CO129-445 - Public Offices - 1917 — Page 634

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for their immediate needs; their credit is still good in many cases; their distributing connections in China have been retained by the careful husbanding and gradual liquidation of their import stocks; their export connections have been largely taken over by British firms, the handling of China produce in the future will depend both upon local competition and upon the capacity of institutions in the United Kingdom and Allied countries to consume this produce and to offer satisfactory prices. The reopening of their connections in the United Kingdom will depend upon the policy adopted by His Majesty's Government and by the willingness, or otherwise, of home shippers, especially those in Manchester and Bradford, to supply them with goods for distribution.

In dealing with this question of German competition it may be well to add that it was largely a local factor, a rivalry between British firms and German firms rather than between British trade and German trade, or British manufacturers and German manufacturers. With the exception of a few articles, such as aniline dyes and war stores, the trade of the two nations tended to lose its nationality on arrival in China and to be distributed through cosmopolitan channels. British goods distributed by Germans seldom bore any mark of origin which was intelligible to the Chinese; they were almost always marked in Chinese "German firm of so-and-so" and often even Made in Germany." The Germans clearly considered it important to persuade the Chinese that the goods they sold were actually produced in Germany; they were even more concerned, however, to advertise to the Chinese their own hong name.

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Japanese Competition. Information from all sources establishes the fact that Japan is our principal competitor at the present time, and that still keener com- petition from this quarter will be experienced in the future, not only in China but in India and throughout the whole of the East.

The Japanese are, in China, real trade competitors from a national point of view, The Japanese though there is little rivalry between the British and Japanese firms. as a nation have spared no pains to equip themselves for the Chinese market. The products of their factories have shown marked improvement within the last few years, and but for the temptations of profitable war work they would no doubt have secured an even larger proportionate share in the trade of China thau they have hitherto acquired. They are quietly consolidating their commercial position (notably in piece goods and sugar) in Manchuria, assisted by the control of the railways in that sphere; they have created a new Japanese commercial zone in Shantung with the capture of Tsingtao and the Shantung Railway from the Germans; and they are training large numbers of young men in the Chinese language and the commercial customs and needs of China in order to distribute their goods into every part of the country. Their principal energies are directed towards the manufacture and sale of piece goods and yarn. American middling cotton has recently been laid down in Japan at the equivalent of 7d. per lb. as compared with 81d. per lb. in Liverpool in consequence of abnormally high freights. Whilst this disability may be removed on the resumption of normal conditions, the Japanese shipping subsidies will always tend to react in favour of low laying-down costs of raw material in Japan. This fact, added to the proximity of the China market, the cheapness of labour in Japan, and the suitability of the Japanese for appreciating and working the Chinese market by an inexpensive and highly-trained class of men, gives them an ever increasing advantage. Their competition can only be off-set by cheaper production in the United Kingdom. In machinery the Japanese are also assuming an increasingly The control of Chinese iron ores from the important position as competitors. Han-Yeh-l'ing and Manchurian districts is of material assistance to them, and they are likely to prove increasingly important as competitors to British iron and steel manufacturers. The main difficulty of the Japanese merchant houses operating in China in the past has been lack of capital and credit; it may be assumed that this will be remedied to some extent as a result of the large profits which have been made during the last two years. Their industrial activities in Shanghai have con- tinued unabated, and, in addition to their cotton mills and silk filatures run with Chinese labour, they now have control of the largest paper mill in Shanghai. The Japanese have shown a new interest in the export trade, which has been facilitated by favourable rates on the railways and steamship lines which they control. They have also done a considerable business in insurance in China, and have strengthened themselves by re-insurance treaties with the influential European countries.

American Competition.-American business men have shown a marked and somewhat dramatic interest in the China market since the outbreak of the war,

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but it is still too early to estimate the results of their recent efforts. A strong financial combine, the American International Corporation, has declared its intention of taking a leading part in the trade of the Far East in future. A number of highly- paid experts have visited China with a view to studying the market; active shipping competition is promised between the Pacific coast and Far Eastern ports under the American flag, and they have made a bid for a place both in the import and export markets of China. In metals, window glass, various steel goods and tools, America controle a certain market, but her manufacturers show no sign of equipping them- aelves for the China market in the systematic manner adopted by the Japanese. Nevertheless, a certain measure of success has been attained. American manufac turers of textile machinery have, for the first time, secured valuable contracts for Chinese spinning machinery. A new departure may also be cited in the case of the selling agents for the American Steel Trust (the United States Steel Products Export Co.). This firm is established at several of the Treaty Ports, and in one case they supply daily quotations of their products to foreign importers engaged in their branch of the trade, telegraph offers at their own expense, and order supplies for these importers,

The success of the United States in the past has been remarkably small in comparison with the efforts put forth. This is mainly attributable to the lack of knowledge, on the part of American business men, both of the country and of Chinese methods. Both these defects, however, will be overcome in time, and, the longer the duration of the war, the stronger will the American hold on trade become. On the whole, however, British interests in China do not take a very serious view with regard to American competition, which they anticipate will relax as soon as the United Kingdom can re-enter the market under normal trading conditions.

Dutch and Scandinavian Competition will probably be more acute in shipping after the war. Owners are laying aside considerable sums out of present abnormal profits for purposes of expansion, and it is likely that severe competition from Norwegian owners will be experienced in chartered steamers.

2. Authentic information with regard to the nature and extent of State aid accorded to our competitors, together with a carefully considered opinion as to the advisability or otherwise of similar Governmental action in the case of British interests, Information with regard to State aid is exceedingly difficult to secure. It will be remembered that even after perusal of the files and accounts of the German firms under liquidation in Hong Kong, I was unable to find any trace of direct German Governmental assistance. The Hankow and Canton Chambers possess no information on the subject. The Tientsin Chamber states:-

My Committee has no information which leads them to believe that their German competitors have been directly supported by State aid, beyond the fact that claims on the Chinese Government after any upheaval have been treated by German officials concerned with a view to obtain as much as possible in the way of indemnity for their nationals, rather than--as has been the case with our own officials-to cut out everything on which there might be any doubt. This has particularly been the case in connection with claims arising out of the Boxer Rising, the financial crisis of 1907, and the Revolution of 1912. By this means many German firms acquired a financial prosperity which they did not enjoy before.

The only definite statement is that made by the Shanghai Chamber, which reads as follows:-

Authentic information is available as to the shipping subsidies granted to certain Japanese lines, notably a grant to the Nippon Yusen Kaisha for their line from Japan to the United Kingdom, which for the year 1915 amounted to Yen 1,830,000. A subsidy of Yen 538,000 is also given to the Nisshin Kisen Kaisha, for the purpose of securing a Japanese hold upon the Yangtse trade and the passenger trade upon the inland waterways of China; in return for this grant the Japanese Government secures control of freight tariffs, and is thus able to encourage Japanese merchants to trade in China and Chinese merchants to make use of Japanese lines,

It is generally believed that German steamship lines were able to afford certain facilities of transport to their nationals, and from this a subsidy has been inferred, although no precise information on the subject is available here. An indirect support to German merchant houses was also afforded

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