philippine Islands suffered from a drop in the prices for their principal articles of export, especi- ally sugar, though in view of the general overproduction of this lat- ter commodity they were fortunate in being able to market a crop of half a million tons in the U.S.A. at reasonable profit.
a
Taking trade as a whole the year was some- what less favourable than its pre- decessor.
As regards the Straits Settle- ments and Malaya, I need not re- fer to the vicissitudes which have befallen the rubber industry dur- ing the year with such serious effect upon the economic situation in general. The drop in rubber prices and a fall in tin in the early part of the year curtailed purchas- ing power and the import and ex- port figures show a sensational falling away from the returns of the previous years. There is com- fort to be found in the expecta- tion that the readjustments which are now taking place in both of the major industries will leave them in the end on a more stable footing, to the ultimate benefit of all the interests concerned.
warns us
con-
The political situation in China shows a marked improvement and although experience against a too facile optimism, the outlook as a whole may be sidered more promising than for a long time past, since there is good reason to hope that the vic- tory of the Nationalists means the end of the dismal cycle of inter- party warfare from which the country has suffered for more than a decade.
The Nationalist Victory. At the annual meeting three years ago your Chairman, after alluding to the bitter and unde- served attacks which the British in China had suffered at Nationalist hands during the previous months, finished by expressing the belief that for all its obvious faults the Nationalist movement held the seeds of regeneration and would, patriotically led, prove the means of delivering China from her great curse of militarism. Though it is early to speak with confidence of the fulfilment of this hope, we gladly recognize the promising ad- vance which the Nationalist Party have made in banishing civil war, setting up a national government and restoring, nominally at least, the reign of civil law.
Let me summarize in a few words the steps which have led up to the present situation. Five years ago -shortly before the death of their founder, Dr. Sun Yat Sen the Nationalist Party launched their
for programme
the freeing of China from military rule and its political reconstruction on the lines now adopted. The first or military stage, which began with the advance from Canton in 1926, ended in June last when the Nationalist armies entered Peking. We are now seeing the develop- ment of the second stage, the so- called Political Tutelage of the country under the Kuomintang. A constitution based on this prin- ciple and placing the whole gov- erning power in the hands of the Party, was promulgated on Octo- ber 4th and a new Government was created, shaped on committee lines and including in it the leading
military chiefs who had combined against Chang Tso Lin and the northern confederation. A national congress of the Kuomintang has been summoned to meet next month to determine future policy.
Manchuria under Marshal Chang Hsueh Liang, who succeeded his father Marshal Chang Tso Lin after the tragic death of the lat- ter by the blowing up of his train on the retreat from Peking, has hoisted the Nationalist flag, al- though for all practical purposes, it still retains administrative and financial independence.
Thus, by the adherence to the Nationalist cause of all the re- gional military commanders, China is enabled to reappear before the world as a unified nation.
Reconstruction,
A
After political unification the pressing need was for economic and financial reconstruction. promising start was made by the holding of conferences in July, at which the opinions of leading busi-
ness
con-
men were freely and boldly voiced, existing abuses exposed and proposals made for essential mea- sures of reform. These, as densed in a programme put out by the Ministry of Finance, includ- ed the following: Redemarcation of central and provincial revenues, with the adoption of a budget; revision of the Customs tariff with abolition of likin; disbandment of troops; rehabilitation of the rail- ways, the regulation of taxes, and finally, the creation of a central bank, reform of the currency and consolidation of the unsecured
debt.
recon-
"Hardly Encouraging." Translated into action, this pro- gramme would form an admirable groundwork for national struction and one looks anxiously for signs of its being carried into effect. I regret that the indica- tions are hardly encouraging, even when allowance is made for all the initial difficulties.
Taking the various points, by agreement with the Treaty Powers the new Customs tariff came into force
on the 1st of this month. The import duties are based on the proposals made during the in-
Tariff terrupted
Conference at Peking in 1925-26 and are to re-
main in force unaltered for one year. Regarded as a whole, the new tariff appears to be conceived on moderate and reasonable lines and British merchants as a whole have acquiesced in the increase in no grudging spirit. The position will be totally changed, however, if, as there seems some reason to fear, the new scale is rendered nugatory by the addition of extra taxation on imports under some other name.
The Central Bank. Another proposal put into effect is the founding of a Central Bank. The Bank, which is capitalised with $20,000,000 supplied from Treasury funds, is charged by its charter with the duties of issuing currency notes, holding Govern- ment funds, minting and the float- ing of national loans, while it is also allowed to engage within specified limits in ordinary bank- ing and exchange. There is every hope that the new Bank will be a valuable instrument to assist the
trade, improve the finances and
[March 1st, 1929.
enhance the credit of China, and I have strong faith in its future if the management profit, as they may, by the experience which has recently been gained in Europe of the functions of Central Banking in the regulation of currency and exchange, the essential element of which is an administration which shall be independent of govern- ment control.
Financial Disorder.
Financial reorganisation general- ly has made, I am forced to say, little visible progress, and there are no signs as yet of the intro- duction of a proper budgetary system, which must be the first step towards effective reform. In fact, it is difficult to see how anything radical can be done in the way of improvement so long as the mili- tary drain on the country's re- sources remains as at present.
a
At the point which especially touches the foreign merchant, namely the irregular taxation of trade, there is no change for the better; indeed the exactions of local authorities are,
generally speaking, worse than before. British merchants as
whole realize that a high level of taxa- tion is in present circumstances inevitable, but what they have bit- terly to complain of is the reck- less and arbitrary imposition of local taxes, which are continually varied and changed. The effect is as prejudicial to the authorities who levy the taxes as to the mer- chants themselves, while the coun- try as a whole, suffers incalculable loss from the holding-up of trade.
The Railways.
The rehabilitation of the rail- ways is among the most pressing needs of the country. Unhappily it is blocked by continued military interference in the form of reten- tion
the
of rolling-stock and "milking" of revenue, in regard to which conditions are particular- ly bad on the three northern rail- ways, the Peking-Mukden, Peking- Suiyan and Peking-Hankow lines. The new Ministry of Railways is energetically combatting this in- cubus by means of publicity and all other means at its disposal. The root of the evil lies, however, in the existence of the regional armies for whose payment and support the individual military leaders are forced to indent on re- venue procurable from the rail- ways by sequestrating the earnings and by refusing to merchants the use of wagons except against heavy payments. Until military expendi- ture comes under the control of Nanking in accordance with the Government programme, We can- not hope to see the railways restor- ed to normal conditions of efficiency and earning capacity. Once they are freed, however, from outside interference and their re- venues made available for the pur- pose of their own improvement, re- covery should be rapid. The out- standing railway debts could then easily be provided for and the
Government would be free to ap- peal with confidence for the finan- cial assistance required to recon- dition and extend the lines.
Already the Shanghai-Nanking and Shanghai-Hangchow Railways, which are under the more immedi- ate control of the new Ministry at Nanking and on which an effective