ENG-1947 — Page 54

exchange earned or held where such an attempt might merely cause the exchange to be directed elsewhere. Exchange so earned or held by merchants was permitted to be used freely to finance trade. Exchange at official rates was made available only to finance Hong Kong's own requirements of essential supplies and in particular raw materials for industry. The comparative freedom permitted in the use of foreign exchange to finance trade significantly increased Hong Kong's trade with the U.S.A. and a valuable re-export business in American goods grew up. A further feature which tended to increase trade with the U.S.A. was the lack of adequate supplies of goods from Western Europe, which will not be available until the industries there have been fully re-established. It has been fortunate that the rising prices in America throughout 1947 have made it an attractive market for raw materials produced in the Far East.

Another direction in which Hong Kong's commerce secured an initial advantage was in trade with Japan. Although this remained on a Government-to-Government basis, it was early realised that the development of trade in Japanese goods was of great importance to Hong Kong and every facility was accordingly afforded to merchants to buy and sell through Government channels. Many Hong Kong businessmen have availed themselves of the opportunity offered by the opening of Japan to merchants to visit the country, and Hong Kong banks, shipping firms and insurance companies have already established themselves there.

Shipping has not enjoyed the same comparative prosperity as other commercial undertakings, largely because, with the war in North China and current limitations on the rice and coal trades, bulk cargoes are few and far between. Furthermore, it has been the policy of the Chinese Government to increase the Chinese merchant fleet and to keep most Chinese ports closed to foreign shipping. Although at times there has been more tonnage than cargo available, freight rates remained high and Hong Kong shipping companies had a not unsuccessful year.

Although firms newly established imported from Shanghai are still numerous, the speculative element in Hong Kong commerce has to a certain degree been reduced (but unfortunately not entirely eliminated) and business conditions are more normal than they were in 1946. Serious overstocking of certain commodities, partly the result of the dumping of diverted Shanghai cargoes, has at times given anxiety. While the trade figures show that Hong Kong has succeeded in building up a prosperous trade in the midst of instability, restrictions and civil war, the circumstances that have made this possible are not permanent and in the long run, the prosperity of Hong Kong's trade' must depend on a return of at least a measure of stability to China. Nevertheless, the port has found favour with international traders, its principal attractions being its cheapness, the speed with which cargo is handled, and the comparatively low incidence of pilferage of cargoes: so that, although in the long run, stability in China is of essential

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