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Undesirable, however, as its fluctuation on this account may be, any artificial measures aiming at "pegging" it or severing its relationship with other world com- modities would be even more disastrous. Silver's rise and fall in the past has inexorably followed the rise and fall of other commodities, and has therefore greatly facilitated the world's trade with the silver-using countries. The belief which ap- pears to obtain in America that under any circumstances a high exchange must increase China's purchasing power is a fallacy. To accomplish that admittedly desirable object, high exchange must be accompanied by an equivalent high world commodity price level, otherwise China's products are too dear for the rest of the world to buy; she cannot export, and if she cannot export she cannot import however high the purchasing power of her currency. Therefore, while violent fluctuation due to speculation is the overseas merchant's bugbear, moderate fluctuation in accordance with legitimate trade requirements is desirable. The time may not be ripe for international action in regard to the world's exchanges, but when it is, we can only hope that the problem of silver will be disposed of with wisdom and foresight. So much depends upon this in the Far East, that one cannot but view with misgiving the many factors of minor importance operating in America to-day tending to confuse the issue.
7. So far from being unwilling to finance trade and industry, certain of the local native Banks lend money too freely on property on insufficient margin albeit at high rates of interest. This practice tends to make credit too readily obtainable. The capital thus acquired is often mortgaged again to the full and an unstable structure of credit results, which is susceptible to any set-back however small, and which renders a financial collapse inevitable when a major depression occurs. It may not be practicable to legislate against this danger, but any step tending to the adoption of sounder banking methods would increase the Colony's stability.
8. Another matter of Finance we view with some misgiving is the recent estab- lishment of "Savings Banks". This class of institution should always be kept in a fairly liquid state so as to be in a position readily to meet withdrawals of depositors who, though small in wealth, are great in numbers. It seems to us that Government should pass some regulations governing the class of investments in which "Savings Banks" may place spare funds and make a percentage limit, which may not be exceeded, for fixed loans or mortgages. Savings Bank depositors are usually people of small means and if there should be a failure of one of these institutions the loss and misery caused would be widespread.
Chapter XII.
AVIATION.
1. Aviation has developed rapidly in the last few years and, as will be seen from the Report on the Progress of Civil Aviation, 1933, recently published by H.M. Stationery Office, the British Empire has not lagged behind in this respect. China is also becoming air-minded, and in such a country with vast spaces having no road or rail communication the gradual establishment of air routes will be a logical development.
2. So far, however, China is not linked up with the rest of the world by air and this, in our opinion, is a matter which should occupy the serious attention of that country to which through air communication will be of great value, and of the British whose Far Eastern route extends as far as Singapore and thence continues to Aus- tralia.
3. It appears to us that this new means of rapid communication which will have a greatly increasing commercial value should now receive from Hong Kong the same careful consideration as has been given to its position as a great port of ocean ship-
ment.