FO371-31667 — Page 83

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they have had six months in which to replace or to duplicate

the British Staff with their own nationals.

The Japanese are

experienced coal miners and there can be no doubt that they will be competent to carry on the operation of the mines without

the services of the British employees. The only event which

could seriously interfere with the production of the mines would

be the withdrawal of the Chinese personnel but of this there is

no sign. The sphere of operations of the Administration has been under the complete control of the Japanese since the outbreak of hostilities with China in 1937 but this has not resulted in

the withdrawal of any of the Chinese labour force nor in any

instructions from the Chinese Government to its nationals to

that effect. On the contrary the output from the mines has

increased materially.

Moreover, it is much to be feared that in the ovent of refusal on the part of the British employees to continue their services they would suffer grave personal consequences.

In the judgment of the Board it is certain that if all British personnel is removed from the Administration, there will be little or no prospect of the Chinese Engineering and Mining Company resuming joint possession and control after the war, and that the mines will pass out of the hands of the Japanese into the control and possession of the Chinese with the result of the total loss of the Company's enterprise in China.

If, however, the British Staff can remain on the site and exercise some part in the management, it is reasonable to anticipate that it will be possible for them to resume the joint control and possession with the Chinese Company on the withdrawal

of the Japanese.

The Board of Directors wish to refer briefly to the great advantages which have accrued to the British Exchequer, to British Trade and to British prestige in North China from the activities of the Chinese Engineering and Mining Company as

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