Trading With China 
 
 Guaranty Trust Company 
 of New York 
 
Trading With China 
 
 
Digitized by the Internet Archive 
 in 2017 with funding from 
 Columbia University Libraries 
 
 https://archive.org/details/tradingwithchinaOOguar 
 
Trading With China 
 
 Methods Found Successful in 
 Dealing With the Chinese 
 
 Guaranty Trust Company of New York 
 
 140 Broadway 
 
 FIFTH AVENUE OFFICE 
 Fifth Avenue and 43rd Street 
 
 MADISON AVENUE OFFICE 
 Madison Avenue and 60th Street 
 
 L ONDON OFFICES 
 32 Lombard Street, E, C. 
 5 Lower Grosvenor PL, S.W. 
 
 PARIS OFFICE 
 Rue des Italiens, 1 and 3 
 
 Copyright, 1919, by Guaranty Trust Company of New York 
 
Interior of the Shanghai Office of the Asia Banking Corporation 
 
Trading With China 
 
 Methods Found Successful in Dealing With the Chinese 
 
 Many regard China as a far-distant land, with 
 an immense population, but so wanting in all that 
 others possess as to be ready to purchase, in un- 
 limited quantities, whatever is offered for sale; 
 whereas what is true is this : China needs neither 
 import nor export, and can do without foreign in- 
 tercourse. A fertile soil, producing every kind of 
 food, a climate which favors every variety of 
 fruit, and a population which for tens of centuries 
 has put agriculture — the productive industry 
 which feeds and clothes — above all other occu- 
 pations, China has all these and more, and foreign 
 traders can only hope to dispose of their merchandise 
 in proportion to the new tastes they introduce, the 
 new wants they create, and the care they take to sup- 
 ply the demand. 
 
 T hus sir Robert Hart, Inspector- 
 General of Chinese Imperial Customs 
 and Posts — a man intimately acquainted 
 with the Chinese — summed up the foreign 
 trade situation in China in 1901, and al- 
 though eighteen years have passed by, the 
 words are as true today as they were then. 
 The fact that in the twelve months end- 
 ing December, 1918, the exports to China 
 of American merchandise amounted to 
 $59,134,960, and the imports from China 
 to this eountry totalled $140,892,573, only 
 serves to emphasize the truth of his state- 
 ment, for success in trading with China 
 has come only to those who have made a 
 careful study of the characteristics and 
 wants of the 400,000,000 frugal, indus- 
 trious inhabitants of that vast country. 
 And our imports from China are still far 
 in excess of our exports to China. 
 
 Nevertheless, the foreign trade of China 
 now amounts to much more than a billion 
 gold-dollars a year. This indicates an ad- 
 vance of more than one hundred per cent, 
 in the last ten years, if figured in gold 
 
 dollars, while in Chinese taels it has ad- 
 vanced about thirty-three per cent. 
 
 With an area of about 4,300,000 square 
 miles, one and a half times the area of the 
 United States, excluding Alaska and our 
 outlying possessions, with about 93 per- 
 sons to the square mile, with only about 
 
 6.000 miles of railways compared with our 
 
 260.000 miles, and with one-half of the 
 population without wheeled vehicles, 
 China is today at the inception of a vast 
 modern industrial development, and will 
 require railway materials, mining equip- 
 ment, electrical plants, public utilities, 
 machinery and factory equipment, and 
 metal products in great abundance. 
 American ships, American capital, Ameri- 
 can organizations must be provided for 
 the expansion of American trade in China. 
 
 Vast Field for Americans 
 
 It is a vast field of opportunity that 
 has hardly been scratched — a field that 
 will yield a rich harvest to the American 
 who cultivates it with intelligence and 
 understanding, because the position of 
 the United States in China is peculiarly 
 advantageous. China regards our coun- 
 try as friendly in the desire to protect 
 rather than despoil her territory. But to 
 meet competition we must have a pow^er- 
 ful organization, a base and rallying point, 
 a tangible something besides mere labels 
 on boxes or bales as representing Ameri- 
 can force. It must be remembered that 
 the Chinaman makes his judgment largely 
 on the outward, visible signs, and that 
 he has a natural tendency to deal with the 
 strongest firm. 
 
 [5 
 
America’s manufacturing capacity to- 
 day, as a result of war-time expansion and 
 increased efficiency in production, is so 
 large that the outi)ut of our plants at full 
 time is much greater than America’s 
 markets can continuously and regularly 
 absorb, and if we are to avoid periods of 
 unemjrloyment of large bodies of workers 
 we must get our share of foreign trade to 
 dispose of this surplus production. The 
 Chinese market will be a great factor in 
 solving this problem. This booklet has, 
 therefore, been prepared to guide those 
 unversed in Chinese commerce. 
 
 Governing Elements 
 Three basic elements govern Chinese 
 business — personality, education, and 
 honesty. Regarding the first, your repre- 
 sentative in China must be a man of edu- 
 cation and tact. The quality of aggres- 
 siA’eness which makes for success in the 
 United States must be toned down in deal- 
 ings with the Chinese, a dignified race that 
 abhor, the breeziness of a certain type of 
 
 salesmen. On the other hand they have a 
 profound reverence for a man of learning, 
 and, if he is familiar with their customs, 
 business relations will proceed smoothly 
 and profitably. 
 
 An outstanding feature of the Chinese 
 character is his commercial honor, and he 
 demands an equally high standard from 
 the foreigner. One deviation from abso- 
 lute integrity on the part of your repre- 
 sentative would probably destroy your 
 business in China. The Chinese merchant 
 is noted for liberality in all his dealings, is 
 tenacious as to all that is material, with 
 comparative disregard for trifles, never 
 letting a transaction fall through on ac- 
 count of punctilio, yielding to the preju- 
 dices of others wherever it can be done 
 without material disadvantage. Judicial 
 procedure being an abomination to re- 
 spectable Chinese, their security in com- 
 mercial dealings is based as much upon 
 reason, good faith, and non-repudiation 
 as is that of western nations upon verbal 
 finesse in the construction of contracts. 
 
 Copyrighted by Newm.an Traveltalks ami Brown & Dawson, N. Y. 
 
 One of the niain business streets in Shanghai 
 
 6] 
 
Copyr!"hte<l by Xewman Traveltalks and Brown & Dawson, N. Y. 
 
 The Bund at Shanghai 
 
 Copyrighted by Underwood & Underwood, N. Y. 
 
 The French Quarter, Shanghai 
 
 [7 
 
Copyrighted by E. M. Newman 
 
 The Garden Bridge, a new steel structure, in Shanghai 
 
 Your representatives should be required 
 to study Chinese, and their progress 
 shoidd be tested by bi-weekly oral exam- 
 inations and monthly written tests. Those 
 showing aptitude should be encouraged to 
 higher Chinese studies and, as an incen- 
 tive to all, a bonus might be given those 
 who, by test examination, show that they 
 have attained a fixed standard. The 
 bonus given by some British firms some- 
 times amounts to $500. 
 
 The success of Europeans learning the 
 language can perhaps best be judged by 
 the statements of the Shanghai manager 
 of the British- American Tobacco Com- 
 pany. According to this statement the 
 comjiany has no fewer than sixty men re- 
 siding in the interior studying Mandarin. 
 In N orth China especially the European 
 travelers of this firm who are equipped 
 with a working knowledge of Chinese may 
 be encountered in the most-out-of-the- 
 way ])laces, j)ushing the business of the 
 firm in a way that would be impossible 
 without their knowledge of the language. 
 So useful has knowledge of the Chinese 
 language proved to be in the company’s 
 business that it stipulates in its contract 
 when engaging assistants in England or 
 8] 
 
 America that the man shall be required 
 within the first four years of service in 
 China to learn the language sufficiently 
 well to be able to transact business with- 
 out the assistance of an interpreter. 
 
 The Compradore 
 
 While personal contact with the Chi- 
 nese by your representative in the field 
 should be encouraged and facilitated in 
 every possible manner, and the study of 
 the language insisted upon in the case of per- 
 manent resident representatives, the most 
 important factor of your Chinese business 
 will be the compradore. There is no more 
 remarkable figure in the history of com- 
 merce than the compradore of China, who 
 discharges duties of large trust with al- 
 most uniform fidelity. In the early days 
 of European trade with China the com- 
 pradore was somewhat of a combined in- 
 terpreter and steward, to whom was com- 
 mitted the business of bargaining with the 
 natives on small matters, but by degrees 
 the compradore has grown in influence 
 until now he is practically indispensable. 
 
 Determination of a purchaser’s credit 
 is, in China, well-nigh an impossible task 
 to a foreigner. Of course, prominent, 
 active, and honest Chinese firms in the 
 
Treaty Ports have a standing and credit 
 known to all; but when the prospective 
 customer hails from the interior, as is of- 
 ten the case, the fixing of his reliability is 
 beyond the power of the ordinary foreign 
 trader. Because of this situation the com- 
 pradore exists in all foreign firms in China. 
 
 A Native Credit Man 
 
 Briefly, the compradore is the Chinese 
 manager and credit man of the firm with 
 which he is connected and the guarantor 
 of all native accounts. Any order for goods 
 countersigned by him is honored at once, 
 as such countersignature renders him re- 
 sponsible for payment on the due date 
 — if the purchaser fails to pay, the com- 
 pradore must satisfy the account. 
 
 Compradores invariably furnish cash 
 guarantees — the amount dependent upon 
 the firm’s turnover — which, as a rule, are 
 placed as fixed deposits, drawing interest. 
 
 in one of the fere gn banks. The account 
 is technically to be drawn upon by the 
 firm if the compradore refuses to pay any 
 account countersigned by him on which a 
 purchaser defaults. It is almost unheard 
 of to draw against it — the compradore 
 meets any calls from his own funds. In 
 addition to cash, the compradore furn- 
 ishes a bond, drawn by well-known and 
 wealthy Chinese, guaranteeing the firm 
 against loss. Even with the.se guarantees, 
 careful investigations of the man’s family 
 connections and standing among the Chi- 
 nese merchants are made before he is 
 taken on as coinjiradore. A man well 
 known to the local Chinese and of an old 
 merchant family will fairly gather up bus- 
 iness for his firm. Members of old official 
 families, even though very wealthy, make 
 poor compradores, as some firms have dis- 
 covered, much to their disadvantage. 
 They have no intimacy with the Chinese 
 
 Copyrighted by Newman Traveltalks and Brown & Paw.son, N. Y. 
 
 A street in the native city, Shanghai 
 
 [9 
 
Cojiyrighted by Xewman Traveltalks and Brown & Dawson, N. Y. 
 
 The Band and Government Buildings at Hong Kong 
 
 merchants, are not in sympathy with 
 them, are ignorant of their methods of 
 working, and rarely get any general busi- 
 ness — though sometimes they capture 
 Government contracts. 
 
 His Work Necessary 
 
 In a business functioning purely on a 
 cash basis, the compradore, theoretically, 
 is unnecessary. But if close investigations 
 should be made, it would be discovered 
 that the head clerk or other employee was, 
 in reality", acting as a compradore, but 
 furnishing cash to the purchaser instead 
 of indorsing his account. Of course, for 
 such advances a commission is exacted; 
 the compradore does likewise, though se- 
 cretly, for countersigning orders. From 
 the firm itself the compradore receives a 
 commission of 3^ per cent., more or less, 
 on all orders he certifies. 
 
 The compradore in some cases receive,® 
 from the firm a fixed salary, for which he 
 agrees to supply a Chinese staff, which 
 includes a customs clerk, an accountant, 
 an office boy, and a few coolies. 
 
 Much publicity has been given in the 
 newspapers to articles on China in which 
 the compradore system has been con- 
 demned as erecting and maintaining a 
 10 ] 
 
 barrier between the Chinese and foreign 
 merchants. The barrier undoubtedly ex- 
 ists. But the compradore system did not 
 bring it into being, nor is this system re- 
 sponsible for its continued existence. The 
 responsibility lies solely on the shoulders 
 of the inexperienced foreigner. He has 
 neither exerted himself to learn Chinese 
 nor has he endeavored to enter into the 
 life of the natives. Of necessity, the for- 
 eigner being ignorant of Chinese and the 
 native knowing no English, a go-between 
 was, and still is, essential. This go-be- 
 tween, the compradore, will exist so long 
 as the foreigner speaks no Chinese, and 
 until investigation of a Chinaman’s credit 
 is feasible. It seems fitting to mention 
 here, in passing, that much of the phe- 
 nomenal advanee of German trade in China 
 was due to the persistence with which 
 German merchants accommodated them- 
 ■selves to Chinese life, and their farsight- 
 edness in equipiiing their employees to 
 carry on business through the medium of 
 the Chinese language. 
 
 Preparing the Campaign 
 Handing over the sale of one’s products 
 to an established firm is often unsatisfac- 
 tory, especially so if the rights are en- 
 
Harbor of Hong Kong 
 
 Copyri;:hted by E. M. Newman 
 
 Street in Hong Kong 
 
 [11 
 
Native Shops in Peking 
 
 trusted to a firm of nationality other than 
 r)ne’s own. Tliere is always danger that the 
 market of similar goods from the factories 
 of the agency owner’s jnother-country will 
 not be aggressively attacked. Further, 
 the market often remains the jjersonal 
 market of the agency owner; and if the 
 manufacturer at any time desires to sell 
 his goods direct, or transfer the agency, he 
 at once di.scovers that he jnust again build 
 up a clientele. The customers will cling to 
 the old agency chief and accept goods re- 
 commended by him rather than the man- 
 ufacturers' j)roducts, unless, of course, 
 no similar ])roduct is produced anywhere 
 in the world. In addition, it is not always 
 easy to close with a good agency — some 
 comj^etitor may already have made con- 
 nections. Handing the sales rights over 
 to an agency with a poor following damns 
 one’s goods from the start. 
 
 d’he best arrangement is the joint estab- 
 lishment by several non-competing man- 
 ufacturers of an office at Shanghai, that 
 12 ] , 
 
 wonderful em{)orium of foreign trade and 
 microcosm of western civilization dumped 
 down inside the entrance gates of the most 
 conservative people in the world — the 
 threshold of China. Branches may be 
 opened at other ports as found necessary. 
 There are forty-eight treaty ports, where 
 foreigners are privileged to reside for 
 business ])urposes under the jurisdiction 
 and protection of the law courts of their 
 resj)ective nationalities. The jmincipal 
 treaty ports in the order of their import- 
 ance, are: Shanghai, Tientsin, Hankow, 
 and Canton. These four treaty ports are 
 the centers of foreign trade activity. 
 
 Experienced Men 
 In selecting a corporation or branch 
 office staff, efforts should be made to ob- 
 tain men who have had Chinese expe- 
 rience, have Chinese friends, understand 
 their language and customs, and have a 
 broad general education. If they have in 
 
addition a knowledge of foreign languages 
 that will be an asset of inestimable value. 
 
 The ideal system for American trade 
 with the Orient, and similar to that fol- 
 lowed by the British merchants who have 
 proven so successful in their trading ven- 
 tures with the Oriental nations, is a com- 
 bination buying Oriental produce and 
 selling American goods. Such a combina- 
 tion could be formed by the association of 
 American manufacturers of non-compe- 
 ting lines, who desire Eastern trade, with 
 American manufacturers using Oriental 
 products. Such an organization should 
 consist of a manager, assistants, an export 
 department, and an import department. 
 Both the export and import departments 
 should have trained staffs. 
 
 The complete control of affairs must be 
 in the hands of the manager and all deal- 
 ings with Chinese done by him, or by 
 assistants deputed to act for him. Of 
 course, for expert advice he would call on 
 his trained import and export staffs as 
 occasion demanded. Terms having been 
 . made by the manager for either purchases 
 or sales, and such terms having been 
 accepted by the native merchant inter- 
 ested, the export or import department, 
 as the case might be, would arrange for 
 receipt or delivery, supervise it to insure 
 
 compliance with contract terms, insure 
 proper packing, etc. 
 
 Such an organization as outlined above, 
 with a manager known and liked by the 
 Chinese, acquainted with their views of 
 life, and conversant with their language 
 and customs, would have a pro.sperous 
 existence, especially if its compradore be 
 prominent in the mercantile community. 
 
 Importance of Trade AIarks 
 
 The manner in which goods are wrapped 
 or marked plays a most important part 
 with the average Chinaman. He has 
 centain symbols which he considers un- 
 lucky, and if you have a box of matches or 
 bottle of perfume or any other article 
 “unluckily” branded he cannot be per- 
 suaded to accept it even as a gift. Simi- 
 larly, there are many subjects which he 
 considers lucky, and he exhibits a marked 
 weakness for certain colors, being willing 
 to purchase the goods bearing these lucky 
 emblems and favorite colors whether he 
 is very much in need of the articles or not. 
 In a country where every bird has its 
 heraldic station firmly fixed, and where 
 every natural object possesses a symbolic 
 meaning, the selection of an appropriate 
 trade mark must be the work of one who 
 has an intimate knowledge of the country. 
 
 Copyrighted by Newman Traveltalks and Brown & Dawson, N. Y. 
 
 On the Yangtse Kiang at Hankoio 
 
 [13 
 
Copyrighted by E. M. Newman 
 
 Chinese salt junks on the Yangtse Kiang 
 
 Of inmiense importance in the Chinese 
 trade are the questions of trade-marks — 
 called “chops” in China — , packing, and 
 advertising. 
 
 The natives who eventually consume 
 the foreign traders’ products are, to a 
 great extent, illiterate. In purchasing their 
 needs they invariably call for “Gold Fish,” 
 “Cloth,” “8 Fairies Oil,” “White Horse 
 Dye,” etc. rather than “Smith and Jones 
 Cotton Sheeting,” “Watson’s Oil,” or 
 “Williams Dye.” They identify an article 
 by its label (“chop”) and any commod- 
 ity’s quality is made known through the 
 country, from mouth to mouth, by such 
 words as “Gold Fish Cloth wears very 
 well;” “1 dyed some cloth two years ago 
 
 with White Horse Dye and the color is 
 still bi’illiant etc. The name of the manu- 
 facturer is immaterial, being unknown to 
 the purchaser, and “chops” are so valu- 
 able that foreign merchants are insistently 
 urging the Chinese Government to enact 
 more stringent legislation against their 
 being j)irated. They also follow up any 
 infringement of their “chops,” sometimes 
 maintaining a staff of speeial employes to 
 ferret out eases of infringement. A “chop” 
 that has gained a footing insures a con- 
 tinued and constantly increasing sale of 
 the commodity bearing it. Vice versa, a 
 bad “chop” means reduced sales and 
 eventual extinction of the product it 
 covers. 
 
 Coj)yri"hted by Newman Traveltalks and Brown & Dawson, N. Y. 
 
 One of the mining towns on the Yangtse Kiang, in the center of the iron and coalfields 
 
 14 ] 
 
In the past there have, not infrequently, 
 been cases where American merchants 
 have received good orders from Chinese 
 merchants and, though the goods supplied 
 were of high quality, have failed to obtain 
 further orders because of the bad condi- 
 tion in which the goods reached the pur- 
 chaser. Cases arrived broken — sometimes 
 barely clinging together — articles were 
 damaged, etc. The American trader had 
 packed the goods as he packed for his 
 domestic trade, overlooking the fact that 
 transshipment from train to steamer, 
 landing from steamer, and transport to 
 destination in China (perhaps by native 
 boat, wheel-barrow, or porter) demanded 
 stronger and more careful packing. 
 
 It should be the policy of American 
 merchants to err on the side of making 
 their packing too solid rather than the 
 contrary. Large cases (say 2}/^ ft. by 2)^ 
 ft. by 4 ft.) should be of ^ inch board for 
 the sides and 1 inch for the ends, bound 
 around the ends — and perhaps the middle 
 — with hoop iron. The ends should further 
 be strengthened by strips 4 by ^ inches 
 
 nailed on the outside iu the form of a 
 frame, thus making the ends, where the 
 side boards of the case are attached, 
 inches thick. The sides of the case should 
 be just flush with this outside frame. The 
 stock used should be good pine and not 
 old discarded lumber. 
 
 Piece goods were packed previous to the 
 war in tin-lined cases. Shortage of tin 
 led to the tin lining being omitted, much 
 to the dissatisfaction of the Chinese mer- 
 chants. It is most probable that the old 
 form of packing will be I’esumed in the 
 near future. 
 
 Size of Cases 
 
 The Chinese usually pack their prod- 
 ucts in medium sized packages and bind 
 two, three, or more together with split 
 rattan around the sides and ends to form 
 one package of any size desired. It might 
 be well for American business men to pack 
 their cargo destined for China in a similar 
 manner, binding the packages together, 
 to form others of the desired size, by 
 strong wire around the ends and sides. 
 
American compound in Tien Tsin 
 
 In carrying such jjackages to the interior, 
 where in some places only small packages 
 can be transported, the question of con- 
 veyance would be simplified. Of course, 
 for certain goods for which custom has 
 decreed a certain form and size of case, 
 such as piece goods, the standard package 
 must be adhered to. Merchants must, 
 howe^’er, take special care that their pack- 
 ages are strong. No business can be re- 
 tained in China if goods are poorly packed. 
 Let merchants bear this in mind ! 
 
 Extent of Advertising 
 
 Advertising is a relatively new idea in 
 China but is making immense strides 
 forward. The British-Anierican Tobacco 
 ('ompany is the most extensive advertiser 
 anti its posters, electric signs, and special 
 bill boards, are found in the interior, and 
 are scattered along all the roads leading 
 to the treaty ports where foreigners carry 
 on business. Japanese medicine firms, the 
 American Standard Oil Company, Asiatic 
 Petroleum Company, Singer Sewing Ma- 
 chine Company, and others also carry on 
 an extensive campaign by posters. 
 
 All the firms mentioned above adver- 
 [IG 
 
 tise extensively in the Chinese newspapers, 
 and large native firms at the treaty ports 
 also avail themselves of this method of 
 advancing their business. Newspaper ad- 
 vertising rates are not heavy. 
 
 For a new firm in China, newspaper 
 advertising should be resorted to, and if 
 sjiecial articles, such as soap, toilet goods, 
 medicines, stockings, etc., are to be carried, 
 a special poster scheme should be inaugu- 
 rated. Posters to be effective must be 
 iiitelligilile to the masses i. e., explain 
 themseb es by the pictures they bear, and 
 draw attention to the chop ” of the goods 
 advertised. The distribution of Chinese 
 calendars of glazed paper, of poster de- 
 sign, is an excellent and effective means 
 of ad\’ertising. 
 
 Customs and Shipping Documents 
 
 Foreign merchants entering the China 
 trade almost invariably meet with diffi- 
 culties because of their ignorance of the 
 Chinese Customs routine and regulations. 
 Unlike the United States, China levies 
 both an export and an import duty. Na- 
 tive cargo from one treaty port to another 
 treaty port in China pays export duty at 
 
the first port and import duty (one-half 
 export duty) at the second. If it is shipped 
 abroad within one year, in its original 
 packages, or in packages repacked under 
 Customs supervision, the half duty is re- 
 funded. Foreign goods are liable to one 
 duty payment only and are then duty- 
 free if sent to any treaty port in China. 
 If for the interior, an additional half duty 
 must be paid. Duty on native cargo is 
 assessed according to rates given in the 
 so-called “Export Tariff.” Foreign goods 
 are covered by the “Import Tariff.” 
 
 Customs and Shipping Documents 
 
 As an aid to those who anticipate ex- 
 ploiting the Chinese market, a short out- 
 line of the Chinese Customs method of 
 procedure is given below: 
 
 There are several forms of a prescribed 
 type used by merchants in their dealings 
 with the Customs. They are: Import Ap- 
 plication, Export x\pplication. Re-export 
 Application, Transshipment Application, 
 Transit Pass Application, Application for 
 Permission to Re-Pack, Foreign Goods 
 Pass, Foreign Goods Sub-Pass, and Native 
 Goods Pass. All of them may be obtained 
 free at the Custom House, with the excep- 
 tion of Foreign Goods Pass, Foreign 
 Goods Sub-Pass, and Native Goods Pass; 
 but merchants as a rule have supplies of 
 these forms printed themselves to save 
 trouble of applying for them at the Cus- 
 tom House. Foreign Goods Passes, of a 
 prescribed form, must be provided at the 
 merchant’s expense. They are sold in 
 bound books of 100 or 200 by Shanghai 
 printers. Blank Foreign Goods Sub- 
 Passes and Native Goods Passes are sold 
 at the Custom House in books of 50; the 
 price is nominal and merely covers their 
 cost. They are made of a special kind of 
 paper, similar to bank check paper, to 
 prevent unauthorized alterations being 
 made. 
 
 A merchant having foreign cargo to 
 import, once the steamer bearing it ar- 
 
 rives in port, carefully fills in an Import 
 Application, attaches his Bill of Lading 
 thereto (invoice also if the goods pay ad 
 valorem duty), and sends same to be de- 
 posited at the Import Desk in the Custom 
 House. This application, after certain 
 formalities that do not concern outsiders, 
 is sent by the Customs authorities to the 
 wharf or warehouse where the cargo has 
 been landed under Customs supervision 
 and examination is effected. Usually an 
 employee of the firm interested is sent to be 
 present at the examination, but this is not 
 absolutely necessary, though it is to be 
 recommended . 
 
 Examination completed, the applica- 
 tion, still in Customs custody, is returned 
 to the Custom House, where a Chinese 
 “Duty Memorandum” is prepared. This 
 memorandum, indicating duty due, is 
 handed to the merchant, who goes to the 
 Customs Bank — near or in the Custom 
 House — and, paying the amount called 
 for, exchanges it for a bank receipt. This 
 bank receipt the merchant deposits at the 
 Import Desk. In a short time, as soon as 
 checking can be effected, the Bill of Lad- 
 ing is returned, sealed and signed, and it 
 is valid to exchange at the wharf for his 
 goods. Merchants receive all documents 
 from the Customs at a distribution office 
 in the basement of the Custom House. 
 They hand in documents at places in- 
 dicated. 
 
 Sub-Pa.sses 
 
 Immediately on receipt of the sealed 
 Bill of Lading the merchant or his repre- 
 sentative, at the Import Desk, must make 
 an additional copy of the Import Appli- 
 cation, an absolutely true copy of the 
 document as it then appears, fill in a sim- 
 ilar copy in his Foreign Goods Pass {i.e., 
 in the book of Foreign Goods Passes, 
 which must be numbered consecutively), 
 and deposit both at that desk. The same 
 day, or the next day at latest, the Foreign 
 Goods Pass Book will be returned with 
 
 [17 
 
the Pass signed and 
 sealed. As he desires 
 Sub - Passes — docu- 
 ments for small lots 
 of cargo, given to the 
 purchaser as a proof 
 of duty payment 
 and as certificates 
 insuring against a 
 second levy of duty 
 if the goods are re- 
 exported to another 
 Treaty Port, as they 
 usually are — he fills in Foreign Goods Sub- 
 Passes, makes corresponding entries in the 
 Foreign Goods Pass Book under the proper 
 Pass, and hands in both at the Custom 
 House. When returned, signed and sealed, 
 each Sub-Pass is a proof of duty payment 
 for the cargo covered by it. The Pass itself 
 will have a similar amount written off. 
 
 For native goods the procedure is the 
 same except that the Passes are not bound 
 in book form and Sub-Passes are not is- 
 sued. The Pass serves, for native goods, 
 the same purpose as do Sub-Passes for 
 foreign goods, and are used in the same 
 way. For this reason merchants usually 
 make out from five to ten passes, totalling 
 the entire consignment, when importing 
 
 native goods, rather 
 than one pass for the 
 entire amount. 
 
 For Re-Export, 
 Permit to Re-Pack, 
 Application for 
 Transit Pass (docu- 
 ment covering con- 
 veyance for foreign 
 goods to the interior 
 and insuring their 
 exemption from Li- 
 kin and Native Cus- 
 toms dues en route) and Transshipment, 
 the routine is simple and calls for no com- 
 ment. The documents, stating full par- 
 ticulars, are deposited at the desk dealing 
 with them, i.e.. Re-export Desk, Transit 
 Desk, etc., and instructions given to the 
 merchant save him from going wrong. In 
 thecase of Re-exports,however, proper Sub- 
 Passes, in the case of foreign goods, and 
 Passes, in the case of Native Goods, must 
 be attached to the application as a proof of 
 duty payment or duty will be levied a sec- 
 ond time. 
 
 Cash Drawbacks 
 
 Foreign Passes and Sub-Passes are valid 
 for three years for cash drawback, if cargo 
 
 Copyrighted by Newm.-iii Trnveltalk.s and Brown & Dawson, N. Y. 
 
 Caris like these are used in China for trajis-porting 
 small shipments in the cities 
 
 Copyrighted by Newman Travelt.aiks and Brown & Dawson, N. Y. 
 
 The South Manchurian Express. This is the finest train in the Far East, connecting with the Trans- 
 Siberian Railway at Harbin. The appointments of this train are not excelled anywhere. 
 
 The sleepers are all in compartments, each accommodating two persons. There is 
 hot and cold running water in each compartment. 
 
 18 ] 
 
Copyrighted by Newman Traveltalks and Brown & Dawson, N. Y. 
 
 Natives traveling fourth-class in China 
 
 is re-exported abroad; they are valid for- 
 ever for exemption from further duty col- 
 lection in China on cargo covered by 
 them. Native Passes are valid for one 
 year, as a general rule. For raw silk, tea, 
 straw braid, feathers, and a few other arti- 
 cles, they are good for a longer period — 
 eighteen months to two years. 
 
 A Customs rule which merchants must 
 never forget is that demanding an indivi- 
 dual number, alongside the mark, on each 
 package bearing the same mark. Without 
 this the right to cash drawbacks is for- 
 feited. Chinese refuse to buy cargo that 
 does not enjoy the privilege of cash draw- 
 back — this is a further reason for bearing 
 the foregoing rule in mind. 
 
 There is a great amount of red tape in 
 the Chinese Customs and merchants’ ap- 
 plications are often held up because of 
 slight clerical slips. Such applications are 
 collected at the Wrong File Desk. When- 
 ever delay is experienced, it should be the 
 invariable rule for the merchant to in- 
 quire at the Wrong File Desk. He will, 
 most probably, find that some slight error 
 has caused the delay and, once corrected, 
 the applications will be passed through 
 smoothly. 
 
 In almost all lines of foreign goods the 
 
 Chinese market is short of stock. The 
 commodities formerly furnished by Ger- 
 many, Austria, and Belgium are in most 
 urgent demand. Belgium will, it is evi- 
 dent, be in no position to resume its China 
 trade for some years owing to the destruc- 
 tion of its mills and factories, while Ger- 
 many and Austria will experience diffi- 
 culty in obtaining raw materials and will 
 be short of tonnage. 
 
 Articles Urgently Needed 
 Briefly enumerating the main items, 
 the yearly sales of Austrian, German, 
 and Belgian products normally reached, 
 approximately, the following totals: Iron 
 and mild steel bars, 17,000 tons; iron 
 and mild steel cobbles (wire shorts), 
 18,000 tons; iron and mild steel hoops, 
 1300 tons; iron and mild steel nail 
 rods, 3,000 tons; iron and mild steel 
 nails and rivets, 3,000 tons; railroad rails, 
 4,500 tons; iron and mild steel sheets 
 and plates, 9,000 tons; enamelled ware 
 (almost entirely Austrian), $500,000; win- 
 dow glass, 225,000 boxes of 100 square 
 feet each; cotton hosiery, 500,000 dozen 
 pairs; miscellaneous machinery and ma- 
 chine parts, $700,000; needles, 4,100,000 
 mille; paper of all kinds, 14,000 tons; 
 railway materials (other than ties, loco- 
 
 [19 
 
motives or coaches), $500,000; stoves, 
 $100,000; rock candy, 3,560 tons; tele- 
 graph and telephone materials, $200,000; 
 tinfoil, 600 tons; and locomotive and 
 railway coaches, $1,000,000. Aniline dyes 
 totalled $1,000,000, and artificial indigo, 
 12,500 tons, worth $5,000,000. 
 
 During the war Japan has been exerting 
 every effort to extend her markets in 
 China. In most of the lines mentioned 
 she has made great headway, due pri- 
 marily to proximity to the market and 
 shortage of tonnage at her competitors’ 
 disposal. But the goods supplied have, in 
 many instances, not given entire satisfac- 
 tion and her present commanding posi- 
 tion in the China field is far from secure. 
 
 New Bank for Asia 
 
 With a view to active participation in 
 the development first of the northern part 
 of China, the Asia Banking Corporation 
 was recently formed under the laws of 
 New York State with a capital of $2, ()()(),- 
 000 and a surplus of $500,000, all of which 
 has been paid in. Among the stockhold- 
 ers of the new company are the Guaranty 
 Trust Company of New A"ork; the Bank- 
 ers Trust Company; the Mercantile Bank 
 of the Americas; the Anglo and London, 
 Paris National Bank, of San Francisco; 
 the First National Bank, of Portland, 
 Ore.; and the National Bank of Com- 
 merce, of Seattle, Wash. 
 
 The Far Eastern territory where the 
 Asia Banking Corporation contemplates 
 centering its activities comprises mainly 
 the northern and part of the central prov- 
 inces of China, Manchuria, and Southeast- 
 ern Siberia. It covers an area of about 
 2,800,000 scpiare miles, with a population 
 of ajiiiroximately 340,000,000. Eighty per 
 cent, of the foreign trade of the entire 
 Chinese nation is transacted through the 
 seaports of this territory. 
 
 Mr. David Z. T. A ui, Honorary Secre- 
 tary of the Commercial Commissioners 
 from the Republic of China, addressing 
 20 ] 
 
 the San Francisco Chamber of Commerce 
 dnring the visit of the Commission to this 
 country, said: 
 
 In a few of the important trade centers of 
 China, such as Shanghai, Hankow, Tientsin, and 
 Canton, we would like to see permanent exhibits 
 established where American manufactured goods 
 could be seen, and experienced men placed in 
 charge who could give complete information. We 
 would tike to see constantly what goods you are 
 manufacturing, and also the progress you are 
 making. Not only should you have these perma- 
 nent exhibits, but you should have catalogues 
 printed in Chinese for distribution, and officials in 
 attendance ready and competent to impart full 
 information. You could tell us in what cities in 
 America the various goods were manufactured, 
 and the prices both wholesale and retail. You 
 could also inform us how you pack them for ship- 
 ment, and, after we have purchased them, how 
 best we can take care of them and procure the 
 best results. 
 
 In this connection it may be mentioned 
 that the Japanese in Antimg have erected 
 a commercial museum in that city where 
 actual exhibits of Japanese manufactured 
 goods can be seen by potential Chinese 
 purchasers, and where exhibits illustrative 
 of the agricultural and mineral products 
 of the district can be shown to prospec- 
 tive Japanese settlers and investors. 
 
 Mr. Yui also said: 
 
 We would like to see fleets of merchant ships 
 coming and going between your great republic 
 and ours, carrying your manufactured goods into 
 our country, and returning ladened with our raw 
 materials. Another suggestion is that China es- 
 tablish in your countr}" as well as ours a perma- 
 ment Bureau of Information. The countries of 
 Europe and Japan send as their agents a large 
 number of business representatives and mer- 
 chants to tour from city to city in China. By 
 this means, and through judicious advertising and 
 sample exhibits they force their goods upon the 
 attention of the people, and thus readily gain a 
 market. 
 
 American manufacturers should regis- 
 ter their trade marks both in China and 
 Japan for goods seeking markets in China. 
 
 What Americans Should Avoid 
 
 We must make goods that will please 
 the Chinaman and not necessarily our- 
 selves. If we are selling print goods, w'e 
 
Branches of the Asia Banking Corporation are established, or are about to be established, 
 in the cities indicated by the circles 
 
 [21 
 
 
Along the water front of Vladivostok 
 
 must make tliem of Chinese designs, even 
 though to our mind our designs are more 
 handsome. Many a tale is told of Amer- 
 ican obstinacy in the Chinese market. A 
 representative of an Ohio hardware firm 
 obtained a trial order in China for $5,000 
 worth of screws, on the condition that 
 they be wrapped in blue paper. The 
 company cabled that their goods were al- 
 ways "wrapped in brown paper and that 
 they could not alter their practice. The 
 order, perhaps the entering wedge of an 
 enormous business, went to Germany. 
 The archives of our consulates are full of 
 similar examples. 
 
 Another bad practice is the sending of 
 all manner of descriptive literature with- 
 out any reference to price. If the product 
 is used in China, the all important factor 
 is how much it will cost the local importer; 
 and if the manufacturer’s letter gives that 
 information, i.e., current prices f. o. b., 
 American port and approximate shipping 
 and other charges to the distribution 
 centers of Hongkong or Shanghai, the 
 local merchant is in a position to know at 
 once if business is possible. 
 
 It may be remarked that very generally 
 American firms when stating prices quote 
 an f.o.b., Atlantie or Pacific coast port 
 22 ] 
 
 price. They should remember that the 
 prospective importer is interested only in 
 the co.st of the goods delivered, and there- 
 fore the exporter, whenever possible, 
 should attempt to give that information 
 as fully as possible. 
 
 It is useless to wait for demand to 
 stimulate supply. In most cases the de- 
 mand must be created, especially in such 
 matters as installations of machinery and 
 industrial undertakings. 
 
 Incorporation in China of American 
 Companies 
 
 A bill has been introduced in Congress 
 which provides for the Federal incorpora- 
 tion of companies engaged exclusively in 
 foreign trade. It is designed to meet the 
 needs of foreign investors who are be- 
 wildered by our numerous State incorpo- 
 ration laws. The advent of such a law 
 will be of particular importance to inter- 
 ests incorporating for the ]nir[)ose of es- 
 tablishing large enterprises such as rail- 
 ways or other public utilities abroad, the 
 capital for which is raised in part in the 
 foreign country affected. The require- 
 ments of such a corporation will be that 
 it devote itself exclusively to foreign trade, 
 
Copyrighted by Newmao Traveltalks and Brown & Dawson, N. Y 
 
 The Plaza at Dairen, Manchuria 
 
 and that a majority of the incorporators 
 and directors be American citizens. 
 
 The principal object of this law is to 
 meet the peculiar situation existing in 
 China, where foreigners are limited to 
 treaty ports in actual trade operations. 
 Incorporation in these ports is usually 
 effected under the laws of the predomi- 
 nant nationality, although it is permissi- 
 ble for corporations whose capital and 
 personnel are of one nationality to in- 
 corporate under the laws of another na- 
 tion. Many American companies there- 
 fore incorporate under the Hongkong 
 Corporation Act, — a very liberal law in- 
 volving only a nominal stock tax. One 
 objection raised against this practice has 
 been that American-manned and Ameri- 
 can-financed companies must transact 
 their legal business in British courts, and 
 must look to British officials for diplo- 
 matic support. 
 
 No present American State incorpora- 
 tion law meets the requirements of China, 
 and it is an unfortunate fact that the 
 Chinese rather distrust our State charters. 
 
 The Chinese would, on the other hand, 
 welcome companies operating under a 
 charter granted by our Federal govern- 
 ment, and good enterprises incorporated 
 in this manner might find it much easier 
 than in the past to raise additional capital 
 in China for the furtherance of their plans. 
 
 Combinations Successful in China 
 
 Before the war German and British 
 engineering combinations were highly suc- 
 cessful in China, and in three years se- 
 cured engineering contracts in that coun- 
 try valued at $450,000,000. One German 
 combination included forty-seven engin- 
 eering firms, in addition to Krupps, and 
 there were also represented in the organi- 
 zation two shipping houses, one marine 
 insurance firm, one life insurance com- 
 pany, and one fire and building insurance 
 company. The combination had branches 
 with one or more Chinese, who spoke Ger- 
 man, in charge at all important Chinese 
 cities. 
 
 While American manufacturers were 
 endeavoring to sell their products individ- 
 
 [23 
 
ually, the Germans began by saving the 
 Chinese trouble. Thus, if there was a 
 mining venture, the representative of the 
 allied German manufacturers would go to 
 the local governors or parties interested 
 and offer to take the whole job, i.e., sink 
 the shafts, develop the mines, put in all 
 the equipment, build the railways or boat 
 lines, erect power plants and equip them, 
 put up workmen’s dwellings, and finance 
 the undertaking. Such an organization was 
 prepared to sell a Chinaman a five-cent 
 handsaw or develop an entire province. 
 
 The Anglo-Chinese Engineers Associa- 
 tion is a similar organization, made up of 
 a strictly non-competing group of 75 con- 
 cerns making machinery, railway supplies, 
 engineering material, and tools. This or- 
 ganization has branch houses in charge of 
 Chinese speaking European assistants at 
 selected ports and industrial centers, with 
 a managing director in Peking. In large 
 cities such as Peking, Hankow, and Can- 
 ton it has competent mechanical engi- 
 neers with Chinese experience, while the 
 selling staff includes men with intimate 
 knowledge of the localities in which they 
 are employed. 
 
 “Slow Siege” the Better Plan 
 
 American goods will sell in China if they 
 are given equal opportunity with the out- 
 put of other nations. The American com- 
 munity in Shanghai has more than dou- 
 bled in the last few years, and there is a 
 
 larger variety of American goods visible 
 in the shops than before. But the na- 
 tional fault of Americans in their attempt 
 to secure foreign trade is impatience. In 
 the domestic market we are accustomed 
 to capture trade by rapid advances, by 
 brilliant assaults. In the foreign field, and 
 especially in China, the slow siege is the 
 better plan. 
 
 Dr. Wu Ting Fang, former Minister 
 to the United States, remarked upon this. 
 He said: 
 
 An American is apt to be in too much of a 
 hurry. He should make up his mind that if he 
 has an article that the Chinese want, they will 
 buy it eventually, but that it will take a little 
 longer to introduce his goods in China than in the 
 United States; but he should also remember that 
 once he gets his article established it will continue 
 to sell for a long time, and indeed will never be 
 displaced until another article of the same kind, 
 but of conspicuously higher merit, and cheaper, 
 is introduced. 
 
 The Chinese nature is not much different 
 from that of other human beings. What at first 
 is a luxury soon becomes a necessity in China, as 
 elsewhere. I have seen this demonstrated in 
 Shanghai. A young merchant from the interior 
 comes to Shanghai for the first time. He is taken 
 about and entertained by the local merchants. 
 He is introduced to some of the delights of the 
 modern civilization. After that he is never the 
 same man. He longs for luxury once he has 
 tasted it. He likes the cigarettes; he hkes the 
 scented soaps, the wines, the perfumery, foreign 
 clothes, automobiles, upholstered furniture. It 
 is largely beyond his reach because of its cost, but 
 as he begins to feel better financially he adds to 
 his stock of foreign introduced luxuries, and en- 
 joys them. 
 
 24 ]