Appendix A.
HONG KONG.
FINANCIAL REPORT FOR THE YEAR 1937.
From the point of view of Government finance the main feature of the year 1937 was the passing of the acute financial stringency of the previous two years. The Estimates provided for a deficit of $3,498,910, revenue being put at $28,760,250 and expenditure at $32,259,160. In the actual result revenue exceeded the estimate by $4,436,118 and with a small saving of $147,938 over estimated expenditure a surplus of $1,085,146 was realised. The surplus of assets on 31st December, 1937, was $14,002,278 a much more satisfactory figure than was anticipated when the Estimates for 1937 were prepared in the Autumn of 1936. The deficits then anticipated for 1936 and 1937 would have reduced the surplus of assets to about $8,000,000.
2. This satisfactory result was achieved almost entirely by an expansion in existing sources of revenue; no new or increased taxes were imposed during the year. General conditions of trade in China, which had already shown signs of improvement in 1936, improved steadily in the first half of 1937 and Hong Kong shared in the general greater activity of trade. The improvement in the financial outlook was therefore sufficient to enable the salary levy to be removed with effect from the 1st July, 1937. During the latter part of the year the general improvement in economic conditions in the Far East was brought sharply to an end by the outbreak of hostilities between China and Japan but the immediate financial effect upon Hong Kong was beneficial. Large numbers of refugees from Shanghai and South China came into the Colony while the practical cessation of trade with the interior of China through Shanghai resulted in an increased volume of trade passing through Canton and other Southern Coast ports, a large part of which was conducted via Hong Kong. Figures of China's trade for the last five months of the year show that while there was a very considerable reduction in the total trade a much larger percentage of it passed through Hong Kong with a resultant increase in the actual trade of the Colony with China.
8. As a result both of the greater activity and of the increase in population, which has been estimated at as much as 25%, practically all the sources of revenue showed substantial increases. The receipts from rates were higher owing to the smaller number of vacant tenements, these having sunk from nearly 3,000 in January to under 1,000 in December. Liquor