1933-02-27 — Page 2

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TOBNI POLITICALLY, ECONOMICALLY, ARTISTICALLY TOWARD

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HONG KONG DAILY PRESS, MONDAY, FEBRUARY 27, 1933.

BANK CHAIRMAN'S CAUTIOUS REVIEW

NEED

FOR RESTORING CREDIT IN CHINA

THE CHAIRMAN'S SPEECH

The Hon. Mr. J. J. Paterson said:

Ladies and Gentlemon,-The Ra- port and Statemtnt of Accounts having been in your hands for some days, I will, with your per-

COMMERCIAL "CONDITIONS mission, take them as read.

OF 1932 ANALYSED

After making full provision for tosses and contingencies the net profits for the year amount to $10,803,720.50, and increase over the previous year of a little over $4 lacs or, expressed in sterling, an

FAITH IN CHINA'S POWER OF RECUPERA-increase of about £70,000.

TION AND PROGRESS

MANCHURIAN CRISIS HOLDING UP TRADE RECOVERY

THE ANNUAL MEETING OF THE HONG KONG AND SHANGHAI BANKING CORPORATION TOOK PLACE ON SATURDAY, THE HON, MR. J. J. PATERSON, OHAIR- MAN OF DIRECTORS, PRESIDING.

Mr. Paterson gave the usual comprehensive review of Far Eastern afairs. His speech was cautious and guarded, dealing with facts, and avoiding criticisms and prognostications.

The following twelve points are among the most striking made in the address.

After making full provision for losses and contingencies our net profits for the year amount to $16,893,720.59, an increase over the previous year of a little over 84 lacs or, expressed in sterling, an increase of about £70,000.

Coming to the statistics of the year, we start with the year's silver output reduced, according to estimates, from '247 to 207 million fine ounces. Against this drop in production of about 17 per cent. we have to set a still heavier decline in visible con- sumption. China is reckoned to have absorbed to million ounces against 57 in the previous year, India 13 as compared with ea. These two traditional silver consumers thus decreased their aggre- gate off-take by nearly 50 per cent.

IN JAPAN

Japanese industries are improving in sundry directions. The skill of the cotton and rayon workers has shown a striking dove- - . lopment; manufacturers, taught by the 1930 crisis, have been set- ting their house in order; rationalisation has advanced, processes been reviewed and labour economised, while a reduction of wages' The was 'cflected following upon the currency deflation of 1930. result of all this is that Japanes factories are now turning out goods at a lower cost and of improved quality goods which, thanks to exchange "bonus," uro competing successfully abroad even in sheltered markets.

How long this state of things (in Japan) can continue is, of course, the question. Costs and wages are already again on the rino, the country faces progressive inflation through the drain on re Bources caused in Manchuria, and the budget is showing a deficit which, the Government state, cannot be bridged by increased taxa tion. Recently the decline of the yen has been arrested and its ex- change value has remained steady for the last couple of months.

CHINA AND THE SLUMP

China entered on 1832 feeling the full shock of the slump in world pricce as well as the aftereffects of the record floods of the. previous summer, while, in addition to this, the opening weeks of the year brought a still further calamity in the shape of the fight- ing in and around Shanghai. The accumulative effect shows in the Customs figures. Imports, which for the last five years had been steadily rising and exports, which had remained fairly constant, both registered heavy declines, over and above the inevitable re- ductions due to the loss of Manchuria's trade.

The figure for imports dropped from $2,222 to $1,628 millions, and that for exports from $1,410 to 9763 millions. The dispropor tionate fall in exports-the level touched being the lowest for 15 years-implies an adverto trade balance of a magnitude which is somewhat disquieting when one considers that the main counter: acting factor, namely money remittances from Chinese overseas, is being simultaneously curtailed by lack of prosperity abroad.

A drop of 45 million taels in the Customs receipts, though partly due to the cutting off of Manchuria, is creating doubts as to the revenue-producing effects of the raising of the tariff, · ·A® serious sequel to the increased dutien has been a phenomenal in- crease in smuggling. The situation causes concern, but we under- stand that preventive measures are being energetically taken in hand by the Chief Inspectorate.

INDUSTRIAL DEVELOPMENT

Of industrial development there is no great progress to record. It is noticeable however that fresh industries are showing signs of taking root in China. Among the more important is a projected joint enterprise by the Chinese Clovernment and foreign chemical interests to manufacture sulphate of ammonia. The appearance of smaller industries, of which the making of aluminium utenails may bo mentioned as an example, testify to the developing skill of the Chinese artisan.

Nearly every province of China is experiencing radical changes through the rapid construction of roads and of long-distances air routes. An aero-innovation which bids fair to transform many re- gions of China consists of long-distances air routes.

China's foreign creditors as a whole, while naturally impatient at the delay in the promised taking in hand of the question of the overdue debts, will give China her due for remaining among the nations which have resisted any temptation to enter-on fresh de-. faults on the plea of the general economic collapse.

Another hopeful feature is the start which the Government has made in dealing with the bandit-communist movement.

A political event of the year which claims our final notice is the recent restoration of diplomatic. relations between China and Russia Its full import yet remains to be seen. Speaking from a commercial view point, I will merely mention, in passing, that the new agreement comes at a time when the invasion of the China markets by merchandise from Russia at undercutting prices -matter to which my predecessor of two years ago made special allusion has been making conspicuous progress. Hussian oil, tim- ber and piece-goods are the products particularly concerned, and these are now in serious competition with imports from other coun- trise.

the

After deducting the interim Dividend paid at 1/3.1/8, and Directors' remuneration, amunt available for distribution is #12,619,033.39 which it is propos- ed to deal with as follows:-

To pay a final divi-

dend of £2 per

sharé (subject to

deduction of In-

British National Finance. siders that the main counteracting factor, namely, money remittances Conditions at home I shall omit from Chinese oversens, is being altogether, linked up as they are simultaneously curtailed by lack of with tariffs, war debts, gold dis- prosperity abroad. One sees the re- tribution and 80 forth-matters fection of this adversa balance of which can naturally be dealt with trade in the change which has far more fully and critically in taken place in regard to the flow London than is possible from this of treasure that is of gold and I silver combined into and out of chair. But before passing on should like to voice our share in China. In the past, as far as re- the expressions of satisfaction and cords extend, the current has al pride which have been called forth ways set inwards, large imports of by the courageous manner in which silver far outweighing any out our Government, with the coun-goings of gold. Last year saw the try's backing behind it, has dealt position raversed, a net loss to with the formidable problems of treasure having taken place to the National finance which faced us tune of some 75 millions of dollars. during the year. Without at all minimising the difficulties ahead, I think we may also congratulate British industry on its efforts in adapting itself to the present diff. cult times-fforts which shaw their mark in the increased percentage of British trade in the trade of the Far East.

India and Singapore. Turning to this direction we find both India and Singapore hard hit

The shrinkage in Chinese exports can be put down in the main to the drop in commodity values. Another factor of no little importanes has, however, been the uncertain quality of some of the principal export

standing defect which the Inspec- tion Bureaus set up by the Gov- crnment seem to be failing to cure and which, as competition develops, is bound to have an increasingly ser ious effect on Chinese trade. The universal disease of "frozen cre-

come. Tax) ... $ 7,690,000.00 by another year of abysmally low dits" has also invaded China and. prices for the natural products on hampered the movement of goods, Transfer to Rank

which their export business de-a season of bumper crops having, Premises Account 1,500,000,00

pends. Jute, cotton, ten, rubber by the irony of fate, come at the Carry forward to

and tin all tell a similar tale. In same time with a general drying

up of native banking facilities. New Account 3,430,033.38 the case of the last, it is true, ca- operative action for restricting out- $19,818,033.39 put and regulating sales was suc- cessful in raising the price from the depths to which it had fallen but this was accomplished with the help of reduction in shipments of nearly fifty per cent. India's fa vourable trade balance sank to 50 low a point in 1932 that, but for her exports of gold to England which, by the way, nearly equalled the export from the South African gold-fields the rupee's exchange

The year 1831 was a very bad one from every point of view, as men tioned by my predecessor in the Chair last year, but I think we can Bay that from a trade point of view 1932 was even worse, in these circumstances I feel that you will agree with me that the figures we are now putting before you can be considered antisfactory.

Bad though the year has been, it has had nevertheless obe or two promising features. There is hope for the future in the improved running of the railways, the in- crease in motor roads and the re- covery of large productive areas in Central China from communist hands. The reduction in world stocks of many raw materials ex- ported from Chins also opens the way to a better foreign demand and I think we may fairly hope that, when the general depression lifts, China will not be behindband in sharing in the recovary.

Manchuria,

I am glad to say that the mar-value could hardly have held up ket value of our investments once In all the markets concerned, the more shows a zatisfactory margin encroachment of Japanese and Rus- over the value at which they stand sian piecagoods continues to grow. space though the new Indian tariff in ear books.

With regard to the figures of the has temporarily caused a check.

Reports from Manila show that Our three Manchurian offices give balance sheet, the biggest change the Philippine Islands ati!! find us a substantial stake in that ter from the previous year is the large themselves sheltered from the worst ritory and you will perhaps be ex- incrense of Cash and Bullion

pecting a word from me about local conditions. What I can add to the press reports amounts to very lit- the. The economic effects of the

against increase in note issue and of the blast by their adventageous of other Banks' balances lying with tariff position vis-a-vis the United us under the heading of Gurrant States. Conditions, therefore, have Accounts, which is ample proof of altered less for the worse than in the dullness of the times we live most places in the East.

The Silver Market.

in.

Japanese Industries.

For Japanese trade the feature of 1932 has been the continued drop in exchange bringing the yen down, in terms of U.B. currency, from the high point of 49 in 1930 to 35 at the beginning of last year, 27 last June and 20 in December.

conflict are of course, well-known the most serious being, I suppose. the enormous increase of banditry which has so gravely affected the fariners that they were said to have cut down their sowings of staple crops by something like fifty per cent. The new Tariff barrier has, of course, interrupted trade and we hear that many Chinese mer- chants have liquidated their af- This and other factors, such as faire to return inside the Wall. the Chinese boycott and changes in The Sungari floods increased the tariff duties, caused Japan's for- general distress and business at eign trade, to follow a somewhat most centres-for the foreign mer- irregular coarse, but the end-of- chant at least-has been almost at growth a standstill. A successful reformi the-year figures revealed

Industrial Development.

The Silver Market for the last few years has furnished the Chair man with considerable material for comment in his speech at the Bank meeting. On the present occasion I find myself with but little to say on the subject, In the first place the year has been a subsidence of the violent disturbances of the parity values between silver and gold which had resigned for several years past, while at the same time much less activity was shown in the putting forward of international in the yen values of both imports of the currency would be something schemes for supporting the price of and exports accompanied by a fifty to place in the balance against silver or stabilising its value. We per cent. decrease of the adverse these unfortunate conditions and we shall await with interest. the re- understand, however, that the ques trade balance. tion of silver is to figure among Though the drop in exchange has suit steps taken in this direction. rise in domestic Meanwhile we can only hope, with the agenda of the forthcoming produced some Economic Conference. Interested, prices, there has been, as yet, but the rest of the world, for an early as we are, in zilver movements pri- a slight degree of inflation and the settlement of the conflict allowing marily a affecting the flow of Far year's favourable showing should agriculture and trade to return to Eastern trade and the general wel- not be set down to purely monetary a normal state.

are Japanese industries fare of China, we hold the belief causes. that the operation of the law of improving in sundry directions. supply and demand-which implies The skill of the cotton and rayon

Of industrial development there the rising and falling of silver in workers has shown a striking deve- harmony with other commodities-lopment; manufacturers, taught by is so great progress to record. It will be more to the public benefit the 1930 crisis, have been setting is noticeable however that fresh in- than artificial measures of control. their house in order; rationalisa- dustries are showing signs of tak- Coming to the statistics of the tion has advanced, processes been ing root in China. Among the years, we start with the year's out reviewed and labour economised more important is a projected joint put reduced, according to eati- while a reduction of wages was enterprise by the Chinese Govern- inates, from 27 to 207 million fine effected 'following upon the cur- ment and foreign chemical inter- ounces. Of this the "new" pro-rency deflation of 1830. The result ests to manufacture sulphate of duction that is the output from of all this is that Japanese fac ammonia, which, for use as a fer- the mines-is 160 million ounces re-tories are now turning out goods tiliser, is in sufficient demand in duced from 190 million while the at a lower cost and of improved China to account for an annual im- rest consists of ballion obtained in quality-goods, which thanks to port of some couple of hundred roughly equal parts by tales by exchange" bonus," are competing thousand tone. The appearance of the Government of India and from successfully abroad even in shelter smaller industries, of which the making of aluminium utensils may demonetized coins from Russia and ed markets,

How long this state of things be mentioned as an example, testi. elsewhere.

Against this drop in production can continue is, of course, the ques-fy to the developing skill of the of about 17 per ceat, we have to tion. Costs and wages are already Chiness artisan set a still heavier decline in visible again on the rise, the country faces consumption. China is reckoned to progressive inflation through the

drain on resource caused by Man have absorbed 40 million ounces charic and the budget is showing * The spending of the accumulated against 67 in the previous year, deficit which, the Government fund of the remitted British Boxer India 13 as compared with 02. These two traditional silver con- state, cannot be bridged by increas Indemnity-nearly £ million sumers thus decreased their aggre-ed taxation. Recently the decline began during the year. The bulk. gate off-take by nearly 50 per cent. of the yen has been arrested and of the material purchased to date and instead of easily heading the ita exchange value has remained market, saw their figuren of con- steady for the last couple of sumption doubled by the other months. countries of the world, The latter, for opinage requirements and "arts and industries" combined, took 100 million ounces, leaving 64 millions of unaccounted balance, which part ly at least is represented by stocks

held in London.

."

Ohina.

Boxer Indemnity.

has been for the Chinese railways. British engines, rolling stock and material. have been supplied to the Tientsin-Pukow, Kinotal and other Government lines and funds have China entered on 1532 feeling the been voted for several new enter full shock of the slump in world prisen. These include the long-talk- prices as well as the after-effects ed-of Yangtze train-ferry between of the record floods of the previous Nanking and Pukow, the Hang summer, while, in addition to this, chow Kiangshan railway (a new the opening weeks of the year and purely Chinese line, running As regards the year's prices, brought a still further calamity in from: Hangchow two hundred miles fluctuations extended from high the shape of the fighting in and in a south-westerly direction points of 20.7/16d. and 81.1/4 U.S. around Shanghai. Trade bad, at through a rich agricultural re cents to the lowest quotations of the the same time, tr shoulder the burgion), and finally the building of year, 18.3/8d. and 24.1/4 cents den of the first full year of the in a Central Machine Shop at the Shanghai tools touched 1/11.1/2 creased tariff, augmented during National capital. Contributions high at a cross-rate of 348, and the summer by heightened duties from the Indemnity funds have al 1/7.1/4 low at a cross-rate of 358.

on a number of luxury goods. The so been made for work on the Can- I must leave to those of my accumulative effect shows in the ton-Hankow Railway. The original hearers who are interested in the Customs figures, Imports, which loan for constructing this line, subject to make their own deduc far the last five years had been which we helped to Boat in 1911. tions from the figures I have quote steadily rising and exporte, which proved insufficient and a gap of ed and will only point to the ob had remained fairly constant, both rather over a couple of hundred yious fact that the one certain registered heavy declines over and miles still remains to be bridged. direction in which to look for the above the inevitable reductions due Its completion is very desirable and strength of the silver market is the to the loss of Manchuria's trade, is engaging the urgent attention of revival of export trade from Ching The figure for imports dropped the Chinese Government, who, un and India. ARA

from 82,223 to 81,828 millions, and fortunately, in the effort to raise

At the clots of a third full year that for exports from $1,410 to the capital are bampered by the of world-wide trade depression my 8783 millions. The dispropor-crushing weight of arrears already review of the state of affairs in the tionate fall in exporte-the level owing to the original bondholders countries which interest us. most touched being the lowest for 15 Nearly every province of China cannot be very cheerful and yon years-implies an adverse trade is experiencing radioalabanges will be glad, I am sure, if I cut it halance of a magnitude, which is through the rapid

somewhat disquieting when one con comparatively short

(Contin

ction