CO129-440 - Others & Individuals - 1916 — Page 92

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that many of the suggestions which had been made would be taken to heart. He thought that perhaps Mr. Ainscough was looking far into the future when he anticipated that there would be changes in the foreign commercial life of China of so drastic a nature as had been indicated in his very able address, especially those in connection with the distribution of the import trade. What he had said about foreigners going into the interior and dealing direct with consumers was quite sound as regards certain commodities, but he doubted if this system was equally sound regarding the great bulk of the imports into China. They would all be extremely glad if they could hit upon some system which would make the import trade more profitable to British merchants; as a matter of fact, if they bought Lancashire piece goods in Manchester to-day and sold them in Shanghai to-morrow, they would lose somewhere about 1s. 6d. per piece, and that state of affairs had been more or less characteristic of the trade throughout the year. Perhaps in dealing with a few commodities of general consumption, such as kerosene oil, soap, sugar and cigarettes, which were in actual practice semi- monopolies, direct sales in the interior might be advantageous to the foreign importer. He was obliged to hold large stocks in China, and had the choice of storing very large quantities at a few of the principal ports, or smaller quantities at many different places in the interior. It was clear that the competition of rivals would be easier under the former system than under the latter. If, for example, the principal importer held stocks to the extent of £100,000 at Shanghai, a com- petitor might lower the market for the whole of that stock, although he himself only held stock to the extent of £10,000. If, however, the principal importer had established a system of agencies all over China, each holding stock for local consumption, with foreign representatives at the Treaty Ports to supervise these agencies, he would be in a much better position to withstand competition, as his rival would be obliged to establish a similar organisation before he could success- fully compete. That internal agency system was com- paratively simple when dealing with one article of universal consumption, but it would be a very different

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matter to organise agencies capable of handling the immense variety of cotton goods comprised in the import trade of China. If that departure were attempted on a very large scale, it was quite possible that importers might come into conflict with the Merchant Guilds in China, which were large and powerful bodies, and which were a not unimportant factor in maintaining law and order in the country. Their influence was very strong and widespread. However, whether the old-established system or the new was the better could only be proven by practical experience, and if, as Mr. Ainscough had said, the new plan was being brought into actual practice in many cases, provided that the people interested found it successful, he had no doubt it would spread. At the same time, if anyone wished to carry on business on a large scale under the new plan they would have to run considerable risks.

Large stocks would have to be held all over the country; one element of risk was that between two provinces internal ex- change sometimes varied as much as twenty-five per cent, within a year; they would have to satisfy them- selves that the agents they had selected were trust- worthy, and there were many other difficulties. They could not settle the matter by theory; it could only be settled by experience. Mr. Ainscough had called attention to the splendid opportunity of recovering trade from the Germans, and he had every reason to believe that many people were taking advantage of the present position of affairs. One of the most important means of recovering trade from the Germans would be the withdrawal of financial facili- ties which in the past had enabled Germans to give long credit to the Chinese. They all knew that for twenty-five years business which was formerly conducted on a cash basis had been turned by the Germans into a trade on a basis of six, eight and twelve months' credit. It was perfectly clear that if a merchant traded to the extent of ten times the amount of his capital in the course of a year, and that this trade was all being done on the lines of extended credit, when a financial or political crisis arose, such as the Boxer revolution, his position became one of great danger. Many serious failures would probably take place, all owing to the encouragement given by our

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