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to a few brief conclusions which are the result of my own personal knowledge of the conditions prevailing in the port. I have not deemed it expedient to consult any of the Hong Kong merchants, as I spent two months in Hong Kong in the summer of 1915, and am well acquainted with their views, and, furthermore, as there is no purely British Chamber of Commerce yet established in the colony.
1 would submit the following general conclusions:-
1. The trade of Hong Kong is almost entirely transit trade. The colony is the great transhipping port for the foreign commerce of South China, and to a lesser degree of the Philippine Islands and French Indo- China.
2. The prosperity of the colony has been built up on a system of complete freedom of trade, both as regards imports and exports. It is in the highest degree essential that this freedom of trade should continue after the war.
3. The present official commercial intelligence system is vested in a Board of Trade Correspondent, who is engaged in business as a chartered accountant, and who, with the greatest of goodwill, can only devote a very small portion of his time to the work. This system is manifestly inadequate.
4. Inasmuch as Hong Kong is the market for the foreign trade of South China, the duties should be performed by a Trade Commissioner resident at Hong Kong. His sphere of activity would include the provinces of China commercially dependent on Hong Kong, viz., Kuangtung, Kuangsi, Yunnan, and Fukien; and periodical visits should be made to French Indo-China and the Philippine Islands. This division of territory is made purely from the point of view of trade requirements. It should be mentioned, however, that under such a scheme this officer would be working in co-operation with the representatives of two departments of State, viz., the Governor of Hong Kong and the Colonial Office on one hand, and 1.M. Minister at Peking and the Foreign Office as regards work on the mainland of China. The officers in the Philippine Islands and French Indo-China would, naturally, also come under the control of the Foreign Office.
5. While deprecating any restriction on the freedom of the port by tariff or otherwise, it is felt that some control should be exercised by H.M. Government upon the activities of aliens in the colony. It should be clearly stated, however, that in view of the dependence of the trade upon Chinese activity and industry, and in view of the deep-seated oriental dislike of restriction, such measures of control should not be applied to Chinese subjects.
6. The measures suggested are as follows:-
(a) The compulsory registration of all alien individuals and firms, other than Asiatics, residing or carrying on business in the colony.
(b) The levy of an annual tax on the turnover of all alien firms, other than Asiatic, conducting business in the Colony.
(c) The prohibition of the appointment of a foreign subject to the post of pilot in British waters, or to any other position affecting imperial defence or economic independence.
7. I would recommend that a purely British Chamber of Commerce be formed
in Hong Kong at an early date.
8. In view of the fact that no statistics are kept as to the origin and destination of goods entering or leaving Hong Kong, it is strongly recommended that a comprehensive and effective system of port statistics should be drawn up, and in this connection it would appear advisable that the system of classification adopted should coincide, if possible, with that of the statistical department of the Chinese Maritime Customs, so that an accurate estimate of the foreign trade of China may be secured. Under the present lack of detailed returns in Hong Kong it is impossible for the Chinese Customs to trace the origin and destination of goods transhipped in the colony.
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SECTION 7. China.
Inasmuch as the general condition of the foreign commerce of China is a matter
of common knowledge, and furthermore, as many of the special features of the trade are dealt with in some detail in the report of my recent mission to the country, it is not considered necessary in this section to give that general sketch of the trade situation which has been outlined in the case of the other Far Eastern markets.
I propose, therefore, strictly to confine my attention to those basic questions which are the foundations of the strength and weakness of the British trade position in the country as regards international competition, and which have been thrown into deep relief by the fierce light of war.
A brief questionnaire dealing with these points, copy of which will be found in the appendix, was circulated to the British Chambers of Commerce at Shanghai, Tientsin, Hankow, and Canton, to the China Association in London, and to the British Engineers' Association, Westminster. Very full replies were received from all these bodies, which have been summarised in the following pages. For the sake of convenience I propose to divide this report under three main headings :-
(a) A suminary of the opinions of the principal British interests in China on the
various points raised in the questionnaire;
(b) My own views as to the post-bellum trade situation in the country and the
special needs of the market; and
(c) A general summary of conclusions and recommendations.
A.
Summary of the Replies to the Questionnaire.
1. Information with regard to the measures which are being adopted during the war by competing nations (taking advantage of our temporary disabilities) to strengthen their hold on the market under review.
From a commercial point of view the most noticeable effect of the war has been the stimulation of all interests-belligerent and non-belligerent to renewed efforts. The belligerent nations have been severely handicapped in most branches of trade by inability to supply goods owing to Government control of industrial activities in the homeland and the shortage of shipping for purposes of transport to the Far East. This handicap, however, has not been so pronounced in the case of Japan. Proximity to the market, and only a slight advance in the cost of production, has enabled her to compete most successfully in a steadily widening range of articles. countries, however, have been handicapped to a greater or lesser degree.
Neutral Competition, in this connection, may be divided under three headings German, Japanese, and American as these are the only three nations which seriously compete with the British Empire for the China trade.
German Competition.-Prior to the outbreak of war the keenest competitors to British firms in China were the German houses. These houses acted to some extent as distributors of British goods, and their busincas was generally conducted on lines similar to those of their British neighbours. They dealt in Manchester piece goods, in metals, hardware, sundries, machinery, and in export produce. Their activities have been largely suspended during the war, owing to the fact that they have been unable to obtain supplies from overseas. reduced considerably by the internment of a large number of their younger men in Their expenses, however, have been Japan after the hostilities at Tsingtao. The remainder have devoted their energies to liquidating the large private loans outstanding with the Chinese Government and to clearing their heavy stocks of piece goods and aniline dyes, some of which have realised handsome profits. It cannot be safely assumed that these German firms will be materially weakened at the conclusion of the war. firms have sustained heavy losses owing to detention of cargoes; other firms will Some of the purely export have difficulty in reinstating themselves on their former basis, chiefly in consequence of the depreciation of their credit with the British and Allied banks, as a result of irregularities in the conduct of their business which have been exposed by war conditions.
They have been greatly embarrassed by the legislation of the Allied Governments during the war, and some of them have been obliged to make inroads on their capital. The majority of the Clerman houses, however, are still possessed of sufficient capital
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