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GENERAL.
CHAPTER IX.
FINANCE.
JAPAN.
226. During the course of our visit to Japan, we received a number of complaints from various quarters as to the alleged inadequacy of British finance to meet the needs of the Japanese market. Complaint was made that British firms trading to Japan have to pay for advances per cent. per annum above the rate ruling in New York for similar business, and at least 1 per cent. per annum above that charged by Japanese banks when financing exports. Further, the burden of financing imports into Japan falls, it is alleged, principally or entirely upon merchant houses established in the country, with the result that the banker of the importer, in effect, carries the risk of the whole transaction up to the ultimate sale in Japan. Formerly, it appears, the Japanese went to British firms in Japan because the latter were rich and the Japanese were poor; the position is, however, now reversed. The Japanese can finance big business, whereas British firms working in Japan cannot do so as a rule. British reluctance to provide adequate financial facilities is, we gathered, particularly noticeable in regard to machinery and other heavy goods in respect of which the purchaser requires long term credit facilities. Further it was asserted that British financial interests do not usually, in the case of loans to municipalities and public authorities, attach a condition that the goods to be purchased with the proceeds of the loans should originate in Great Britain. The absence in Japan of British credit insurance and hire purchase companies, and the severely limited application to Far Eastern trade of the Export Credits scheme, were contrasted with the facilities which American exporters possess by means of recourse to finance com- panies which grant from 60 to 90 days' credit after receipt of goods. A suggestion was made to us that there should be established a Far Eastern banking corporation, the shares of which should be held by banks financing British manufacturers, banks interested in the Far Eastern trade, and by the British Government, This corporation would have, as its object, the financing of British export trade to the Far East, including the grant of long-term credits where necessary.
227. The provision of further credit facilities than those now available to British importers in Japan, or the re-organisation of our present system of financial dealings with the Japanese market, can only be justified on the assumption that British goods are competitive in price with those of other sources of supply. On this assumption, however, we consider that there is a prima facie
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case for examination into the present system of financing British exports to Japan (whether they be consumable goods or equip- ment for industry), and also for exploring the suggestion that conditions as to purchase of British goods should be attached to loans. There is undoubtedly a strong feeling amongst the British community in Japan that British merchants established in that country are not receiving from British finance the assistance to which they are entitled in their endeavour to sell British goods. The question is one on which an opinion can only be expressed after full exploration of the facts by all parties interested. We therefore recommend that a conference should be called at an early date by the Department of Overseas Trade, at which British bankers, industrialists, exporters, and merchant houses interested in the Far Eastern market, should be represented. This confer- ence should study the facts and examine the complaints in regard to British finance in the Far East. It will then be in a position to decide whether further developments are possible and desir- able in our financial practice as regards the Far East for the purpose of promoting British export trade to Japan and else- where. The conference should study the question of long term credits in China which is referred to below.
CHINA.
228. In China the problem of credit is of more far-reaching importance than in Japan, because of the possibilities which the former market possesses. We have been informed that credit is the greatest factor at the present time, and will be for years to come, in obtaining orders from China for machinery and equip- ment. In the case of machinery, the question of credit is as im- portant as the question of price. In China, as in Japan, the suggestion was made to us that there should be formed a British Banking Institution ready to undertake not only ordinary com- mercial risks, such as are now carried by the importing houses, but also the financing over a term of years of exports from Great Britain to China of equipment and machinery. This may necessi- tate Government support or aid through such an instrument as the Export Credits scheme. Cases have been brought to our notice where large contracts have been lost to Great Britain because credit has not been forthcoming. Instances have been cited where British goods have been preferred and the price has been acceptable, but the terms of payment made it impossible for the These credit terms British importing house to accept the orders. were accepted by European and American competitors.
229. Business on a large scale can, we believe, be promoted in China, by the provision of adequate and long term credits. Our competitors are fully alive to this, and, with and without Government interest, are discovering ways and means of extend- ing credits in order to secure business. The demand in China
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