Page 12.
(e) Japanese Trade - Ceneral Considerations
45.
I have not been able to ascertain yet whether copics of all communi- cations with the Secretary of State in connection with the conduct of trade with Japan have been passed to this Office but I have recently seen a copy of the Secretary of State's Circular Telegram of the 24th September, 1947, in connection with Japanese Trade and in view of the last sentence of the telegram I have enquired whether the Secretary of State has been informed of the arrangements made by Goverment for financing private trade with Japan. It is understood from a newspaper report in the "South China Morning Post" dated the 17th November, 1947, that Hong Kong was, in fact, excluded from the currency arrangements made in November, 1947, by His Majesty's Goverment with the Supreme Commander for the Allied Powers for the purpose of facilitating trade between Japan and the sterling areas, but I have not been informed by Goverment in this connection. I have also seen the following telegrams from the Secretary of State on Secretariat or Supplies, Trade & Industries departmental files, viz:-
(a) No.451 of the 20th March, 1947 to Governor, Hong Kong.
(b) No.950 of the 15th June, 1947 to the Officer Administering
the Government, Hong Kong.
(o) Circular Telegram Saving of the 26th August, 1947.
It would appear from these telegrams that Secretary of State was anxious to ensure that the Colonial Governments should regard Japan as a "hard currency" country; that imports should be restricted to essentials; that trade with the sterling arce should, as far as possible, be balanced; and that Hong Kong should participate in any currency arrangements that might be made by His Majesty's Goverment to this end.
46.
Attached as Annexure A is a list of imports from Japan, classified under main types of commodities, during the periods 1st December, 1946 to the 31st December, 1947 and the 1st January, 1948, to the 30th April, 1948, payment for which was financed by the Hong Kong Government through the "two-way" account with S.C.A.P. It will be apparent that trade financed in this way increased considerably in 1948 and that imports have not been restricted to what in normal conditions may be considered as
" essentials" as suggested in paragraph 3 of the Secretary of State's Circular Telegram saving of the 26th August, 1947.
47.
In this connection, it has recently been olaerved as a result of audit examination that the freight, amounting to $313,966.70, from Hainan (in China) to Japan on a shipment of iron ore, sold by a Hong Kong firm to S.C.A.P., has been paid for by Government, on behalf of this firm, in Hong Kong dollars to the shipping company against a credit from S.C.A.P. through the "Two-Way Account". The payment has been charged to the Japanese Trade, Suspense account and I have accordingly asked to be referred to the authority for this expenditure to be so charged in the accounts. has also been observed that payment for the ore by S.C..P. does not appear
It to have passed through "Two-Way Account" and I have enquired as to what arrangements have been made for the payment.
48.
It is not possible at this stage to form an opinion as to whether the arrangements made by Goverment for financing trade between Hong Kong and Japan conform with the general policy advised by the Secretary of State, since it is not known whether all communications foom the Secretary of State have been passed to this Department, but in the light of the information