10 DECEMBER 1937, Page 46


I wish I could hold out solid comfort to readers who have inquired about their holdings of Chinese customs loans. Until the outbreak of hostilities these loans were the touch- stone of China's credit, their service having not merely been regularly met but covered, at any rate in recent years, by a large margin of revenue. Last year, against the annual interest and sinking fund service requirements of roughly £4,600,000, the receipts of the Maritime Customs Administration arnounted to the equivalent of over £17,000,00o. That was a very strong position and was rightly reflected. in a high valuation of the bonds. Since July the catastrophic fall in market prices has measured the market's growing fear that even if the receipts themselves continue to cover the loan service, the Japanese military group may seize control of the Customs Administration and either stop or interfere with payments.

Here is a political problem, to which, I am afraid, nobody can sup-ply the answer. In the light of Japan's past record since she began her exploits on the Asiatic mainland, I cannot feel other than sceptical about her willingness to co-operate, although she might consent to the remittance of the Chinese bond service in exchange for certain political concessions. In these conditions the customs loans, even at today's low prices, are clearly reduced to speculations on political ,possibilities. But so much is allowed for in present prices, that I would advise unfortunate holders to see things through.

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