self-sufficiency move in south china threatens hong kong
TRANSCRIPT
Institute of Pacific Relations
Self-Sufficiency Move in South China Threatens Hong KongAuthor(s): W. W. L.Source: Far Eastern Survey, Vol. 4, No. 20 (Oct. 9, 1935), pp. 162-163Published by: Institute of Pacific RelationsStable URL: http://www.jstor.org/stable/3021568 .
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purchased by ordinary banks, 324 millions by savings banks, 196 millions by brokers, and 286 millions by others. This absorption of government issues has been made possible chiefly by a rapid increase in the vol? ume of demand and time deposits throughout the
banks, trust companies, and postal savings system. Bank advances have lagged behind the accumulation of funds, partly as a result of repayment of loans from
profits. Government paper has absorbed the bulk of these liquid resources, though other securities have also been purchased in considerable quantity. The preva- lence of low money rates and an active market in new
private issues suggests that government bonds have not been taken up at the expense of satisfying private capital requirements as expressed in the market.
This expansion of bank deposits and of clearings may be taken as a sign of moderate inflation. Yet, viewing the course of prices, interest rates, note issues and credit conditions as a whole in conjunction with the active state of industrial production and trade, one
may agree that government deficit finance has been
skilfully handled without alarming strain on the credit
system. Together with yen depreciation, it has pro- vided the monetary stimulus to convert a serious stag- nation into an industrial and trade boom, which in turn has facilitated governmental borrowings.
This is not of course the whole story. The direc? tion of spending raises other questions. Huge outlays have been devoted to building up the military estab- lishments and carrying on the Manchurian venture. The heavy industries, notably munitions, have profited, but the distribution of benefits for the country at large has so far been highly selective. Furthermore, it is
questionable how long the Bank of Japan can continue its security distribution successfully along past lines, though in July a fresh 200 million yen issue of 4% bonds was underwritten at 98.50. In any case the
advantages of borrowing to cover deficits diminish as
heavy interest charges continue to mount.
Moreover, while present conditions are not alarm-
ing, past experience teaches one to be wary of the usual measurements of prices, credit and the like as criteria of financial soundness. The banks are now loaded with government obligations. Japan's recent industrial and trade boom, furthermore, has brought inflated profits in many lines and extensions of plant capacity reminiscent of previous "new eras." If a note
of caution is now being sounded in Japan with increas?
ing frequency, it is perhaps from the perception that the country's industrial prosperity has been occasioned
by a conjuncture of circumstances essentially imper- manent in character. It has not been securely founded
on any general rise in the level of well-being of the masses.
Some of these questions are now being closely exam- ined in Japan as attention is centered on budget prepa- rations for next year, 1936-37. Apprehensive over the
mounting debt, Finance Minister Takahashi has pro- posed a halt in increased expenditures. The Army and
Navy, on the other hand, have presented budgets even
larger than last year, justifying them on grounds of
urgent national necessity. Requests from all govern? ment departments total 2,800 million yen, some 600 millions more than is contained in the present budget. The demands of the military services make up almost one half of this amount and equal roughly the total
ordinary revenue estimated for the current fiscal year. So far little attempt has been made to readjust the tax
system to the new level of expenditure. Yet with the recent appearance of signs that the boom is tapering off (see Far Eastern Survey, September 11, 1935, p. 146), opposition to reduction in government spend? ing is likely to increase. Japanese press opinion ap? pears to be divided on the desirability of retrench-
ment, but agreed that there is little likelihood of its
carrying the day. W. W. L.
SELF-SUFFICIENCY MOVE IN SOUTH CHINA THREATENS HONG KONG
A recommendation that Hong Kong cling to its free
port status but seek an arrangement with China grant- ing free and preferential entry of its manufactures into the China market was recently made by a Hong Kong Economic Commission in a report on the present status and future prospects of the crown colony. In return for this concession, the Commission suggested, co?
operation might be offered China in checking the
smuggling now notoriously prevalent in south China waters (see Far Eastern Survey, September 25, 1935, p. 154).
The Commission recognized that the prosperity of
Hong Kong still rests largely on its foreign trade, of which four fifths is the re-export of imports from China and other countries. It firmly vetoed any pro- posal that the colony's free trade status be abandoned.
The recommendation that Hong Kong request prefer- ential treatment for its products in China was appar- ently based on the hope that its return from entrepot trade might be supplemented increasingly by large- scale industrial development in the Hong Kong-Canton area.
World depression and China's recent financial crisis have borne heavily on Hong Kong's transit trade. This trade furnishes important revenue from commis-
sions, shipping and banking charges, and insurance pre- miums. Industry and trade have also suffered from the rise in the value of the Hong Kong dollar along with other silver currencies. Partly as a result of United States silver purchases, the dollar stood at
$.529 (U. S.) in July, 1935, as against $.382 in 1934 and $.288 in 1933. Moreover the disparity between
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the Hong Kong and Canton dollars has recently in?
creased, the former standing at a premium of 48.6% over the latter in July. A number of local industries
largely Chinese in ownership and management have
developed within the colony in recent years. Cur?
rency appreciation and the weakening in the boycott of Japanese goods are now discouraging exports of local products such as rope, ginger, rattan furniture, ruhber-soled shoes, flashlights, and provisions, just as reverse tendencies previously encouraged such trade.
More ominous for the future of Hong Kong is the move towards self-sufficiency and industrialization in south China. Import duties have risen, and the pro? vincial governments are undertaking to control the manufacture and sale of numerous commodities. Im?
ports of rice, for example, now pay higher taxes. Sugar imports are limited by provincial efforts to promote the growth of cane and to develop domestic refineries.
Hong Kong beer now pays 100% duty; and cement
manufactured there is virtually excluded from Kwang- tung. In January, 1933, furthermore, the Kwangtung authorities launched an ambitious Three-Year-Plan,
calling for the construction of plants to manufacture a variety of goods hitherto imported such as textiles,
sulphuric acid, beer, paper, cement, sugar, alcohol, steel products, munitions and aircraft. The majority of these plants are now in operation or nearing com-
pletion, some of them equipped with British machinery. These developments bode ill for the future of Hong
Kong trade and industry. Presumably it was this which prompted the Economic Commission referred to above to stress the point that the British colony, be?
ing economically a part of China, should seek to pro- mote its industrial importance in relation to that coun?
try. Present tendencies suggest that foreign control of this south China port, long an economic advantage in
terms of political security, may become a distinct
boomerang. W. W. L.
TRENDS IN JAPAN'S LUMBER AND WOOD PULP TRADE
American lumbermen, especially those of the Pacific
Northwest, are expected to benefit from Japan's im-
position of a 50% excess tariff on Canadian lumber and wood pulp. This action was taken on July 20 in con- nection with the trade dispute between Japan and Canada (see Far Eastern Survey, June 19, 1935, p. 93). The corresponding losses to Canada, while doubtless
annoying, will be by no means unbearable, as available
figures do not indicate that Japan takes more than about 3% of Canada's total exports of sawmill prod? ucts and wood pulp, which themselves form only about two fifths of all Canadian exports of wood and wood
products. Wood is a major export of Canada, however, while
it is of minor importance in the United States export trade. Japan, in 1933, took 42% of total export of unmanufactured wood from the United States, valued at $3,389,000, but only 7% of total exports of saw? mill products, valued at $32,275,000. Nevertheless, it was an important customer for Douglas fir, both manu? factured and unmanufactured, as well as for hemlock and western cedar. United States exports of wood
pulp are very small, but in the case of sulphite pulp Japan is the leading customer, taking 64% of the total
exports of $3,049,000 in 1933. Timber is one of the few raw materials with which
the Japanese Empire is comparatively well supplied, there being extensive forests in Japan proper as well as in Korea, Japanese Sakhalin, etc. Yet domestic
production falls considerably short of supplying the demand. A rough calculation for 1932, when imports were at their lowest point in years, puts the value of wood imported at nearly 20% of that produced do-
mestically. The rise of the paper industry, which sup?
plies nearly all the domestic requirements plus a small but growing export trade, has led to a large demand for wood pulp. More recently the chemical industries, of which rayon is the outstanding example (see Far Eastern Survey, February 13, 1935, p. 21), have be?
come increasingly important consumers of wood pulp.
Japanese imports of lumber declined rapidly from
1928 to 1932, as a result partly of the completion of
reconstruction work after the great earthquake of
1923, tariff changes and the world depression. Valued
at 35 million yen in 1932, the import rose to 40 million
yen in 1933 and 1934, and seven months' figures for
1935 show a gain of 50% over the preceding year. About
half of this import comes from the United States and
a quarter from Canada. The Philippines and Nether?
lands India have advanced to third and fourth places
respectively, while the Soviet Union, formerly an im?
portant source of supply, now occupies a subordinate
position. In the case of wood pulp, the increase in Japanese
imports has been meteoric?from 73,000 long tons in
1928 to 225,000 tons, valued at 44,256,000 yen, in 1934, as compared with domestic production of around
600,000 tons. The United States contributed nearly one third of the imports, most of the remainder coming from Norway, Canada and Sweden. Imports through
July, 1935, show a 64% gain over 1934. It is probable that much of this startling rise is attributable to the
rapid progress of the rayon industry which has taken
63% of the total pulp imports by value (slightly less
than half by volume) this year. M. S. F.
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