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that in this direction also subordination to authorities in Hsinking is so complete that it is impossible to secure a settlement of questions of any importance by local representations in Dairen.

III. CONSULAR CORPS.

5. In January Mr. S. E. Grummon, American Consul, was transferred to Moscow, and was succeeded by Mr. W. T. Turner. Mr. Turner has spent most of his service in Japan and has a good command of the language. In July Mr. Rudolf Hermann, who is a small commission agent, was appointed honorary Czecho-Slovak Consul, and in August Mr. A. Luraschi, the only Italian merchant in Dairen, was appointed honorary Italian Consul.

IV. BRITISH INTERESTS.

6. During the year British interests have continued their uphill struggle against adverse conditions. The virtual embargo imposed by the exchange control system has caused Messrs. Imperial Chemical Industries to lose all their trade in soda ash, which was their main stand-by, while in other directions they are now restricted to supplying certain specialities which are not obtainable from Japan. In June they had five applications rejected in respect of goods which they planned for their own convenience to obtain from stocks in Hong Kong instead of from England. It was clear that the motive for rejection lay solely in the fact that the goods were to be imported from Hong Kong. In the same way Messrs. Butterfield and Swire have lost all their trade in Taikoo sugar. Messrs. W. H. Winning and Co., a purely local concern and the only British firm of general merchants in Dairen, have lost the whole of their import business, and are having a hard struggle to maintain their existence by means of earnings from shipping and forwarding agencies and from Lloyd's fees.

7. From October 1937 until August 1938 the exchange control authorities discriminated against the Dairen Agency of the Hong Kong and Shanghai Banking Corporation by withholding from them monthly permits for the transaction of inter-bank business in foreign exchange, which were granted to other banks, including the National City Bank of New York. As representations to the local authorities proved to be entirely unavailing, diplomatic representa- tions were made in Tokyo during August, but on the 10th of that month the exchange control system in the Kwantung Leased Territory, as in Manchukuo, was entirely reorganised, terminating all inter-bank business in foreign exchange.

8. At the end of July the stocks of the Dairen branch of the Rising Sun Petroleum Company became exhausted owing to their inability to secure further import and exchange permits. Their predicament, which was shared by the Standard Oil Company of New York, probably originated in the utter confusion in which the exchange control system had by that time become involved, and they were regularly assured that the situation would be remedied at the first opportunity. In October representations were made on their behalf to the local authorities and were met by similar verbal assurances. Finally, in November, they were granted some of the permits for which they had applied, and were able to re-enter the market in December, after having been out of business for over four months. As they supply vitally necessary products, there is no reason to believe that their trouble arose from discrimination; on the other hand, however, there may be a recurrence, because the exchange control authorities seem to be reduced to a hand-to-mouth basis in obtaining foreign funds.

V.-BRITISH COMMUNITY.

9. As a result of depressing circumstances such as those enumerated above, the size of the British community has dwindled during the year, and is now under sixty persons. It is a sign of the times that the German community is steadily increasing and is double the British in numbers; ten years ago the

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