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they desire. The refusal of the Post Office and other Departments of the Government to accept Chinese cins is of course justified by these not being legal tender. The example of such refusal if generally followed by such companies as "The Electric Traction Company of Hongkong" would tend to check the circulation in the Colony of the Chinese subsidiary
coins.
44
5. In that part of the Company's letter which follows the astounding quotation from The South China Morning Post" from which I have quoted the Board rightly recognise that it is not only the Chinese but also the Hongkong subsidiary coins that have fallen in value though they seem not to be aware of the main cause of this fall-the over-issue of Chinese coins by the Canton mint and the corresponding shortage of dollars from which these coins have, at any rate partly, been produced.
6. Of the two proposals of the Board the first, namely, that the Chinese coinage should be made illegal and abolished is not practicable. Chinese coins are not legal tender in long- kong and it is open to everyone to refuse to accept them, but to make it punishable by law to possess such coins or to offer or accept payments in them would fill the gaols of the Colony and at the same time would deal a serious if not mortal blow to the large traffic and petty trade which goes on between Hongkong and Canton. As Your Lordship is doubt- less aware some 4,000 people daily come and go between the two places. For currency purposes Hongkong is and must remain an integral portion of the Chinese Empire and it is no more possible to exclude Chinese subsidiary coins from the Colony than it is to exclude dollars and establish a gold currency there.
7. As regards the second proposal of the Board that this Government should “give instructions to their officials not to tender Chinese money in exchange for Hongkong coinage", I presume dollars and dollar notes are intended by Hongkong coinage. Such instructions are already in force and breaches of them must be rare, as none has been brought to my notice.
The Right Honourable
THE EARL OF ELGIN, K.G.,
$C.,
Sri.
I have, etc.,
M. NATHAN.
HONGKONG.
Confidential.
GOVERNMENT HOUSE, HONGKONG, 27th April, 1907.
MY LORD,With reference to Sir MATTHEW NATHAN'S Confidential Despatch of the 5th instant and previous correspondence, I have the honour to represent to Your Lordship that in my opinion the time has arrived for this Government to take some steps for the rehabilitation of the subsidiary coin of the Colony.
2. To say nothing of private firms, the Government alone is regularly losing a large amount on account of the receipt as Revenue of sums of subsidiary coin tendered in accord- dance with legal requirements, such amount of course varying with the rate of discours which has been as high as 10 per centum. At present, however, there has been an in-t provement in the rate which has fallen to 6 per centum presumably on account of the nem approach of the silk season in the Canton Province, but it is anticipated that with the cloaǝ of the season the coin will flow back to Hongkong.
3. With a total issue of over $10,000,000 worth and with the Colony's population under 400,000 it is obvious that there has been issued a great excess over legitimate require- ments; though, so long as our subsidiary coin was practically favoured as currency in the Provinces of South China, no evil effects resulted.
Now, however, with the enormous issue of small silver coins from the Canton and other Mints our coin is being displaced in China.