§ The Secretary of State for Foreign Affairs (Mr. Anthony Eden)
With your permission, Mr. Speaker, and that of the House. I should like to make a statement.
The House will be aware that British firms in China have, for reasons beyond their control, been facing for some time past increasing difficulties so far as trade and industry inside China are concerned. These difficulties are partly due to the increasing extent to which many of the functions formerly handled in China by private merchants and industrialists are being taken over by organisations operating on a State basis.
There are, however, other difficulties; for example, the increasing restrictions on the entry and exit of foreign staffs, arbitrary taxation demands and compulsion to retain and pay redundant labour. In these circumstances, many firms have been operating at a loss for a considerable period.
For these reasons, most of the British companies have reluctantly come to the conclusion that they can no longer operate satisfactorily inside China, and that the time has come to arrange for the disposal of their businesses. Many have already decided to apply for closure, custody, transfer, or lease of their various interests, as may be appropriate in each case.
There are likely to be many problems involved and, at the request of the China Association, acting on behalf of the firms concerned, Her Majesty's Government have presented a Note to the Central People's Government of China requesting that all the necessary facilities be made available to ensure that these problems are dealt with expeditiously.
Both Her Majesty's Government and the firms themselves remain convinced of the need and desirability for British trade with China to be continued. The suggestion has been conveyed to the Central 266 People's Government that the requirements of this trade under the changed conditions in China might perhaps be met by setting up a new form of organisation.
The firms feel that this could take the form of an association of representatives of manufacturers and overseas buyers, who would maintain direct contact with the appropriate Chinese authorities. This body could, in fact, act as a permanent trade organisation.
I should like to take this opportunity to pay tribute to the skill, tenacity and courage of the British Community in the Far East. During the course of their long and honourable connection with China they have contributed greatly to the prosperity of both countries, and much of the traditional goodwill and mutual understanding which has existed between our two countries is also due to them.
The firms concerned have recently had to face increasingly heavy losses, as I have explained, and have been, in many cases, unable to replace their foreign staffs in China, who, as may be imagined, have been working under conditions of acute strain and anxiety. In these circumstnces, it is difficult to see how the firms could have made any other decision.
Her Majesty's Government for their part fully realise the gravity of this step, but they feel that, having regard to the factors which I have outlined, they can only endorse the decision which the firms have taken.
§ Mr. H. Morrison
I am sure that all of us in the House will have heard the statement of the Foreign Secretary with very deep regret, but I am bound to say, from my own experience at the Foreign Office, and, not only that, but also from private conversations with British businessmen who have done business with China and who were anxious to continue it, that in all the circumstances I do not see for the time being what other conclusions could have been reached by them or the Government, but it is bad for East-West trade. It is really not our fault, and we are very sorry about it.
I do not know whether the right hon. Gentleman will give an assurance—I think he will—that the Government will keep a watch on the matter to see whether any new opportunities should occur, and also that the possibilities of 267 trade through Hong Kong will be maintained. Further, can he give any indication whether, as a result of what was known at the Economic Conference recently held in Moscow, any new possibilities of trade between us and China as well as the Soviet Union may arise?
§ Mr. Eden
I am obliged to the right hon. Gentleman. As regards the first question, this new organisation which the firms contemplate setting up is, we think, in all the circumstances, the best way of keeping the situation open so as to make use of any opportunities that may arise. Hong Kong will in no way be affected by the statement I have made, which, of course, concerns only British firms operating inside China.
As regards the results of the Moscow Economic Conference, we did immediately take up with the Chinese Government what we understood were to be the proposals of that conference, and we offered any facilities in our power to bring them to a result, but we have had no answer.
§ Mr. Bellenger
Has the right hon. Gentleman any idea of the value of the immovable assets in China belonging to British sources, and can he say what is going to happen to them under this new arrangement?
§ Mr. Eden
As I am sure the right hon. Gentleman realises, it is extremely difficult to give a correct estimate in the changed conditions which have taken place, but I think that an objective estimate will probably be something between £200 million and £250 million. Various negotiations have been proceeding on a private basis, and not the same kind of negotiations being conducted by each company, because the circumstances vary so largely. We only want to do all we can to help each company to retain its assets, but I fear that the right hon. Gentleman is quite correct, and that, whatever the result, the loss to British firms will be very serious.
§ Mr. J. Amery
Can my right hon. Friend say whether it is only a question of suspending the operations of British firms, or whether we are proposing to renounce ownership of the properties concerned?
§ Mr. Eden
It is more than suspending operations, I am afraid. The House will understand that some firms have been suffering very heavy losses, and I have a note of one which, in the last year alone, had to pay £100,000 in addition to £20,000 in taxation, and which was unable to get a single penny out of China. Clearly, British firms cannot continue on that basis, and the purpose of our Note is to see whether negotiations can be concluded to enable some of these firms to come to an arrangement which is not too unsatisfactory for them.
§ Mr. Ellis Smith
Am I correct in understanding that it is the desire of the Government to maintain the good will of the Chinese people and, if so, is any liaison officer or representative of the Government to sit on this new trading organisation? Is the right hon. Gentleman aware that those of us who have been engaged on millions of pounds worth of contracts for China and live in a country to which this means so much are desirous that the very best possible relationship with China should be resumed as soon as possible?
§ Mr. Eden
Of course we are desirous of that trading relationship, but I think the hon. Member will agree it is pretty heavy work for our own people when we have done all we can, for instance, to take up the offers of the so-called Moscow Economic Conference and we do not even receive an answer. Trade is a two-way traffic and, if people do not answer one's communications, one cannot get very far.
§ Sir H. Williams
Does my right hon. Friend not think it was a fundamental mistake that, as a result of pressure from the party opposite, we abandoned our rights in the Treaty ports some 10 years ago?
§ Mr. Robens
Could the right hon. Gentleman use his influence with the Conservative Central Office to prevent this being described as a "scuttle from China," as was the case with Abadan?
§ Mr. Profumo
Would my right hon. Friend say a little more about the restrictions to which these firms have been subjected? Could he explain to us the phrase he used, "compulsion to retain and pay redundant labour"?
§ Mr. Eden
Many of these firms, of course, operate their own factories in China, and when they cannot obtain raw materials they cannot employ labour; yet they are compelled to continue to meet the whole wages bill as if they were still obtaining the raw materials to keep their factories going. That is only one of many examples to show that there was no alternative to an event which I regard as a tragedy for both China and Britain.
§ Mr. Harold Davies
Is the right hon. Gentleman aware that on both sides of the House all of us who have been able to listen to his report felt that quite a moderate tone was employed in this reply to the Chinese situation? In view of that, will he do his utmost to encourage the Chinese to establish here in London a trading organisation? Is the right hon. Gentleman aware that Mr. Nan Han-chen, to whom a number of us spoke at the Moscow Conference, and the head of the People's Bank of China are very desirous of establishing the maximum amount of trade with the British people if we can discover a formula to work in with the new situation in China?
§ Mr. Eden
I have already assured the House that we want trade with China, subject, of course, only to the limitations 270 to which we have all agreed in respect of strategic materials in view of the situation in Korea. The hon. Member must understand that I do not think we are to blame for this. We have our representative in China, but the Chinese have no representative here, and when our representative in China tries to follow up the alleged agreements of the Moscow Conference he simply does not receive an answer to his communication. That is not our fault. The blame lies squarely on the shoulders of the Communist administration in China.
§ Sir I. Fraser
Ought we not to try to learn a lesson from the past for the future and avoid this kind of thing happening in other parts of the world, following upon India, Burma and Abadan, so that what remains of British trade throughout the world may not be further prejudiced?
§ Mr. Shinwell
Do I understand the right hon. Gentleman to indicate that if this proposed trading corporation in China required Governmental assistance, financial or otherwise, it would be made available, because there is always the possibility of a compromise being reached between ourselves and the Chinese Government at a later stage and we ought to keep the field open?
§ Mr. Eden
The corporation is being set up at the suggestion of the firms themselves. We thought it the best way in which the situation can be handled, and we have told them that we would give them any assistance in our power. But I must repeat that we are being completely obstructed in any attempt to open this trade at the present time. The House ought to understand that.