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to play their part in devising schemes for enabling foreign capital to be used without undue risk until their own capitalists are better educated or usury is better controlled.
179. Whether for national schemes or industrial equipment of new works, it is generally felt that there is need of some form of credit insurance with Government backing. One proposal is to form a Sino-British Engineering Finance Corporation supported by some system of Government export credit and by association with Chinese banks. The corporation would be so staffed as to be able to examine the technical soundness of projected business. The associated Chinese banks could review the security offered and if necessary control operations till the contract was cleared. But by whatever means the financial problem is solved another difficulty will arise, and that is, the training of the Chinese to look after their new industry when it takes to its rapid growth. Supposing as it so often has, British finance helps Chinese development, it will be a poor thing if British trade cannot reap the benefit.
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180. By putting "tags on loans or credits, immediate returns may be effected but in the larger future buying will become free and the buyers will be largely influenced by their own experts and these will be largely influenced by the school in which they have been trained. That our competitors have done more in educating Chinese in the past than we have is notorious. It seems essential that we take a more important part. Chinese students from our own university of Hongkong and from Chinese universities should be given opportunities of technical training on British railways, in British public works and in British factories. Some scholarship, or other system, should be devised to defray their expenses. The returned students would not only be propagandists for British pro- ducts if they were employed in Chinese engineering, but could supply technical salesmen for our merchants and agents and add greatly to the efficiency of their sales organisations.
The engineering side of the Hongkong University are in hearty accord with these ideas, and suggest that free passages and subsist- ence allowance might be found for deserving candidates, pointing out that often the best workers are not well-to-do. They consider that some body in England should be established which could look after any Chinese students going to England, and see that they were properly placed in suitable factories. They suggest that this might be undertaken by the China Association. Probably, to consider these problems and their solution, the Federation of British Industries, or some similar body might set up a special China Educa- tion Committee in collaboration with the China Association and the Department of Overseas Trade. Granted we can participate in finance and education, we shall not reap a maximum harvest unless our own selling methods are brought up to a state of maximum efficiency.
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181. The China market for machinery is a very competitive one, as well as a very speculative one*. At present, and for some time to come, it will suffer from lack of capital and lack of knowledge. Both these will militate against spending money on high quality materials and machinery, and to sell such goods against low-priced competition will be difficult, but the difficulty must be faced, for it is in the better quality lines that we excel. To give up this position and confine our competition to price is to sacrifice one of our greatest advantages.
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182. A careful study of local requirements for say, a cheap sturdy lathe, a small simple oil engine, or a handy oil press, may enable us to specialise on a cheap mass-produced article and so help our total sales. But we must still keep on educating the Chinese in the meaning of equal specifications, for given these, our prices are, contrary to often expressed opinion, quite competitive. It is not British practice to gamble on overheated motors or on cast steel doing as well as forged and we should stick to our practice and not try to copy inferior competing standards. The oft iterated catchword that the British maker will not change his standards to suit the market is meaningless-our competitors do not do so either. They force their standards on the market-then our mer- chants want us to copy them. There is a bit too much catchword argument among traders in the Far East when discussing their own and the manufacturers' difficulties, such as, A merchant must live",
British manufacturers are behind in invention
"British catalogues are bad ", and a dozen others were thrown at us with wearying frequency. Though catchwords may contain a small foundation of fact, they are usually a convenient method of begging the question. Taking the one about invention, for instance- actually far more originality in invention has been shown by Great Britain than by any other nation, and many successful exploitations by our competitors are the result of British pioneer work. That this is so is due to the protected markets of our competitors which enable them to develop a speciality in a way in which our open market does not permit. It cannot be denied that our British merchants have in the past, and in many ways still are, valuable outposts of British trade overseas, but their success has largely depended on British financed enterprises. Now that these are no longer able, or willing, to support the merchants, the latter are faced with the difficulty of competing in the open market with well organised rivals. These are quite prepared to buy the goodwill existing in our old established houses by making generous agency agreements with them, relieving them of many expenses which had been theirs according to old trade custom, and even granting them special rebates. As a result some of these houses to-day represent our competitors to as great an extent as they do our own firms. They
* Some examples of competition are given in Appendix D.
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