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15. Our view in this respect has the support of all the evidence taken by us except that of two witnesses. One of these, who is Professor of Economics at Hong Kong University, favoured a change to a gold basis even if China remained on a silver basis, being inclined to discount the disabilities to trade which a change to gold would involve; the other, who is Chief Manager of a shipbuilding firm in the Colony, considered the present currency unsatisfactory because of the effect the fluctuations in the price of silver had in making it difficult to estimate sterling costs in his business, or to keep a firm offer open for the length of time required hetween tendering and acceptance, and also to finance ships after construction; he advocated therefore some measure of stabilisation, though he would not go so far as to say we should depart from the silver basis before China did so.
16. It may be apposite here to recapitulate very briefly the arguments upon which traders both past and present (se especially the memoranda of Messrs. Mackie and Russell Nos. 34 and 35 in Part III),-rely to show how any attempt to base the currency on any other metallic standard of value than that used in China would be harmful to the trade and thus indirectly to the general welfare of the Colony. They are as follows:-
(1) Hong Kong is not a producing but a transit centre; its exports and imports are almost entirely on China's account; the trade which it handles is in reality China's trade. In spite of the fact that all countries from which imports come and to which exports go are now on a gold basis, and that there a great improvement nowadays in the speeding up of communications between the Colony and China, it still is of the utmost importance that the Colony's currency should conform as closely as possible to that of China, and that unnecessary exchange transactions be eliminated.
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(ii) The ill-effects of any diverge ice are amply shown when a high premium exists on Hong Kong exchange and drives business past the Colony to Shang- hai. It naturally follows that these ill-effects would be accentuated by making a clean break between the two currencies.
(iii) If Hong Kong had a currency based on gold with China's currency still remaining on a silver basis, merchants fear that the financing of trade would tend to gravitate towards China, where a direct exchange transaction could be effected and bargains struck readily to the exclusion of Hong Kong as an intermediary. Trade might thus pass the Colony, and a centrifugal move- ment might set in, which in the long run would adversely affect the prestige and prosperity of the Colony.
(iv) We do not attach much weight to certain other objections which were mentioned to us. For instance, some feared that Chinese merchants, being traditionally accustomed to handle silver, might prefer to continue to do so, and move their businesses elsewhere rather than adjust their methods to the new currency. Again it has been stated that there is the possibility in the event of a marked appreciation of the price of silver that the Colony would forfeit a great portion of its silver token coinage to the melting pot.
(b) In what respects if any is the present currency situation in the Colony unsatisfactory?
17. We have concluded, and are supported in our conclusion by all the evidence before us,-that the currency system of the Colony suffers from the follow- ing faults:-
(i) There is in fact a fluctuating premium on the bank-note over the silver dollar in exchange.
(ii) The silver dollar is itself a most inconvenient medium, being difficult to handle, carry and store.
18. Some witnesses have also expressed dissatisfaction with those provisions of the currency system by which the privilege of note issue is delegated to the somewhat arbitrary control of private banking institutions.