Above all, the fact that China has long remained an agricultural community supporting a constantly swelling- population and thereby leaving very little surplus produce for accumulation, has resulted in the scarcity of capital. This fact is evidenced by the prevalence of an exorbitant rate of interest, which directly represses industrial development by raising the general cost of production. The high interest rates also indirectly' curb enterprise by creating a general expectancy of an impossibly high rate of return on investment. In order to satisfy this irrational desire for an excessive return, and to attract additional capital, some adopt the questionable expe-client of paying dividends that ultimately impair the financial condition of the business. I am not here to trace the many rami: fications of the paucity of capital insofar_as they adversely affect industrial development, but we can hope for no immediate change for the better unless the problems are squarely faced and met.
The next important economic obstacle in the way of industrial development seems tobe the imperfection and crudity of business organization and methods. This fact is too patent and! elementary to require any explanation. Perhaps I should call attention to one especially noteworthy aspect of this question, namely, that of accounting and auditing.
The old method of bookkeeping, while good enough for a simple business, becomes utterly inadequate for a complicated industrial organization, and to the extent of this inadequacy there exists an opportunity for waste and inefficiency, and an opening for'losses of even baser character. In this connexion the prevalent method of making payments in cash and in bearer checks increases the ease of committing fraud without leaving possible clues of detection, and to that extent aggravates the evil inherent in bad accounting and audit. For the sake of promoting industry and commerce and of increasing efficiency and eliminating fraud the correction of the defective organization and method' is fundamental in importance.
The rapidity and extent of the removal of the foregoing causes for the unsatisfactory industrial situation will determine the extent and direction of industrial growth in the future. On the eve of sailing for Europe, I have no other desire than to endeavour to discover the effective means of promoting the removal of these causes, insofar as the limited time for the trip allows me to do so, SOCIAL UPHEAVAL, But in the process of industrialization, China is also confronting dangers which are almost inseparable from that process, dangers, which, if not properly guarded against, may lead to the destruction of economic and social stability.. There is, first of all, the danger of growing conflict of capital and labour. And then, the emergence of big industries and industrial towns will bring about a gradual, unhealthy exodus of the rural_population and the consequent deterioration of agriculture. Furthermore, as the industrial organization grows. more and more complex and delicate and -the market for the products becomes more and more extended, the chances of an abrupt breakdown are rendered increasingly numerous, such as the familiar business crises of regular recurrence, with all their accompanying hardships to the profit-seeking as well as to the wage-earning classes.
It is, therefore, to be hoped that in attempting to hasten industrialization we shall always be on our guard against the pitfalls, such as the ones just mentioned. All the industrially advanced countries have suffered from them in different degrees, and it would be a pleasant surprise, indeed, if our country turns out ito fbe an exception. How to promote industrial development and yet to avoid! its incidental evils, or at least how to mitigate them, will afford a problem that merits very serious thought and study of all. (ap-
Text read from the printed page and cleaned; old type leaves the occasional error.