Two or three events which have recently occurred in China seem to point out new danger in our financial arrangements, We need scarcely say that we allude to the passion for winding up local public companies, which has lately found favour with speculators, and has not received at the hands of those who are interested in the permanent prosperity' of the place, the amount of deprecation which might fairly have been dealt out. It is of much consequence that facilities should be offered for the management of local enterprise, and that the serious drain upon the resources of a trade such as is carried on at Shanghai, should be economise to the uttermost. It will be perfectly understood that we are not putting in a plea for any particular association. It may have happened that the institutions referred to were, in public and private interest, best closed. Btill there have been peculiarities of method which we would prefer not to have seen introduced into our local undertakings. It is some years ago since, in the case of the old China Fire Insurance Ca,, the idea of winding up a company then prosperous, and mainly because it was prosperous, occurred to the public of Shanghai. The ae. cumulated funds, which, held together would have been available for local enterprise, were dissipated; and for some: years Shanghai and the rest of China had to pay @ heavy tax to Home offices in the shape of fire insurance premia, It was scarcely attempted to be shown that the office was not paying, or was not likely to pay. There was left, after the Yokohama fire, 8 considerable amount to reserve, and the temptation to divide this, and forestall the goose in the laying of the golden eggs, was too great for the majority of Shareholders. The case differed, perhaps, from more recent ones in this, that the action was not premeditated; but was the result of a genuine "tank," caused by heavy losses incurred in one great conflagration, and which suggested a desire to realize shares, still very valuable, before they could incur farther depreciation. It is trae the Hongkong Fire Insurance Ca. quickly enlarged its capital and its operations, to fill the gap; but one Company cannot do the work of two, and the result was that, for some time, as we have said, a large sum in Insurance premia. went out of Chins that might have been profitably retained here.. Insurance is, in fact, 8 form of business which can best be performed by local enterprise. When carried on on the spot, trade only suffers the amount. of actual loss proceeding from natural and unforeseen causes.
When,-on the contrary, a community insures at a distance, it of necessity imposes a heavy tax on trade in general, spent in supporting institutions from which it derives no corresponding benefit. Few merchants can afford the risk of becoming their own insurers, as their ions are not of a sufficiently extensive and varied nature to warrant them, on the theory of averages, in exposing themselves to heavy losses which, perhaps, there may be a difficulty in repaying. But, although individual merchants may easily refrain from adopting the dangerous course of accepting their own risks, an association for the purpose of mutual protection may on the same principles be the safest of investments. It is to such a principle that institutions like the North China Insurance Ca. owe their success; and, before proceeding to close any local company, which has for its object the earning of Jocal capital, it would be well to consider closely all the varying circumstances of the case. We do not mean to say that all the shareholders who voted for the winding up of the Victoria or the China and Japan Insurance offices were actuated by false er shortsighted motives. Many, perhaps most, thought they were doing wisely. There is, however, no doubt that, both in one case and the other, the agitation which resulted in majorities for winding up, was got up in an artificial manner, and didn't proceed from thespontaneous wish of the shareholders. Such a spirit is, we believe, fraught with danger to local enterprises, the partners in which are so fickle that, at the first suggestion of some outsider, they will listen to pro-Is for a division. The state of feeling produced in such circumstances is likely, besides, to be contagious. There seems, or did seem, as good q reason a few weeks ago for winding up the S. S..N. Company and the Hongkong and Shanghai Bank, as for performing the operation on the other companies. It needs little originality of genius to perceive that, at some periods, there is a tendency for the market price of shares in any ordinary undertaking to fall below what may at the moment be their actual value, if realised. If, on every such occurrence, the partners in a concern were to rush wildly to realise, we might bid good-bye to all reasonable chance of legitimate investment. It is in some such direction that the share speculators of Shanghai and Hongkong seem at present drifting clatching at the shadow, they are not unlikely to find that they have dropped the substance; but, meanwhile, much permanent injury is not unlikely to have been inflicted on real and bond fide investors, whose permanent interests are sacrificed to gratify the desire of others for immediate gain.
Text read from the printed page and cleaned; old type leaves the occasional error.