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been found that a low exchange rate is more favorable to an active foreign trade because the Chinese obtain the money to purchase foreign goods from the sale of Chinese products for export. Normally, therefore, a high exchange rate limits exports and thereby indirectly limits imports.

When foreign goods are purchased, the Chinese buyer or the importing house enters into an exchange contract with a bank in the port of importation, which acts as agent for that bank in the country of origin to which the documents covering the purchase are hypothecated. These contracts are usually arranged by exchange brokers. If the contract calls for the purchase of goods at a price in gold, the buyer usually pays for the goods on a c. i. f. basis and, in addition, pays the interest on the draft and the profit of the importing house. Contracts made at a silver price often stipulate that the importing house is to look after the bank and other charges. In such cases the price that is paid by the Chinese buyer includes the importer's profit and the interest on the draft, and the goods are said to be sold on a c. i. f. c. i. basis; i. e., cost, insurance, freight, plus commission (more properly, profit) and interest. Both methods are common; the practice varies with the importance of the transaction and the nature of the goods.

The fluctuations in exchange make it difficult to state accurately in United States currency domestic prices in China, local costs of production, etc.

The following table shows the average exchange rates of Shanghai taels and silver dollars for 1912 and 1913, and for each month from January, 1914, to March, 1918. Actual quotations for the silver dollar for this period are not available; the rates given were obtained by multiplying the Shanghai tael by 0.7174:

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$0.443

. 447 . 460 491 534 501 . 475

506 .523 .528 .568 601

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. August.
September.
October
November.

December 1915:

January
February
March.
April
May.
June
July.
August.
September.
October
November.
December

590 .614 .579

598 .606 631

657 G.722

827 .684

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No attempt will be made in the present report to convert silver dollars to United States currency or any other equivalent; this is considered impracticable on account of the constantly changing price of silver, which has varied greatly in the last few years. A person doing business in China soon learns (of necessity) to think in terms of "Mex.” currency. Unless otherwise indicated, the $ siqn in the Chinese sections of this report means Chinese silver currency.

With special reference to the railway situation, it may be well to revert for a moment to the subject of depreciated currencies. The earnings of the steam railways are not affected by the "small" silver coinage or the "copper cent,” since their charges are based on the “large” money. To support the paper issues of the Bank of Communications and the Bank of China, both of which have been at a heavy discount, these issues have been accepted for some time by some of the railways at their face value in payment for fares and freight charges. But in paying interest charges and expenses the railways have had to bear this discount loss, which has had quite an appreciable effect on the earnings of the lines north of the Yangtze River. However, as this was an expedient to assist the Government in supporting these issues, it is felt that it need not be considered as a permanent feature of the railway earnings. The tramways promptly reduce their “small money” and “copper cents” to a “large” money basis,

AGRICULTURE AND PASTORAL PURSUITS. China is primarily an agricultural country, and the wide range of climate, the rich soil, and the simple wants of the people make it one of the few countries in the world that can, if necessary, be self-supporting. The products are very varied. Rice is the principal crop and staple food in South and Central China, but in the colder parts of North China millets very largely take the place of rice. One of these, known as kaoliang, provides a food substitute for rice and is the principal fodder crop, while the stalks and roots are one of the principal sources of domestic fuel. Wheat is a secendary crop but is growing in importnnce.

Where transportation is available special crops are being raised, with much success in many instances-for example, soya beans in Manchuria, potatoes along parts of the Peking-Suiyuan Railway, peanuts along the Peking-Hankow Railway, and tobacco along the Shantung Railway.

While the cultivation in many instances is what might be called intensive, the methods are very simple and the implements almost primitive, usually necessitating a great amount of human labor. One feature that is particularly noticeable is the wide areas usually under cultivation with po fences whatever. The Chinese apparently do not believe in wasting good material for such a purpose as separating one another's crops, but, rather curiously, they close in their lowbuilt dwellings with high mud or brick walls, doubtless as a means of protection.

Pastoral pursuits in China are entirely secondary to agriculture, although in the aggregate the products are very considerable, particularly from the interior regions in the form of hides, wool, and hair. The marketing of some of these articles involves a large amount of transportation and will mean a considerable source of railway freight, as is illustrated by the traffic over the Peking-Suiyuan line at present.

MINERAL PRODUCTION.

COAL.

China, no doubt, has very large, varied, and valuable coal resources, but it is difficult to obtain definite data concerning them. The Japanese have thoroughly proved the fields they control in South Manchuria, at Fushun, Yentai, and Penchihu. The Fushun field on the Fushun Branch of the South Manchuria Railway, 236 miles north of Dairen, contains about 800,000,000 long tons and carries a high percentage of nitrogen, and there is a very complete Mond gas plant, producing a considerable amount of ammonia. The Yentai field near the main line of the South Manchuria Railway, about 225 miles north of Dairen, contains a much smaller quantity of steaming coal. These two fields are controlled by the South Manchuria Railway and are both equipped with modern apparatus; with a total of approximately 20,000 employees, they are now producing about 2,225,000 tons à year.

The Penchihu field, 47 miles from Mukden on the Antung Branch of the South Manchuria Railway, while limited as to quantity, contains some very good coking coal. This is of much importance to the Japanese interests in connection with the two 150-ton iron furnaces at Penchihu, the two new 250-ton furnaces of the South Manchuria Railway at Anshan, about 190 miles north of Dairen, and the new iron plant at Pingyang on the Korean Railways in Korea. The coal, iron-ore, and limestone deposits and the iron furnaces at Penchihu are controlled by the Okura Co., of Japan, and the present coal production is about 300,000 long tons a year.

The only other instance in which the writer was able to see data proving the quantity and quality of the coal was that of the Kaiping field, controlled by the Kailan Mining Administration, which is located on the main line of the Peking-Mukden Railway about 80 miles northeast of Tientsin. Here there is a proved amount of about 1,000,000,000 long tons of first-class coal, a considerable portion of which will coke. With about 20,000 men the present production is approximately 3,250,000 tons a year, with a production of about 100,000 tons of coke now produced by the Chinese process. It was stated by a well-informed authority that the Kailan Mining Administration contemplates improvements amounting to approximately $10,000,000 United States currency in the way of washing and byproduct processes, these improvements to be undertaken as soon as possible after the end of the war. The greater part of the coal now exported from China proper comes from this field, and the average rail haul to Chinwangtao, the principal coal-exporting port, is about 75 miles. This is the only port of North China on the Gulf of Chihli that is free from ice during the long winters of this section, except Dairen, which is under Japanese control.

The next largest producing mines are the Pinghsiang collieries of the Han-Yeh-Ping Iron & Coal Co., in Kiangsi, about 260 miles southwest of Hankow. The annual production is about 1,000,000 tons, and all the fuel and coke for the Han-Yeh-Ping Iron Works at Hanyang, near Hankow, come from these mines.

There is no doubt of the fact that extensive and valuable fuel deposits occur in many parts of China, particularly in Chihli, Shansi, Honan, and Kiangsi, but so far as could be learned none of the fields other than those mentioned have been conclusively proved up as to quantity and quality. The best statement of the recent production situation was published in the Far Eastern Review for October, 1917. As this publication prepares its data with much care, the following information is given substantially as printed. The total present coal production of China from all classes of mines is about 18,000,000 tons, of which about 8,000,000 tons come from the larger mines where more or less modern methods prevail and which are, in the main, under foreign control or administration. According to figures collected by the Geological Survey of China for the year 1915, the most recent year for which figures are available, the output of the principal mines was as follows:

Name of mining enterprise.

Location.

Province.

Nationality.

Produc

tion in long tons.

Kailan Mining Administration. Tangshan-Kaip-Chihli..

ing. Pinghsiang Colliery.

Pinghsiang.. Kiangsi. Peking Syndicate.

Chaotso.

Honan. Lincheng Coal Mining Administration.. Lincheng. Chibli. Chunghsing Coal Mining Administration Yishien.

Shantung Tsingching Mining Administration. Tsingching. Chihli. Paoching Co.

Yangchuan. Shansi. Liuhokou Coal Mining Co..

Liuhokou.. Honan
Tungshing Co.

Mentowkow Chihli.
Subtotal.
Fushun Colliery.

Fushun and Manchuria..

Yentai, Penchihu...

Penchihu.

do.

Sino-British..... 2,971, 792
Chinese.

927, 463 British..

480, 875 Sino-Belgian..

259, 703 Chinese.

244, 825 Sino-German..

179, 154 Chinese..

131, 396 ..do.

91, 822 Sino-British.

80,000

5,367,030 Japanese. 2,034, 856 do.

275, 777 7,677,663

Total.

In addition to the above, the Japanese military administration mined 259,611 tons in 1915 and 443,368 tons in 1916 from the mines along the Shantung Railway, and it was expected by the Japanese authorities at Tsingtau that this amount would be increased in 1917 and again in 1918. In the above-mentioned article the rather surprising statement was made that even now China is importing from 1,000,000 to 1,600,000 tons and that in normal times there would be an excess of imports over exports. Even with the present railways, if adequate equipment and arrangements were provided, there is every reason to think that China should become an exporter of coal instead of an importer. It would appear that many of the developments have not had the possible measure of success because the proving was insufficient to determine the best scheme of development. This applies particularly to the matter of drainage, which has been the cause of trouble in many of the operations.

IRON.

It is reasonably certain that China also has important iron-ore deposits, but the obtaining of definite information regarding the proving data was found to be even more difficult than in the case of the coal resources.

The October issue of the Far Eastern Review also referred to the iron and steel production of China, stating that at present the total pig-iron production of China, aside from Japanese production in Manchuria, is about 300,000 tons.

One-half of this is the output of

the Han-Yeh-Ping Co. at Hankow; the remainder, produced by scattered native plants, is nearly all consumed locally.

The Han-Yeh-Ping works consist of two 100-ton and two 250-ton furnaces, but at present one of the 250-ton furnaces is not being operated, on account of lack of power. In addition, there are in

, course of erection two 400-ton furnaces near Hwangchow, about 70 miles below Hankow, on the Yangtze River. These last furnaces are on the river at the point where the ore is brought from the Tayeh mines by means of a 2-foot-gauge railway. At present about 250 tons a day are converted into steel and iron products, and all the rest of the pig iron goes to the Japanese. This plant has the only rail mill in China, the maximum capacity of which is 120 tons a day. It is understood that there is a Japanese loan to the Han-Yeh-Ping Co. amounting to $12,000,000 (gold), the principal and interest of which is to be paid in 40 years in iron ore and pig iron. This loan arrangement for the pig iron is at the price of $21 (gold) per ton of 2,240 pounds for the 40-year period. It is estimated that the present production cost is $18 (gold) per ton. The loan agreement also provides that 2 tons of ore go to Japan for every one that is smelted by the Han-Yeh-Ping Co., and the minimum amount going to Japan is estimated to be 1,000,000 tons a year.

The two 150-ton Penchihu furnaces of the Okura Co. (Japanese) are now producing about 70,000 tons a year, and the new Anshan plant of the South Manchuria Railway is expected to have the first 250-ton furnace completed and in blast before the end of 1918 and the second 250-ton furnace before the end of 1919. The production from both these plants, as well as that from the new Pingyang plant, in Korea, which may use both fuel and ore from Penchihu, is controlled for Japanese consumption. As soon as the work can be carried out it is planned to install a complete steel plant at Anshan, particularly for the production of plates for shipbuilding, of which Japan is in such urgent need and anxious to have its own supply. In any event, all the production that can reasonably be expected in the next few years will fall far short of taking care of the combined needs of China and Japan, even when one includes all the possible production in Japan proper.

OTHER METALS.

China is said to produce in commercial quantities 26 different minerals, of which antimony ranks first in value. As with the coal and iron resources, there is great and urgent need for scientific investigation of these mineral deposits, so that they can be properly and successfully developed. The transportation of minerals other than coal and iron is at present of no considerable volume and is not likely to influence materially the building of new lines of railway; rather, the building of new lines will influence the development of certain of these mineral resources, which in some cases is now much handicapped on account of slow or expensive transportation.

GENERAL MANUFACTURING.

Notwithstanding what appear to be very slow, primitive, and expensive methods of transportation, there is a great amount of native manufactured articles that are somehow gotten to ports for

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