BRITISH TRADE IN CHINA

Greymouth Evening Star, 12 August 1936, Page 11

BRITISH TRADE IN CHINA

FUTURE “MORE FRUITFUL.”

LONDON, June 24

That China will in the future prove a more fruitful field for British commercial, industrial, and financial enterprise is the opinion expressed by Sir Frederick Leith-Ross, Economic Adviser to the British Government, in a statement issued in Shanghai yesterday.

“Our principal interest here,” he added, "is to promote the peace, the prosperity, and the trade of China. In working for this, it. seems to me, we are working in the interests of all countries trading with China.” Sir Frederick has been in China for nine months on behalf of the British Government, examining the country’s economic and financial problems. He states that he fully agrees with the observation of an American economic mission, that “a vast change is coining over China; a modernisation that, as compared with ten. or even five, years ago, marks many centuries."

Sir Frederick’s statement added: “The reconstruction of China is a vast task, which will take years to accomplish, and there is room for all to assist her in this task. The present Chinese Government has, despite conditions of peculiar difficulty, made remarkable progress in the restoration of law and order, the re-settlement of the devastated regions and the development of communications.” Sir Frederick pays tribute to the Chirifeso Government for its recent currency reform. He states: ‘‘Silver has for many centuries been the currency of China, and the sudden and sharp rise in the value of silver during 1934 caused a similar rise in the exchange value of Chinese currency. This, in turn, caused a contraction of credit and an acute deflationary crisis; prices began to fall, debts could not be met and the bunks became more and more ‘frozen.’ “By October, 1931, the situation had become so serious that the Chinese Government imposed a variable export tax on the export of silver, thereby divorcing the. Shanghai dollar from the free silver standard.

“But this measure, while it mitigated tlio extreme effects of the rise in silver, did nothing to remedy the difficulties which that rise had already caused, and when I reached Shanghai last September it was evident that further positive measures had to be evolved.

“I did not bring any cut-and-dried scheme out with me to ‘put over’ the Chinese Government.

“1 was examining the situation with a view to the preparation of a detailed programme with adequate safeguards, and if possible, with international support. But before any such scheme could be devised, the exchange market became dangerously weak, and the Chinese Government decided to adopt an inconvertible managed currency on the basis of their own resources. JUSTIFIED BY SUCCESS. “I had no responsibility for this bold step, but i have, of course, closely followed the situation, and 1 have no hesitation in saying that the action taken has been fully justified by the success which it lias achieved. “The notes of the Government banks have been steadily replacing the silver dollars in circulation. Their exchange value has been firmly maintained; the rate of exchange fixed has tended to encourage exports, and the adverse balance of trade has been greatly reduced. The fundamental economic conditions for a stable currency are fulfilled. “Confidence in the currency is growing. But much has still to be done before it can be solidly assured as a basis for long-term trading and investment plans. “The unification of the note issire and the reorganisation of the Central Bank as an independent reserve bank has not yet been carried through effectively. There have been unfortunate speculative movements of a non-commercial character which have disturbed sentiment. There is a large Budget deficit, and the domestic bond market is depressed and Government credit low.

“The prospects of currency, and indeed of the whole financial situation of China for the future, will depend firstly on the maintenance of peace and order in the interior of China, and secondly on a settlement of the special situation in North China. In particular. Customs revenues are a vital factor in Chinese finance, and every effort should be made to put an end to difficulties in the way of their collection in East Hopei. •‘These difficulties cannot be removed without a better political understanding between China and Japan. During my last visit to Japan 1 was assured that the Japantese Government. desires such an understanding; ilrnt it favours the maintenance of Chinese Customs administration, and will give no support to the creation of a. special tariff by any local authority in China, and (hat it lias no wish to interfere with the internal administration of China.

IMPORTS PROSPECTS. “Exports are expanding, and the adverse balance of trade has been greatly reduced. But the export trade could be still further stimulated if the burden of local taxes, interport duties and export duties could be reduced, and if the standards of production, manufacture and handling could be improved. “As regards imports the immediate prospects may not seem encouraging. But it is no use importing goods that cannot be paid for, and the export trade of China must improve before progress in imports can be looked for. "If, however, present tendencies are maintained there is every reason to expect a gradual and steady improvement in the import trade. 1 hope that British exporters will take advantage of the turn in the tide if and when it comes.

“imports, of course, are largely affected by the tariff, and I hope that the Chinese Government will consider whether the present tariff cannot be revised in a downward direction, so far as this is possible without reducing revenue. During the depression a number of the tariff rates have been pushed up to a point at which they produce no revenue, and merely prohibit legitimate trade. These rates require to be reconsidered in the light of the present exchange position.” Sir Frederick’s statement concludes: “The development of China

will require the importation of capital goods, and this is probably the most promising field for British exports. Such exports would be greatly facilitated by a flow of credit to China, where capital is scayce, and the yield under proper management would be fully remunerative.”