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296. Unless the British wool textile industry is placed on a level with its competitors, particularly its European competitors, our trade with China, in cloth, at least, will continue to diminish and may in course of time become relatively negligible.
THE NEW CHINESE TARIFF.
297. The new Chinese tariff which came into operation on 1st January, 1931, contains 647 items, for about one-third of which specific duties are provided, the remaining duties being levied on au ad valorem basis at rates varying from 5 per cent. to 50 per cent. The specific duties being expressed in gold but payable in silver, the result is an increase in the burden of the duties on the im- porter with each fall in the value of silver.
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298. A comparison of the old and new tariffs makes it clear that the main object of the revision has been to secure a substantial increase of revenue, there being-with certain important excep- tions-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 ". For the first time there are indications of the intention of the Chinese Government to use the tariff as a means of protecting native industries. The Chapter in our report relating to the new Chinese Tariff (Chapter VII) deals with the effect of the changes in the tariff on the more important classes of imports. On the whole, with the possible exception of duties affecting woollen goods and artificial silk, the main lines of British trade with China are not severally threatened by the higher rates imposed. Indirectly, however, British trade is penalised since the extra cost resulting from the increased duties will further accentuate the demand in China for cheapness rather than quality. The net result of the new tariff will be a tendency to restrict im- ports and encourage the establishment of certain industries in China.
CULTURAL RELATIONS WITH CHINA.
299. We desire to draw attention to the undoubted benefits which the trade of the United States derives from the fact that many of those in responsible positions in China have been educated in American universities and are strongly American in sentiment. This result appears to be due to a deliberate policy of the United States Government which, in 1928, remitted nearly 12 million dollars of its share of the 1900 Indemnity, this money and a later remission of over 6 million dollars being used in assisting the educa- tion of Chinese students destined to proceed to America, and in educational and cultural activities in China. While we understand that it is the intention of Great Britain to devote part of her re- maining share of the 1900 Indemnity to educational purposes in China, it cannot be denied that the cultural and educational activities of the United States in China have already given her a
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big advantage over Great Britain, particularly in engineering and other technical education. We feel that it is a matter of most urgent necessity that a more intimate cultural relationship should be promoted between China and Great Britain, for the purpose of attracting Chinese students to British universities and workshops. We recommend that this matter should be considered at a con- ference to be summoned at an early date by the Department of Overseas Trade, at which the British Universities and business men interested in the China trade should be represented.
FINANCE.
300. During the course of our visit to Japan, a number of com- plaints were made as to the alleged inadequacy of British finance to meet the needs of the Japanese market. The nature of these complaints is outlined in our Report, and in view of the importance of securing that British export trade to the Far East is placed on at least as favourable a footing as the export trade of our com- petitors, we recommend that the Department of Overseas Trade should call a conference at an early date at which British bankers, industrialists, exporters, and merchant houses interested in the Far Eastern market should be represented, for the purpose of enquiring into the complaints made and deciding what action, if any, should be taken.
301. As regards China, the problem of credits relates principally to long term credits for orders for machinery and equipment. Cases have been brought to our notice where contracts have been lost to Great Britain because credit has not been forthcoming. We recom- mend that the conference suggested above should consider the question of the provision of long term credits for exports of machinery and equipment to China.
It is clear that the Chinese Government and the Chinese nation have set their faces towards a policy of industrialising China. In this development British capital should play its part and no restraint should be placed upon it.
302. The continued depreciation of the value of silver has enormously reduced the purchasing power of China, and if it con- tinues will hasten the growth of industries in China, the manu- factures of which will compete with imported products from Great Britain. Reduction in the value of silver also increases the diffi- culties of China in meeting interest on foreign loans, and so com- pels her to raise further revenue by increasing import duties. If the depreciation of silver were to affect the foreign loan service, much damage would be inflicted on British interests.
303. In our opinion, every means should be sought of bringing about the stabilisation of silver and so of restoring to China her full purchasing power. Only by international agreement can this result be attained, and we feel that Great Britain should take a leading part in endeavouring to secure such agreement.
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