United States. Bureau of Foreign and Domestic Comm.

Commercial handbook of China .. online

. (page 129 of 143)
Online LibraryUnited States. Bureau of Foreign and Domestic CommCommercial handbook of China .. → online text (page 129 of 143)
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70,980

29,940

86,304

214,696

330,251

249,453

461,703

513, 178

461,112

517,945

689 982

897,268

1,065,020

1,221,194


Pieces.


Pieces.


1900








1901








1902








1903








1904








1905


'"is 66'
4 00
6 66
3 33

6 00

7 66
11 00

8 66
3 66

2 00

3 00

2 83

3 00






1906






1907


1


1908






1909






1910


85
79,508
75,842
139,326
214,910
339,603
405,496
500,393
470,834




1911




1912


10


1913


40


1914


10,890
27,992


1915


1916


18,691
20,967
25,929


1917


1918





a Nostatlsttcs of trade throufTh the Native Customs prior to 1906 are available.
^ Not separately classified prior to 1910.



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354 C0M2££RCIAL HAHDfiOOK OF CHINA.

The foregoing figures indicate the rapid strides that the industry
has made in recent years in China.

In 1917, 42,400 pieces of grey sheetings and shirtings and 228,933
pounds of yarn were exported from Hankow. A large part of the
production of the mill at Wuchang, just opposite Hanlrow, on the
Yangtze River, is sold locally and does not enter into the trade
returns. Similarly the yarn manufactured in mills outside of treaty
ports is marketea in tKe interior, and it is impossible to obtain
figures of the total production and export.

At the present time (1919) China has about 1,500,000 spindles and
7,000 machine looms, in addition to the tens of thousands of hand
looms in use throughout the country. It is estimated that spinnings
in China during 1918 totaled $60,000,000 in value- (See p. 322.)

The princip5 factors that have contributed to the establishment
and growth of the Cliinese cotton-goods industry have been the fol-
lowing: (1) A supply of native-grown cottons of sufficiently good
?uality for spinning low counts; (2) an enormous domestic demand
or the product of the mills, which, in the case of yam, by far
exceeds that in any other country in the world; (3) low cost of
power, which is secured through a good supply of coal from native
mines and Japan^ and, in Shanghai, by tne unusually low rate
charged for electric power generated by the municipality; and (4)
an abundance of very cheap labor, which makes the cost of prodnc-
tion lower than in any other part of the world, and which is not sub-
ject to any legal restrictions as to hours of work or age of employees.

The cotton that is consumed in the mills is not as good in quality
as American cotton, but it can be used economically for spinning tba
coarse counts, which are in greatest demand in China. Its low cost
gives the mills a marked advantage in the production of heavy sheet-
ings and drills, in which the value of raw material constitutes a large
percentage of the total cost.

The marked success of the well-managed foreign mills in Siang-
hai and the extent to which they have increased their productive
capacity in the past few years are ample proof of the fact that China
oners a splendid field for the development of cotton manufacturing.
The large earnings of these mills in recent years (some mills averag-
ing dividends of 25 per cent for the past eight years) will make it
easy to procure ample capital, and it is the consensus among those
who are engaged in the industry that the time will come in the near
future when China will manufacture within its own borders the
greater part of the coarser yams and cloth consinned by its vast
population.

HAND-LOOM WEAVING IN CTONA.

The use of hand looms is far more extensive in China than in any
other country in the world. Statistics do not show the number in
operation or the quantity of cloth that they produce, but a fairly
ckar indication of their unportance is afforded oy the enormous con-
sumption of yam, all of which is used on hand looms.

In 1918 the imports of piece goods and all other cotton manu-
factures, exclusive of yam and thread, amounted in value to $114,-
298,544. It is safe to assume that the production of the hand looms
exc^s in value and quantity the imported piece goods.



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COTTON GOODS IN CHINA. 355

Thus China is, to a considerable extent, independent of foreign
piece goods. Whenever the price of the latter rises, there is an
increase of hand-loom weaving throughout the country to supply
the demands of the people, whose buying power is limited and a
large number of whom are quite contented to use the native cloth for
their clothing.

Hand looms are scattered throughout China, and thousands of
them are to be found in the homes of the farmers, where they are
operated when the crops are gathered or during the idle days in
winter. The principal centers are in the Yan^e Valley around
Shanghai; Tientsin, in the north; Hankow, Kiukiang, Shasi, and
other districts in Hupeh; Honan, Shensi, and Szechwan Provinces
in the interior of the country; and Canton, in the south. By far
the largest production is from individual looms in the homes of the

Eeople, but there are also many establishments containing 50 to 300
and looms tiiat are owned and operated by Chinese merchants or
men of means. More than 40 of these hand-loom mills are located
in Shanghai, in which more than 3,000 looms are operated.
1 The hand-loom industrv is so firmly established and so widespread
in China that it is doubtful whether it will be seriously affected, for
some time to come, by the competition of foreign cotton goods. The
cloth that is woven on these looms is extremely popular among the
natives, and although that sold in the market is oiten as expensive
as similar foreign goods, it must be remembered that a large pro-
portion of it is made in the homes of the peoi)le for their own use ;
and as long as they can buy raw cotton and spin it into yarn or buy
foreign yarn at low prices for weaving into cloth in seasons when
they are not occupied in the fields, they will probably find this a
more economical method of providing themselves with clothing tlian
to buy foreign goods.

An interesting reason for the survival of the hand loom was given
by a prominent Chinese who has been engaged in tlie cotton-goods
trade for many years. He stated that in Szechwan, a Province that
buys large quantities of yam for hand-loom weaving, and in other
parts of the country, the fiettei^ class of natives do everything possible
to encourage the industry and discourage the purchase of foreign
cloth, because the hand-loom weaving establishments give employ-
ment to many people at wages ranging from $8 to $9 Mex.^ per
month, whereas their earnings as coolies and on the farms seldom
reach more than $1 to $2 Me:x. per month. If the hand-loom in-
dustry should cease because the people adopted foreign cloth, thou-
sands of operatives would be thrown out of employment, and would
have far less money to spend in trade.

An additional factor m the continuance of hand-loom weaving is
the spirit of something akin to patriotism, through which the natives
are urged to buj^ clom that is made in the country, which is often
put up under attractive names, such as " patriotic cloth," in order to
appeal to them on the groimd of supportmg a home industry.

» See footnote on p. 124.



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SUGGESTIONS TO AMERICAN MANUFACTURERS AND

MERCHANTS.

By commercial Att«oli6 Julean AmolO.
INTRODUCTION.

Although the American manufacturer or merchant may feel that
he has to-day all the trade he can well handle, he could insure himself
against future depressions in the home market by giving a little time
and attention now to effecting connections abroad, and few if any
fields offer greater potentialities than China. There are manufac-
turei*s and merchants in the United States, who, although making
satisfactory profits, might be able to secure even better returns with
good connections abroad, particularly in China. There are some
whose products find their way to the China market but in a manner
that leaves the greater part oi the profit to others. Likewise some are
purchasing materials which originated in China but which pass
through so many hands before reaching them that they are costing
them much more than good business organization should permit.
Some, moreover, are missing entirely chances to sell or purchase arti-
cles tnat are, or could be, a feature in China's trade in a way ad-
vantageous to both themselves and the Chinese. A study of the ma-
terial presented in this handbook should indicate to the American
mercantile interests the possibilities of China as a field of opportu-
nitv for American trade.

After having consulted this handbook for such material as may be
of interest along any distinct line of trade, the American manufacturer
or merchant, in the event that he has not yet effected satisfactory
connections in China, should address the Far Eastern Division of the
Bureau of Foreign and Domestic Commerce at Washington, or the
nearest district office of the Bureau, soliciting all available material
at its command and suggestions as to the best method of making fur-
ther investigations. The American consular service in China has de-
veloped remarkably during the past 10 years as an agency for the ad-
vancement of American trade. American manufacturers and mer-
chants who have not already done so ghould get acquainted with this
very effective medium of assistance. After having become fairly well
convinced throug'h this- preliminary investigation that China oners a
field of opportunity for his line of business, the manufacturer or mer-^
chant can (1) send his representative to China to make further in-'
vestigations, with authority to establish a branch or agency or to ef-
fect connections otherwise; or (2) through correspondence h© can se-
cure an agent, representative, or direct buying or selling connections.

PROBLEMS INVOLVED IN SENDING OF REPRESENTATIVE.

Should he (singly or in combination with other manufacturers)
send a representative to China, he should send one of his high-
class men, a man whom he finds he can not easily spare: in fact,
the nearer he comes to sending the best and biggest man in nis estab-
356



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SUGOESTIONS TO AMERICAN MANUFACTURERS. 357

lishment, the nearer will he come, ordinarily, to getting big results in
his China venture. Sending a cheap man is the most expensive thing
he can do. The initial steps in a new field are the most important, as
they determine the policy ror the future. A big man will plan wisely
and lay a good foundation, whereas a poor man can scarcely be ex-
pected to do otherwise than to blunder where initiative and foresight
are vital factors in the solution of a problem. Furthermore, a biff
man will meet big men and be able to profit by their suggestions ana
assistance, whereas a small man meets his kind and is naturally in-
fluenced by them. It should be remembered that among strangers
one's organization will be judged by the representative it sends among
them. Scores of American manufacturers and merchants have failed
to realize on big possibilities in their lines in China because the men
who could be most easily spared at home were sent to China to lay the
foundations for their future operations or activities there. Ir one
concern is unable to send its own man, it might advantageously join
with several other firms in allied lines and send a joint representative.
This system has much to commend it but, unfortunately, has been
little resorted to. Since the passage of the Webb Law permitting
combinations for foreign trade, manufacturers should take advantage
of the possibilities of joint representation. The decision having been
made as to the character of the representative to be sent to China, this
individual should be furnished with a small working library of litera-
ture helpful to him in his new field, and he should be instructed to
^ve the long hours on the ocean voyage to familiarizing himself with
it, so that when he arrives in China he will not find it necessary to
waste his and other people's time and, incidentally, create a bad im-
pression and thereby handicap himself, by displaying ignorance on
matters concerning which all who could bie of service to him have a
right to expect him to know something. It is recommended that,
before sailing from the United States, this representative call at the
Bureau of Foreign and Domestic Commerce, Washington, — or, if
this is impracticable, at its nearest district office — and obtain there
the information and assistance that the Bureau has to offer.

Many times an American manufacturer has gone to a consular of-
ficer in China and asked questions which that consular officer could
rightfully consider unnecessary, and often the consular officer finds
his time taken up teaching some one the A B C of contact with China
instead of devoting an ^qual amount of time to serving the person in
a more advanced way. The inauirer is the loser and not the consular
officer, for the latter is in duty bound, within his limitations, to serve
all Americans to the extent of their ability to be served. The same
remarks apply in the case of bankers and business men in China who
might be of service to the newcomer, except that they may not feel
themselves obligated to give as much time to such a person as a con-
sular officer may devote. Our government service in China can be of
much assistance to American business men, and when the American
officials find such men to be of good caliber and thoroughly representa-
tive they are particularly desirous to be of service^ not only in furnish-
ing information but also in seeing that the business men are intro-
duced to persons who may be of assistance to them.

The American representative should bring with him proper letters
and documentary evidence of the standing of his principals, as con-



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3&8 COMMERCIAL HA:^rDBOOK OF CHINA.

sular officers and others in China have m^ the facilities that are avail-
able in the United States for checkiiig up a man or his oral repre-
sentations. Americans coming to China must bear in mind that scores
of adventurers have preceded tnem and that they help to protect them-
selves and make more easy the detection of adventurers when they
bring with them their credentials. They should not take it for granted
that because they are known by everybody in commercial circles at
home, everybody (or anybody, in fact) knows them on the other side
of the earth. Furthermore, they should not feel offended if one of our
Government representatives in China asks for their credentials^ If
they are sensitive in this matter, they mi^t use a little diplomacy and
save their own feelings by taking the initiative and presenting their
credentials.

When he comes to China, the American on a tour of investigati(m
should not content himself with visiting Shanghai and possiWy Hong-
kong, which seem to be the limits of many such visits. Shanghai and
Hongkong are not China^ although Shanghai is the commercial me-
tropolis of China. Peking, Tientsin, Hankow, and Canton should
not be excluded from the itinerary of the American seeking to under-
stand the potentialities of China for his purposes. Moreover, several
good trips to Chinese cities in the interior stoold be incluaed, the
particular ones to be diosen depending on the lines of business in
which the representative is engaged.

American representatives also make the mistake of failing to seek
interviews with Chinese business men. Foreigners (non-Chinese)
in China do not know all there is to know iU)out China and the
Chinese people; in fact, but few, other than the foreign missionaries^
have taken the trouble to learn the language of the people. A very
effective way of learning to know something about a people and a
country is by associating with some of the representative natives of
that country. Americans must, however, bear in mind when meeting
Chinese that the latter do their business over the teacup rather than
over the telephone, and thus good manners and patience are essential
virtues. Americans coming to China desirous of learning to know
something about the country and the people should not overlook the
advantages of meeting some of our missionaries, especially when
traveling in the interior. These missionaries, as a class, know China
and the Chinese pec^le better than do the mercantile mterests as a
class. There are nearly 6,000 Americans in China, and probably nx>r8
than half this number is made up of missionaries. The American
missionaries are generally college men and women, and their organi-
zations are probcu>ly spending more in the furtherance of their wori^
in China than American merchants are taking out of the country in
profits on trade. Their work is appreciated by the Chinese, and they
have a close personal contact with the people of the country which
affords opportunities to know them well

No representative of an American manufacturing or business con-
cern coming to China for investigation purposes and for effecting
connections ^ould plan to remain less than two month3« He should,
ordinarily, arrive m the autumn, so far as climatic conditions are
concerned. He should not allow himself to be deterred from onning
to China because of rumors or reports of internal disturbances or
plagues, pestilence, etc. Twenty thousand or more Westerners r^ide
m China continuously without concern as to these reports, which are

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SUGGESTIONS TO AM£RICAJ9^ MANUFACTURERS. 359

from time to time spread broadcast. Americans have been known to
have got as far as Japan and turned back from there because of
reports of troubles in China, during the whole period of which for-
eigners were continuing in the even tenor of their ways throughout
the sections of the country in which they have their residences and
vfork.

The primary question that confronts the American who comes to
China to consider establishing business relations with that country
has to do, of course, with the best method of effecting that consum-'
mation, assuming that he has concluded that his line lends itself to
development in trade with China.

METHODS OF ENTERING THE MARKET.

He will find that China's foreign trade is in the hands of peoples
other than Chinese, except in a comparatively few instances. For-
eigners had to come to China to get China's wares and to exchange
their products in the first instance, and they continue to do so. Thus
there is as yet but little that might be defined as direct trade between
Chinese in China and foreigners abroad. Gradually the Chinese are
developing import and export concerns, but it will be years before
th^e become substantial factors in the trade. The American is,
therefore, confronted with the question as to whether he shall (1)
establish his own house in China, (2) affiliate with a house already
established, ^3) leave his business in the hands of an agent, (4) em-
ploy a traveling salesman, (5) deal through a home commission or
forwarding house, or (6) do his business directly with dealers in
China on an open-market basis. These methods we may consider in
the order as given:

ESTABLISHMENT OF AN INDIVIDUAL PLANT IN CHINA.

Undoubtedlv the most effective and most satisfactory way to get
results is by the establishment of an individual plant in China, pro-
vided the prospects of the trade warrant It must, however, be oome
in mind that tne initial outlay in the building up of an or^nization
will be comparatively ^at The essentials for the openmg of an
independent office in China would be as follows:

Ttels Tftels

per per

moath. year.

Bent for quarters 200 2, 400

Light, heat, water, janitor service 40 500

Comprador and Chinese staff 160 1, 800

Two native salesmen 100 1,200

One office assistant, Eurasian, for cables and accounts 125 1, 500

One stenographer 150 1,800

Local manager or agent 400 4, 800



Total 14, 000

Furnishings are cheap in China. The value of the tael in terms of
gold has ranged, during the past few years, from $0.65 to $1.35.

The comprador guarantees accounts and makes advances up to a
limited sum. He ordinarily receives, in addition to his compensation,
one-half per cent commission on all business done, based on c. i f.
value of goods sold. Where the turnover is large he receives onljr



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360 COMMERCIAL HANDBOOK OF CHINA.

one- fourth per cent commission. This is fixed by agreement. He
pavs, out of his salary, his Chinese staff. As business develops, it
will be necessary to add the rent of a warehouse and two warehouse
attendants — a total of about 100 taels per month. The figures given
above are on a liberal scale. One could open an office in China on
several thousand taels per year less with a smaller office and equip-
ment.

It must be remembered that foreign trade in China is done on the
basis of large turnovers; the net profits on these range in normal
times on staple lines from 2^ to 10 per cent, but since the outbreak of
the war they have ranged from 5 to 25 per cent and in many instances
far more. Profits on miscellaneous articles and products vary con-
siderably by reason of variations in market conditions in China, but
10 per cent would seem to be a fair basis of estimate of net profits.

Having established an office in China under a man found competent
to manage and handle it, the manufacturer or merchant in America
should not expect to run that office from home any longer than is
absolutely necessary to pet it properly organized. American busi-
ness in China has suffered because it is run too much from New York
and Chicago and not enough from Shanghai and Canton.

Get a g^)d man on the job in China and then trust his good judg-
ment, and better and bigger results will be obtained, provided you
have the right man — and you should have no other. As the business
grows add young Americans, preferably college graduates, and make
the salaries so attractive that they will not easly succumo to hcnne-
sickness during the first few years of their residence in China. Send
out good men, pay them well, take an interest in their welfare while
they are in China, and give them opportunities to expand in their
work.

Americans at higher salaries are, generally speaking, worth more
to an American finn than others for positions of responsibility.
Americans will stay out in China if proper, businesslike inducements
are made. There are hundreds of young Americans in American
business houses in China at present, and they are content and appar-
ently there to stay. Every American firm m China should arrange
to give its American employees opportunities for the study of the
Chinese language, as this will prove an invaluable asset to their work
and to the welfare of the American firm. Nothing tends to link
a man to a country in a more solid way than a knowledge of the Ian- ,
guage of the people of that country. The American Chamber of
Commerce of China, at Shanghai, is arranging for special class work
in Chinese for Americans in mercantile concerns. The American
manufacturer or merchant opening up in China should do so with the
idea of making the institution a permanent one, and when men are
sent out from the United States to join this firm, they should under- '
stand that they come to a permanent position with opportunities for
advancement m the field. It is found that after an American has
spent four or five years in China he generally prefers living in China
to living elsewhere.

ASSOCIATION WITH A FIRM ALREADY IN THE FIELD.

An effective way of getting established in China is by association
with a firm already in the field in other and, if possible, allied lines,
by the addition or a department to this concern under the manage-



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SUGGESTIONS TO AMERICAN MANUFACTURERS. 361

ment of the representative of the new concern. This gives the new
concern the benefit of the experience and financial, shipping, and
marketing facilities of the established firm under some mutually
satisfactory arrangement. A firm with branches or good agencies
throughout the le^ing ports of China might be found of particular
advantage in certain Tines. Care should l)e taken, however, in the
choice of the firm with which these affiliations are to be made, and,
other things being equal, American firms should be given preference,
for obvious reasons.

GIVING THE BUSINESS INTO THE HANDS OF AN AGENT.

It may be found desirable to commit the business to the hands of



Online LibraryUnited States. Bureau of Foreign and Domestic CommCommercial handbook of China .. → online text (page 129 of 143)