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export. A good illustration of the peasant products is straw braid from North China, particularly Shantung, which is exported in considerable quantities from Chefoo, to which port it is transported by Chinese methods. A good example of a community product is chinaware at Kiukiang, on the Yangtze River, where quantities are manufactured by native methods much in excess of the local needs. Such examples of native manufacturing can be noted in many parts of China.

The manufacturing in China of distinctively foreign articles is constantly becoming more important from year to year, and, on account of the vast supply of cheap labor and the adaptability of the Chinese, there is every reason to believe that China, in the course of time, will become a most important source for many lines of products requiring a large amount of labor. The number of modern cotton mills is probably most noticeable, but other lines that warrant attention are cement, sugar, flour, etc.

RAILWAY MANUFACTURING.

The Chinese railways have in most instances reasonably wellequipped workshops, but these are primarily for the purpose of making all classes of repairs to rolling stock in order to insure a very long life-this being the general policy of all railways in the Far East, as in Australia. The exceptions to the general rule that workshops are only for repairs are the Tangshan workshops of the PekingMukden Railway, which are laid out for erecting locomotives, passenger and freight cars, and the Shanhaikwan bridge works of the same railway, which were arranged for the fabrication of new bridges and all kinds of structures. Both of these works followed British practices, and it unquestionably was the purpose to build all rolling stock and fabricate all bridges and structures for new as well as existing Chinese Government railways. This condition has not prevailed in the past, and one seems warranted in concluding that it will not in the future. In the writer's opinion, if the present tendencies continue these works need not be given serious consideration, although this may seem very inconsistent with what is said in this same connection regarding the Japanese workshops at Dairen (Shakako) in South Manchuria.

It has been assumed that the Han-Yeh-Ping Iron Works would furnish all the rail required for both the existing and the new lines of Government railways in China, but as this company's maximum rail production is only about 30,000 tons a year and there has been a constant demand for much more iron and steel than the total production of this plant, this expectation has not been realized and probably will not be in the future.

Much the most important manufacturing plant from the standpoint of American manufacturers of railway equipment and fabricated structural materials is the Shakako shops of the South Manchuria Railway Co., near Dairen. This is a well arranged and equipped modern manufacturing plant rather than a railway workshop for the repairing of rolling stock. About two-thirds of the present products are other than for the use of the South Manchuria Railways. As an illustration of the products, it may be mentioned that all the materials for the extensive buildings erected by the Japanese in South

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Manchuria during the last three years have been fabricated at these works, the materials for the new 150-ton blast furnace at Penchihu have been handled there, and the materials for the two 250-ton blast furnaces and steel plant at Anshan will be furnished from these works. Meter-gauge locomotives have been designed and built for the Yunnan line of the Indo-China Railways. The 4 locomotives, 10 passenger cars, and 60 freight cars for the Ssupingkai-Chengchiatun Railway (nominally a Chinese Government line being constructed with borrowed Japanese capital) are all being built at these works. For the past three years all the new rolling stock and also to a great extent that for the Korean railways have been erected in these works, and there is no doubt that this will continue to be the case in the future. In the past the greater part of the equipment for these two lines was bought in America, frequently through Japanese companies, such as the Mitsui Bussan Kaisha. These works, no doubt, will also furnish all rolling stock and structural materials required by the KirinChangchun line connecting with the South Manchuria Railway at Changchun; this line, although a Chinese Government line, is now under Japanese control as a result of recent loan agreements. These same remarks apply to requirements for any extensions of this line, which may be very considerable, as explained later.

The total number of employees at these works was approximately 4,150 in July, 1917; of these 72 per cent were Chinese, none of whom were employed in administrative, technical, or clerical positions, or as engineers, cranemen, or similar employees, but entirely as artisans and laborers. These Chinese workmen make unusually good molders in iron foundry work, and they also are unusually good brass workers. It is said that on an average 250,000 Shantung laborers cross the Gulf of Chihli annually from the ports of Shantung to South Manchuria and scatter over the country, following agricultural pursuits, and that the Japanese now recruit these men from this source for the manning of their various enterprises in Manchuria, such as these workshops, the labor on the docks at Dairen, the Fushun, Yentai, and Penchihu coal mines, and the new steel plant at Anshan. The Shantung man is probably the most robust and upstanding of of the Chinese proper; he is, for example, one of the best stonemasons in the world. The utilization of the cheap and plentiful Chinese labor by the Japanese in Manchuria is a very interesting subject on which much might be said, but it is thought that the above is sufficient to point out the possibilities in this general connection. In support of the statement as to the cheapness of this Chinese labor, one may mention the fact that on account of the recent high price of silver the daily wage of the Chinese laborer at the Fushun mines was raised from 25 Japanese sen (12.5 cents gold) to 30 sen (15 cents gold).

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II. CHINESE COMMERCE.

GENERAL CONDITIONS.

A traveler in China studying the transportation problem soon perceives that Chinese commerce is of very considerable volume and of very great variety. He wonders how it is all accomplished with the present transportation methods and he will probably conclude, if he stays long enough, that the problem is really beyond the full comprehension of the occidental mind.

With improved transportation facilities, Chinese commerce would greatly increase, as is shown by the traffic over some of the present railways, which, with increased and improved facilities, would show an even larger volume of business.

There has always been a large trade between the various Provinces of China in the native manufactured products, and there is now a growing commerce in manufactured products of foreign character.

IMPORTS AND EXPORTS.

China's total imports for the year 1917 were valued at $565,032,460 United States currency, of which $61,937,831, or 10.96 per cent, came from the United States. For the same year the total exports were valued at $472,190,262, of which $96,681,954, or 20.48 per cent, went to the United States.

While in the aggregate this looks large, when it is considered on a per capita basis for China it is seen to be very small and there is every reason to think that it will be much increased in the future. In the past the imports have included a moderate amount of materials and equipment for transportation purposes, and while it is difficult to pick out the actual amount of business, there really has been more than could reasonably have been expected in view of the restrictions of the loan agreements that are mentioned later.

Chinese requirements for transportation materials and equipment are certainly going to be very considerable in the future, and a large amount of this business should come to American manufacturers if developments are allowed to proceed in accordance with the best interests of China's transportation needs. China's transportation can be handled better with equipment conforming to American practice. than with that which follows the lines of continental practice, as is well illustrated on the South Manchuria and Korean Railways.

LIKIN.

There is imposed on the interprovince and native commerce a tax called likin, which is unquestionably retarding the development of China's internal trade as well as putting an unwarranted restriction on the natural movement of traffic, particularly over the present railways. To an extent, at least, this tax helps the foreign trader who imports his goods, since he is allowed to pay this tax by a nominal ad valorem duty as he ships his goods to the various interior points from the open port, while the native trader has the substantial handicap of numerous inland impositions of this likin, causing much inconvenience as well as additional indirect expense and loss. That the

imposition of these taxes as now applied is a very serious matter in connection with the development of Chinese railways and general business is very fully explained by Dr. C. C. Wang, managing director of the Peking-Hankow Railway, as a conclusion to a series of articles on Chinese railways published in the Chinese Social and Political Science Review and republished in the December, 1917, number of the Far Eastern Review. The following is what Dr. Wang says on this subject:

Since likin only taxes the trader, one may question why we should advocate its abolition in connection with railway finance. The reason is that likin barriers bother the trader directly and hinder the railway indirectly, Railways, we may say once for all, depend upon the trader. What hurts the trader immediately hurts the railroad eventually. Therefore, in order to insure the prosperity of the railroad, one must endeavor to remove the difficulties which lie in the way of the trader. Generally speaking, there is hardly any other institution that is retarding the development of railway traffic more seriously than the imposition of likin along the railways. The difficulty does not lie so much in the amount which is collected as it does in the delay and damages, the cost of paying the taxes, and other inconveniences which arise from these collections. Indeed, the costs of the trader in paying his taxes are often more than the taxes themselves. The reported corruption, extortion, and purposely committed damage to goods by the likin collectors upon helpless traders are too notorious to need emphasis. When these facts are taken into account, it is really a credit to our traders that they can still survive.

But without going further into the question, we feel it safe to say that the abolition of such barriers will not only meet with the hearty welcome of the honest trader, but will as well prove a boon to the commerce of the whole country. And it is by the development of our commerce that our railways may earn more money, thus preparing to meet the approaching financial difficulties. What is lost by the abolition of likin will be more than made up by the increase of railway revenue. To make up the loss of funds of the Ministry of Finance resulting from this abolition, the Government can easily require the railways to credit the Ministry with a lump sum every year equal to the likin revenue derived from railway traffic, which the railways are probably willing to do. By so doing, the Government will have everything to gain and nothing to lose. So it is safe to say that this is one of the very few reforms which will bring benefit to all and harm to none. The only people that will suffer from this reform will be the likin runners, and it is very likely that they will raise every opposition.

The competition between our commerce and industry and those of other countries also demands the removal of the likin obstacles along the railways. In this regard we have to remark that not only the customs tariffs but also all state railways, and to a certain extent even private railways, in other countries invariably make special efforts to help domestic industry. Germany, Belgium, Switzerland, France, Japan, etc., are some of the most obvious instances where customs and railway tariffs are well known to have been used to protect home industry, and their results are justifying their practice. But we have been following a diametrically different policy. Instead of helping our home commerce and industry by showing them favors, we obstruct them in their uphill struggle against foreign competition and place them at a great disadvantage by subjecting them to the numerous inland impositions while exempting the foreign competitors. For it is only imported goods that can be transshipped to any open port in the country upon paying a nominal ad valorem duty at the port of entry, while there is no way open to the home trader by which he may avail himself of similar immunities. This is not only harmful, but unjust and absurd; and it alone is enough to prevent our trade and industry from catching up with those of our competitors, to say nothing of the numerous other serious disadvantages which our industry has to face in its uphill struggle. Inasmuch as we are restrained from raising or adjusting our absurd customs tariffs, we have no other way to help our home industries than to place them on a fair basis with foreign competition by removing the obstacles resulting from inland taxes.

TARIFFS.

China is one of the very few countries where, so far as import duties are concerned, goods from all sources are treated on the same basis. There are no preferential duties. There is supposed to be

a uniform tax of 5 per cent on all imports, but in many cases there are specific duties that amount to less than 5 per cent ad valorem. A commission has recently prepared a revision of the Chinese customs tariff, with the object of making the specific duties more nearly equivalent to 5 per cent ad valorem, but this has not yet gone into effect.

The above statements should not be understood as indicating that there are no preferential conditions in the import markets of China, as this would be far from the facts of the situation. To the interests controlling shipping, terminal, godown (warehouse), and other transportation facilities, there are very substantial advantages. In China, moreover, there are a number of very unusual features in this connection; for example, China is one of the few large nations, if not the only one, that permits other nations to handle coastal shipping and, more particularly, shipping on inland waters. control of this coastal and inland-waters shipping and the facilities that go with it constitutes, to say the least, a very great advantage to the trade of the interests associated therewith.

TREATY PORTS.

The

When a port or trade center is thrown open by treaty or proclamation to foreign trade and residence, it is known as a treaty port" or "open port." This may be a seaport in the ordinary sense of the word or it may be an inland trade center many miles from the seacoast. The first five treaty ports were opened by the treaty of Nanking in 1842; they were Shanghai, Canton, Amoy, Foochow, and Ningpo. Since then, the number has been increased until there are now about 80, covering the greater part of the country, particularly along the seacoast and the Yangtze Valley. The most important from the standpoint of markets for transportation materials and equipment are probably Shanghai, Tientsin, Hankow, Dairen (Japanese leased territory), and Canton. The British leased territory of Hongkong, of course, is a very important business center and a reshipping port for all parts of South China, French Indo-China, and the Philippine Islands.

Peking is also an important business center, but while there are a great many foreign residents and business concerns outside the Legation Quarter, it is not a treaty port.

CONCESSIONS AND SETTLEMENTS.

Concessions and settlements are described by Dr. Tyau as follows: (1) "A concession or piece of ground conveyed by deed of grant in perpetuity to a lessee State for a residence of its nationals, the same to be administrated by it 'saving the sovereign rights of the Emperor of China,'" and (2) "a settlement, or site selected for the residence of all foreigners, within which they may organize themselves into a municipality for certain purposes and be governed by their elected representatives."

Outside of its participation in the administration of the municipality of Shanghai and the Legation Quarter of Peking, the United States has no concessions or foreign settlements in China.

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