62. The exchange rate between Chinese National and Hong Kong currencies fluctuated considerably during the year. The rate opened at 1052 and closed in October at 1794, the highest and lowest points touched being 187 in August and 105 in February.
63. The transaction rate between the two Sections, fixed at 100 by mutual agreement, gave reasonably satisfactory results until the middle of June when Chinese National currency commenced its tumble to new low levels. This unexpected development operated against the British Section. Negotiations for a revision of down rates and fares had not been completed when through traffic stopped. Losses from this source were more than offset by gains resulting from the apportionment of up transit traffic receipts. These were collected in Hong Kong currency, and it was necessary to make monthly payments on account to the other Administrations in National currency directly the division sheets were completed. Since National currency had usually depreciated between the times of collection and payment, profit to the British Section accrued. To obviate this state of affairs, the Tripartite Agreement was amended on June 16th. Up rates and fares were quoted subsequently in Hong Kong currency, and down rates and fares in National currency, the British Section receiving its appropriate share in Hong Kong currency as laid down in its Transit Rates Schedule.
64. The position regarding final division sheets is far from satisfactory. This is due to causes beyond the control of the Administration. The last Terminal and Sectional traffic sheets to be accepted by the Chinese Section of this Railway were those for October 1937. Transit traffic sheets, on the other hand, have been certified by both the Chinese Section and the Canton-Hankow Railway up to and including June this year. Everything possible is being done by the British Section to facilitate a speedy verification of these accounts when normality is regained, including the preparation of inward division sheets up to the time traffic ceased. The financial state of affairs at the end of the year was that both the Chinese Section and the Canton-Hankow Railway had received preliminary payments, based on monthly statements of debits and credits, up to and including the month of August 1938, while the traffic balances held in suspense pending settlement of the various issues involved, were:-
Chinese Section $46,821.31 Through Traffic $65,201.08 Transit Traffic $112,022.39 Total $234,032.09 Canton-Hankow Railway Transit Traffic65. Depreciation charges on rolling stock for the year $53,050.97. This sum has been included in the operating account. The amount now standing to the credit of Depreciation Reserves is $904,186.39.
66. Special Expenditure aggregated $333,777.28. This has been allocated as under:-
Capital $261,155.30 Revenue $767.53 Depreciation Reserves $66,231.45 Government $5,623.00 Total $333,777.2867. The statistical section has continued to compile comprehensive returns of the working of the Railway.