Sessional_Paper_1917 — Page 98

66

46

04

facility, and the total cost of financing is merely the accepting Commission, & per cent. per month, interest at 1 per cent. below "bank rate, and the cost of the Bill Stamps. The Accepting House

66

LL

เ

send the documents with a letter of lien attached to their clients in "China either direct or through an Eastern Bank--usually direct. "The China House signs the letter of lien, returns it to London, and takes delivery of the goods upon arrival. In most cases the China House pledges itself in the letter of lien, not only to meet "the Bill at maturity, but to keep the proceeds of the goods in trust and separate from all other transactions and moneys belonging to "other persons. In the case of the German Firms in Hongkong this "trust has been broken in almost every case. The goods were "handed over to the Chinese Buyer on 4-8 months' credit, and as 'they were paid for, the monies were placed to general account and "used for the carrying on the business. Bills at maturity were met

out of the general funds of the House."

Now had the funds been kept separate it is probable the bills would have been ruming at least nine months before being taken up, and the accepting commission of per cent. per month would thus have counterbalanced the cheaper discount rate.

As stated in the Chamber's letter of 5th August last First Class British firms could have obtained the same facilities and some undoubtedly did but the conditions were complied with.

My Committee trust that this information is what His Excellency requires.

The Honourable

The Colonial Secretary,

Hongkong.

I have, etc.,

A. R. LOWE,

Acting Secretary,

No. 13.

No. 10.

GOVERNMENT HOUSE.

HONGKONG, 2nd June, 1917.

Su---Referring to my Confidential Despatch of the 18th August, 1916, 1 have the honour to forward copies of further correspondence with the Hongkong Nos. I and General Chamber of Commerce regarding the advantages alleged to have been

derived by German Firms in Hongkong from the London Acceptance System.

12.

2. The Chamber's argument is that the German Firms, by reason of their non-observance of the lien which was a condition of the system, obtained from the system an unfair advantage over their British competitors, who were prepared to observe the lien; but the statement in support of this argument, that had the lien been observed the bills would have been running at least nine months before being taken up, is not very convincing, as firms of the financial standing of the majority of the German houses could have met the bills at maturity, whether or no the lien was observed. And, even if the German