[This Document is the Property of His Britannic Majesty's Government.]
31868
CHINA TRADE.
CONFIDENTIAL.
(29877]
No. 1.
[August 9
530
ALG 20 SEP OC! SECTION 3.
Sir J. Jordan to Sir Edward Grey.-(Received August 9.)
(No. 226.)
Peking, June 24, 1909. Sir,
THE commercial depression which has prevailed in Tien-tsin for some time past has reached a point which renders it necessary that drastic measures should be taken before any real or permanent improvement in the import trade can be expected. There was indeed a certain revival in February, but Mr. Ker reported later that this had proved to be merely a "flash in the pan," and that by the middle of March all enquiry had practically ceased, and stagnation again reigned supreme. Since the beginning of 1906 there has been a steady deterioration in the trade of Tien-tsin, sales have been growing scarcer and smaller, most firms have made losses, and the business of the shipping companies has been going from bad to worse, with few cargoes and small freights. The prosperity of previous years had resulted in the purchase of large stocks of imports which can find no buyers, an imprudent extension of credit has encouraged these speculative purchases, while at the same time the scarcity of money in Europe and America has adversely affected the import trade of the port. Numerous foreign firms have established themselves in Tien-tsin during the of prosperity,
years and had entered into competition with the older-established firms, underselling them to secure a market, and improperly extending credit to native firms without proper security. The result was inevitable; the supply soon exceeded the demand, and importers have had to choose between keeping large stocks on their hands, and selling at a loss. Many non-British firms have failed and others would follow suit were it not for the continued assistance of the banks. The banks themselves are to some extent responsible for the over speculation, as they have given credit too freely, and now have to continue to support the importing firms in hope of better times, and to avoid immediate losses and possible failure.
The more serious side of the problem is the indebtedness of the native dealers to the foreign importers. These native dealers are mostly mushroom firms encouraged to speculate by the long credits afforded them. They are quite unable to meet their liabilities, and their failure would spell ruin to many foreign firms. In fact, the bankruptcy of several of these native dealers in piece goods, whose stocks were thrown cheap on the market, so depressed importation that practically all demand ceased, or if not, such as there was not for goods already in stock.
The revenues of the Imperial Maritime Customs in Tien-tsin for the first six months of 1908 showed a decrease of 640,000 taels on the corresponding period of 1907, about 75 per cent. of this decrease being due to the fall in imports of foreign goods. The following quarter showed a further decrease of 160,000 taels. The total indebted- ness of the native piece-goods dealers to foreign merchants is put at 14,000,000 taels, Of this large amount, fortunately, the portion due to British firms, thanks to their more conservative system of trading, forms a very small percentage. estimated in January that the total outstanding contracts with British firms amounted to 635,000 taels covered by goods in band to the value of 386,000 taels. Taking the probable loss on reselling these goods at one third, the British firms stood to lose approximately :---
On goods delivered on credit On goods still in hand..
Total
Taels.
249,000
131,000
880,000
Mr. Ker
There has naturally been some hesitation on the part of many involved in adopting remedial measures, of which the effects might extend from the native dealer to the foreign importer, and from him to the banker who has financed him, and to the exporter who has supplied him with goods, but it is rather disheartening to see on all sides, except on the side of the British merchants, a desire to shirk responsibility and the consequences of imprudent speculation, and to put off the inevitable day of reckoning. In fact, one of the most serious features of the crisis has been the
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