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Chinese pockets of to-day-and that Great Britain does not offer enough of those types of goods which are within the buying power of the bulk of the Chinese woollen cloth wearing population. Un- fortunately the demand for the better types of cloth such as Great Britain makes most largely appears to be decreasing. On the other hand, the demand for the cheaper classes of cloths offered by our competitors is increasing. Apart from the broad proof of the truth of these statements, confirmed by the figures previously re- ferred to, we have been shown innumerable samples of cloths, admittedly usually of not so good a quality as British, but suffi- ciently good for their purpose and at much lower prices. A certain amount of woollen cloth is now being replaced by knitted gar- ments made in China from imported yarns, but this factor applies to all importing countries alike and is not peculiar to Great Britain. (Reference to the growth of this trade has been made in the Yarn Section of this report.)
205. The remedy for this state of affairs must be found almost entirely at home. It may be that exporting charges from Great Britain and importing charges into China are greater than they should be, but as the same importing houses are handling Con- tinental goods along with British, there seems to be little in this point, unless it is to be supposed that importers are attempting to make larger profits on British goods than on Continental. We are satisfied that this is not the case, and that on the whole, from the time goods leave the country of origin, whichever this may be, they are on equal terms as to distribution costs and profits in China. It is true that Continental shippers have certain advan- tages in freight rates from Continental ports, and we put forward this point for careful consideration by our proper authorities at home. There is yet very little competition from Japan except in Manchuria where propinquity enables the Chinese buyers to estab- lish direct contacts with Japanese exporters and so to cut out some intermediate costs. For all the remainder of China's wool textile imports (the preponderating portion) conditions and distribution are practically equal as between Great Britain and her competitors.
CONCLUSIONS.
206. Unless remedies can be found and applied promptly to place our wool textile industry on a level with its competitors notably at present the Continent of Europe it is certain that our trade in China (and not China alone) will-in cloth at least-continue to diminish and may, in course of time, become relatively negligible.
In our view, the remedies are to be found partly in the re- organisation of at least those sections of the industry which are engaged in bulk lines, i.e. for mass production and/or possibly mass distribution (see note) and partly-and of much greater im- portance in the drastic reduction of production costs of all kinds.
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This latter will necessitate a searching scrutiny by those concerned into all charges that bear on the industry, since these must be substantially modified if we are to hold a place in the market.
Note. This may involve the holding of stocks in China or Hongkong and possibly a dyeing and finishing plant there so that stocks may be held in the grey and prompt deliveries given to buyers.
CHAPTER VII.
THE NEW CHINESE TARIFF.
207. At the beginning of the present year the Chinese Govern- ment promulgated a new Customs import tariff which contains many important modifications of the previous schedule of duties, and the question of the probable effect of these changes on foreign trade generally and on the importation of British goods in particular is deserving of careful study.
The tariff list contains 647 items, for about one-third of which specific duties are provided, the remainder being on an ad valorem basis at rates varying from 5 per cent. to 50 per cent. The specific duties are expressed not in silver currency, but in
gold units" equivalent to gold $0.40 or 19.7265 pence, the amount actually payable in silver by the importer varying with the rise and fall of exchange. This system was introduced a year ago by the Chinese Government in order to counteract the heavy fall in the value of silver which threatened to prejudice their capacity to meet the gold obligations secured on the Customs revenue, and from this point of view was doubtless a very necessary step, but with exchange sink- ing to ever lower levels it obviously results in the amount payable in silver currency by the importer in respect of Customs duty being correspondingly increased.
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208. On comparison of the duty lists, both specific and ad valorem, in the old and new tariffs, it is clear that the main object in view has been to secure a substantial increase of revenue, there being (with certain important exceptions) an all-round advance in the scale of duties, with much heavier rates on certain articles, more especially on those regarded as coming under the description luxuries ". This, however, was only to be expected, and a more noteworthy feature of the new schedule is that for the first time we find indications of the intention of the Chinese Govern- ment to make use of the import tariff not only for revenue purposes, but also as a means of affording some degree of protection and assistance to native industries. Evidence of this development is to be found both in the imposition of very heavy duties on certain classes of imports competing with Chinese products and in the reduction of the rates charged on machinery, and whilst so far only a small proportion of the items in the list is affected, there can be little doubt that this policy will be extended in future revisions.
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