This state of affairs continued for only a very short while, i.e., from about 1905, when there was a boom in imports at the close of the Russo-Japanese War, till 1911, when the revolution brought about a radical change in native banking. Apart from the political consequences, the Russo-Japanese War has had a very important bearing on trade and banking in this country. At the time when the banks and dealers had arrived at a modus vivendi practically with a view to restrict the volume of imports, exaggerated hopes were raised on account of the sudden termination of the Russo-Japanese War in a manner which was certainly unexpected. Merchants, both foreign and Chinese, were misled as to the capacities of the Manchurian market; it was thought, with some reason no doubt, that a province of nearly a million square miles and possessing vast tracts of the most fertile land, should be able to consume enormous quantities of foreign goods. Such reasoning left out of calculation the fact that, although the province was huge, it was very sparsely populated; nearly half the area was still under Russian control, the significance of which was that foreign trade was as impracticable in that region as it was when the whole province was under the domination of Russia. Even these exaggerated hopes could not have brought about a boom in import trade, but for the heavy competition among merchants of the different nationalities in this country. It was then a race between all nations to capture as much of the new trade as possible; each national sent out huge orders for goods for prospective sale in the Manchurian provinces and thus the market was overflowing with cargo. The Chinese were also in the swim; in all matters of business they generally blindly follow the foreigners. Naturally they shared in the hopes of the foreigners about prospects in the Eastern provinces. Luckily for trade there was a rise in exchange owing to causes which had nothing to do with the position in China; and the advantage of having to pay less silver than usual for the same gold-priced goods was specially apparent to the Chinese dealer. As I have stated already, the banks had already begun to do business, the original dealers performing only the functions of cargo brokers. At that time, they took in the bait, the result being a further addition to their already heavy burden of goods. It is well known how the Manchurian market proved to be thoroughly disappointing, and how in 1907 the imports dropped nearly to half the total of the previous year.

Although the position of currency and banking has been detrimental to commerce for a long while, it was never so seriously felt as after the debacle of the Manchurian boom. Apart from currency there were schemes for the reform of banking galore; but the native dealers or bankers were not in a mood to listen to any schemes of reform in their then state of affairs. The dealer had already been playing second fiddle to the banks and at that time his occupation was gone, for all practical purposes. The native banks absolutely refused to grant any orders to dealers except for such of them as were practically in their employ. By this action they alienated the support of two parties; the rich dealer who had wealth enough, but whose capital was tied up for the moment in goods, and the poor man who wanted to profit out of the sale of goods but could not get credit in the shape of a native order. In other circumstances, it is probable that not much importance would have been attached to this development; but as the native order had been recognized as the proper vehicle of trade, something had to be done to prevent any possible dislocation. What really happened was that the system of native orders was continued by the richer dealers themselves opening banks, and the poorer dealers inducing men of straw to start banks and grant native orders. All the arrangements arrived at before the Manchurian boom thus came to naught; and for a while at least it looked as if things had adjusted themselves to changed conditions.