'As might have been expected, the prosecution of hostilities has' od-versely affected the national finances of China," The Chinese Maritime Customs and Salt Gabelle Services have been seriously interfered wilh by" the Japanese, ports of Shanghai, Tientsin and Tsingtao, which contribute between them the major portion of China's customs revenue are in their hands, their control of the customs administration in the two latter ports being oractically complete. 'The Japanese are preparing to take over' the Salt Gabelle revenues and while, as in the case of the Foreign loans secured upon the Customs Surplus, Jan assurance 1s given that the of foreign bondholders in respect of British, American, French and Japanese loans secured on the Collections, will receive consideration, the position is far from reassuring. The Chinese National Government has lost control of several of the more important railway lines and the mileage it still controls is being used almost exclusively for military pure At Shanghai—ind at various ports in the Far East, to which cargo destined for China was diverted after the outbreak of hostilities—enormous quantities of goods intended for consumption in China have accumulated, These stocks are not likely to be liquidated until economic conditions in the Yangtsze valley, and in other areas of China in the grip of hostili-les, return to normal.
No good purpose would be served by venturing to express an opinion concerning the future of British economic interests in China until ome measures of peace has been restored and the terms of settlement fare known. While the Yangtsze Valley remains a theatre of hostilities there can be no. substantial recovery in the trade of Shanghai.
The outlook in North China remains obscure and some time must necessarily elapse before an admin-{stration acceptable both to the Chinese and Japanese can be evolved for the provinces beyond the Yellow River.
Tt Is too soon to form an opinion as to the extent to which the interests of the Bank are likely to be affected by the present crisis in the For East." The information that has reached. me from our Managers in China inspires the boliet that development has yet taken place Which would be likely to impair permanently the profit-earning capacity of the Bank asa whole. Tam bound fo admit, however, that the situation. continues to cause the Directorate snd the Executive a great deal of anxiety.
Material Losses You will be gratified to learn that the material losses sustained by the Bank at its branches in China have, far, been slight, Our Shanghai [Branch narrowly severe dam-fage during an air raid on the afternoon of 14th August, The building next oer was gutted and appalling loss of life ensued. During the evening of 30th October the fourth floor of the Bank Building was. struck by we shells, both of which exploded. Fortunately "no loss of life was caused. The damage to the building was not serious. I shall refer later fo the services of the Bank's staff al Shanghai and elsewhere, but at this point it would be appropriate to say that on no Lusiness day, since hostilities, opened, has our Shanghai Branch ceased, even temporarily, 10 function in Its own premises.
with international trade rather than The Bank is concerned international polities and there could bbe no Justification for an attempt on my part to judge between the issues involved inthe present tragic conflict in China, This Bank. has associations with Japan and China, extending over a long period of years, and itis my earnest hope, as it must also be yours, that the present con-ict between these great and ancient nations may speedily come to an end that the return of peace may usher era of tranquil progress and international ce-operation in the Far East. It is appalling to contemplate the enormous losses of life, and the widespread destruction that have pat been caused during the past seven months.
Text read from the printed page and cleaned; old type leaves the occasional error.