611b.9417/256: Telegram

The Consul at Hong Kong ( Donovan ) to the Secretary of State

Referring to the Department’s telegram of July 24, 3 p.m. Exports of textiles manufactured in Hong Kong and China from Hong Kong to the Philippines amounted to 248,000 linear yards valued at 70,500 Hong Kong dollars in May and to 312,000 linear yards valued at 89,000 Hong Kong dollars in June. Similar exports of Japanese made textiles amounted to 1,338,000 linear yards valued at 233,000 Hong Kong dollars in May and to 3,527,000 linear yards valued at 760,000 Hong Kong dollars in June. Figures for July will be forwarded by August 3rd.11

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Six leading firms, comprising both local manufacturers and exporters, have been interviewed on this subject. Four of these firms were unable to give any explanation for this increase other than seasonal demand and improved business conditions.

The other two firms gave the following reasons:

Japanese textile manufacturers anticipating trouble in North China with a reluctant [resultant?] lack of demand in that area and a drop in prices.

Japanese textile manufacturers were short of ready cash and therefore disposed of their products at any price obtainable.

Increased vigilance of the customs authorities in North China has recently made smuggling of Japanese textiles very difficult.

Manila importers bought heavily due to fear of a Sino-Japanese war with consequent irregular sailings, higher freight rates, and higher insurance rates.

The new Imperial Preference requirements for cotton textiles will affect unfavorably the demand for Japanese textiles as reported in my despatch No. 593 of July 23, 1937.12

It is difficult to evaluate the reasons given but it is believed that all of them played some part in the recent increase. The volume of June exports is still below the figures for some months of 1936.

Stocks of Japanese textiles in Hong Kong are at present estimated at 3,006,000 linear yards.

Trade Commissioner Manila fully informed.

Donovan
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