It would be a good opportunity for the reputable native banks, operating after the introduction of this reform, to reduce the extent of their responsibility with regard to native orders. There is no doubt that the best banks would take care not to incur undue risks, and to give orders only to dealers, who are thoroughly sound. But the principle of the bank itself doing business is not sound. Much of the financial difficulties that China has suffered from could either have been minimized or altogether done away with, but for this unsound principle. In the chapter on Banking in China I showed that the over-trading and the frequent debacles in trade in this country have been brought about by the native order system permitting the banks directly or indirectly to do business on their own account. If some method is adopted by which the native order could partake of the nature of a document of guarantee, it would serve the purpose of security to foreigners who deliver the goods on receipt of the native order, and would also be a guarantee that the native banks do not do business on their own account. For all practical purposes, such a procedure would change the order into a cheque drawn by a merchant on a bank and marked "good for payment" by the bank. This need not always mean that the merchant has enough funds in the bank to meet the cheque; but it would certainly mean that the bank is willing to give him credit - the security or any other transactions connected with the loan, if any, having nothing to do with the party receiving the cheque. Such an arrangement could easily be brought about by the simple mention of the name of the dealer, who presents the native order, in the order itself. In any case, it is not such a far reaching change; even to-day, the foreign merchants who deliver the goods on native orders look to payment not only to the bank issuing the order, but also to the dealer who presents it and takes delivery of the goods - as well as, of course, the compradore of the firm concerned. The mention of the names of the dealers in the orders would help the foreigners and foreign banks to understand the real credit of the dealers. Thus it may lead to an improvement in commerce, because the foreign merchants would then be able to grant more extended credit to dealers who are trusted extensively by the native banks. Much of the complaint in regard to the paucity of foreign trade in this country is based upon the lack of credit, and the impossibility of extending credit in this country, under present conditions. The best way of finding out the standing of a merchant is to know how well he is trusted by his own people and his bank. The arrangements that I propose would help towards this end.
Another advantage is the prevention of illicit transactions in native orders. At present, the native order contains a promise to pay a certain amount to the party that presents it on a certain date. Consequently, there is nothing to prevent the transfers of the orders to questionable parties, banks having no control as regards their ultimate use. If the name of the dealer on whose behalf the order is given is mentioned, and the order is not transferable, it would still be negotiable, while there would be a check on the irregular use of it. The chances of loss or default, both to the foreign merchant and the Chinese bank, are thus minimized, and trade would be more healthy and attended with less risks.