CO129-440 - Others & Individuals - 1916 — Page 84

in conjunction with native agents and correspondents. During the past few years this method has been adopted by a rapidly increasing number of British, American, German, Russian and Japanese houses, but it is noteworthy that, whereas the German penetration has been largely effected by merchants whose head- quarters were at the ports, the British organisation has been almost entirely carried out by large manufacturers of semi-monopolies and proprietary articles, such as cigarettes, kerosene, alkalies, household soap, candles, patent medicines, and refined sugar, who, having previously conducted their business through the medium of merchants in the ports, have discarded this system as being unsuitable to their requirements, and have undertaken the marketing themselves. This fact demonstrates that there has been a much closer co- operation between the German manufacturers and merchants than is the case in this country. The Germans have enjoyed the virtual monopoly of two important lines of trade, viz., arms and ammunition, and aniline dyes and synthetic indigo. The manu- facturers have insisted upon the elaboration of an extensive up-country organisation, have defrayed the bulk of the expense, have sent out experts to assist in the work, and have allowed a generous commission of not less than five per cent. to their agents for the services rendered. These agencies have had a dual advantage. In the first place, they have provided the German merchant in China with a handsome annual profit; and, secondly, they have furnished him with an organisation, free of expense, which he has been able to utilise for the sale of those other lines of imports in which he was interested. This brings us to the vital question of the sale of industrial and machinery supplies, a business which has been fostered by our rivals by these extensive methods, and where they have been rapidly gaining on us. I feel very strongly that unless prompt steps are taken by British manufacturers and merchants towards installing the necessary organisation for securing the new contracts which are springing up in all parts of China for electrical power plants, and industrial and mining machinery and supplies of all kinds, we shall find before very long that the market is closed to

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us, and is entirely in the hands of our competitors. British manufacturers can, as a rule, produce the machinery required at competitive rates, but we have lost and are losing ground through less efficient methods of marketing, and the fact is that while our representatives are busy in their offices in Shanghai and elsewhere the German firms are tapping this considerable and rapidly increasing stream of trade at its source. This question

is one which has been dealt with in some detail in certain interim reports, which doubtless many of you gentlemen have already seen. I will, therefore, briefly describe the methods which have been employed by our rivals to secure the trade. The German houses through their valuable agencies, and also their hold on the export trade of China produce, have usually a branch at the interior Treaty Ports, such as Chung King, Changshen and Tsinan Fu. Their trade in arms and munitions and other equipment for Government contracts has enabled them to maintain representatives at the large provincial capitals such as Chengtu, Yünnan Fu and Moukden. In many cases they have been able to induce the Chinese authorities to employ their nationals to operate the plant in the Government powder factories and arsenals, which means that all renewals and extensions are obtained

through them. From these bases in almost every province a system of Chinese correspondents has been elaborated, who inform the local office of any new industrial scheme mooted within their district, and receive a small commission should business result—an inexpensive but quite satisfactory arrangement. Should it become likely that an electrical power plant or mill of any sort is shortly to be required, the firm sends down usually a Chinese-speaking engineer, who is also tactful and possesses the savoir faire required in handling Chinese, and this representative remains on the spot sometimes for months if the scheme is an important one, acquires the confidence and goodwill of the buyers by means of painstaking and persistent methods, entertainment, social intercourse, and the preparation of specifications and plans of the machinery required. Pressure is also occasionally brought to bear by the nearest Consul, working through the officials, and in nine cases out of ten the representative does not leave that locality

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