CO129-555-6 Banking crisis 24-9-1935 - 18-10-1935 — Page 17

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anything like the rate of interest that the Chinese depositor

expects.

Consequently, the excess deposits are invested in

landed property and shares of companies, and the so-called

savings bank department becomes more and more frozen. The

next step is that a part of the deposits are not invested

at all, but used for speculation on the exchange market.

For this purpose the parent company throws off a new limb,

which is called a bank.

I have just been going through the balance

sheets of one of the biggest of the department stores here,

Wing On. The parent company has on the liabilities side of its

balance sheet:

Paid up Capital

Deposits & current accounts

Reserves (including an exchange

$00,000

40

(100)

110

(64)

29

(31)

fluctuation reserve of 2 lakhs)

out of a total of 214 lakhs; and on the assets side:

Stock in trade

19

(27)

Properties

56X

(38)

Shares (including

60x

(20)

9 in a subsidiary)

The more liquid items are

Loans & mortgages

Current accounts

Cash

36

18

}

(113)

7

(1)

The figures in brackets are those of Wing On (Shanghai), which

has a Manager with a European name, and as you will see is not

so vulnerable to a run by its depositors; and the Wing On Bank,

though it is on a small scale, being of fairly recent origin,

is very liquid according to its balace sheet, having 20 lakhs

x At cost, and therefore almost certainly

unrealisable now except at a heavy loss.

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