14
AGAINST STABILISATION
(Continued from Page 0.3
Hong Kong, as a Port... Hong Kong, is now one of the large ports in the world. No other pore in South China is now able, ore likely at any data which wo ean forase to be able, to provide equal facilioita.
Whatover currency the Colorry has, therefore, it is likely to rematit the principal store-house for goods in transit to and from South China. It must derive a very considerabl income from storage and handling charges on these goods, and no change in the currency system is likely to have much effect on the volume of receipts from this source, so long as trade follows its présent channels.
J
Hong Kong as a Place of Law. And Order And A City of Refugo,
Thera is a steady flow of immi- grants, not only of the labouring but also of the well-to-do classon, into Hong Kong and it is well known that capital is being steadily imported into the Colony by persons of the reatier and capitalist classca Colony possesses one which is no
Apart from these attractions the. shared by any of the other areas in which Chinese settle, such as Malaya, the Philippines, etc..hame ly, that it is the only place near China where the currency is still,
HONG KONG DAILY PRESS, TUESDAY, NOVEMBER 17, 1931,
Take that of Canton for instance. Cauton currency can be exchanged for other currencies only through the medium of Hong Kong our
rency.
event
Wo have considored whether, in than the one eurront at the time of view of the alteration in the status the operation, whether the exchang of the dollar coin, the issue of fly by legislativo net or gradanny value of the dollar-ba-ruised abrupt notes should be resumed; but we are by starving the varrency. definitely of the opinion that this. For instance there are these übe stays of Hong Kong'a prosperity It is not difioult to understand would be undesirable en groundssons to both the abrupt and the we have no hesitation in deciding how in these circumstances it is both of hygiene and of expense..
gradual policy, "though "some would have greater force in one- that on this count the argument entirely impossible to buy or soll
Subsidiary, coin. The objections than in the other :- is strongly against stabilizõtion. forward sterling in direct exchange?
(1) Any txing of winto other been reiterated by one banker after monetizing the silver dollar and refore arbitrarily and unjustly with another, both Chinese and non-placing it by a base metal token coin relations between debtors and credi Chinese. We have already drawn do not in our opinion, apply with tory and, would undermine the basis attention to this fact, which has a strong bearing on the problem be equal force to the aubsidiary silver payments in Hong Kong currency For all existing contracts involving fore-U-
coins of smaller denominations. at futuro datos. We believe, on the evidence we Among the Defects of the Pre- have received, that the Chinese po- (e) In relation to the remitant Currenty System are stated. tance business, much of Hong The first is that the form of cur-pulation would show no groat re-preference to, any other figure. 1 Kong's attraction as a centre for rency which is the only unlimited luctance in accepting token coins receiving remittances from Chi-legal tender, the silver dollar, is of a different composition. nese residents overseas would dis- entirely unsuitable for that pur appear.
(h) In the trade, between Northwith Canton currency, and this hay/which wo have stated above to do than the current rate would ref="
and South Chinn passing through Hong Kong as a centre the two exchange transactions from silver into gold and from gold back to silver desteid of the present double exchange in silver ourrez eles would be a great hindrance to this important business.
poss..
Defects.
adequate justification for fixing the (2) It would be impossible to find rate at any particular figure in
·44.
We therefore recommend that a (d) The present casy flow of
new issue of base-motal subsidiary eppital between Hong Kong and A concrete example will illus coinage should be minted, that dur Santh China which is instrument-trate this. The weight of the legating the period of one month referference between the new artificial ninancing primary productender currency which the seller of red to in paragraph 121 it should tion and small trades and indus-motor-car coating any $4,000 (at be offered freely to the public in tries in South China would be the present rate of exchange, about exchange for the present silver sub seriously impeded.
$200) could. demand, would be asidiary coin, and that at the end little over two hundredweight, of that period the latter should be
demonetized. '
(e) The export trade. from South China woukl have to free an uncoverable time-risk in the gold-silver exchange.
The banks when they require more currency always want more notes. If the Hong Kong and
parations for ultimate stabilization Dealing with the question of pre. the report says:
is sometimes said that there is a nermal value for the dollar (the Agure usually in mind being 28) but we cannot find any basis for this view,
(3) The cost of mooting the dif value and the actual bullion value of all coin in the Colony, and also, we think, of the bar silver in the bank-nota reservo funds, would have to be 'undertaken by the Government, that is by the general body of tax of this liability would of course de Payers in the Colony. The amount
than several millions of pounds pond upon the rate selected and
sterling affected, but could hardly be less the amount of coin and 'bar silver
the difficulty that they must other scheme we suggest is designed to import silver dollars or remain in place in the hands of the Currency Most important of all, the the unantisfactory, and perhaps a silver standard so long as China dangerous, position of holding anfund which will go at least some Hong Kong currency for specula-
Board a steadily-growing sterling inadequate proportion or currency. against their liabilities. If the way towards providing for the tive purposes would be given an
(4) Persons who had acquired
like that of China, on a silver hasta | South China would be deprived of Hong Kong and Shanghai Bank in couvertibility of the dollar into fundeserved bonus and would pre-
which forward, contracts change could be made and no cur- of ex- rency in which there would be a satisfactory supply of bank-notes.
Final Remarks and Conclusion.
willing to issue the notes, the banks prefer to see the Hong Kong dollar rise to a premium rather than cor- rect the premium by importing coins, though when it reaches an abnormal height they naturally be come restive;
Conficting Interests. We understand that the present and Shanghai-Bank has announced Chief Manager of the Hong Kong
sterling when the change is made and, if sufficient time is given, muy a completely adequate for that Purpose without being supplement ed by borrowed funds.
It will probably be possible to acoumulate this fund in various
Ways:
bably cause considerable embarrass mang to the barks and other in stitutions with which their money was placed by withdrawing it m mediately..
son set out above in our opinion
The general tenor of the conclu-Shanghai Bank refuses to issue more notes, the other banks are in gives balance to the argument that Hong Kong is economically part of China and must remain on does, If Hong Kong currency censed to be on a silver basis, It seems in as that, if Hong Kong the only ndopted gold standard while
convenient currency China still remained of silver i medium in which it could conduct business on a large scale either would be likely to lose many of the internally or with foreign countries, benefits attaching the speciale., it would have no currency in position described above. Hong Kong as a Producing Centre.
The objections cited above are, we think, fundamental. It should, also The importance of Hong Kong as a producing bentre is small in com-
be recognized that large temporary The replacement of the silver subdisorganizations of trade frequently parison with its other business ne
sidiary coip by base metal coin will mean permanent loss cr business tivities. There are however, if
We have now considered the gen.
tial amount of silver, no that their (0) All stocks of goods in the Cas furnish the Board with a substau- connection. Hong Kong Luerencs were one end arguments in invour of stabi gold basis and silver declined in lization and examined its probable will in future always apply an ex- excess of their obligations on silver saleable at the dollar price at which as the policy of the bank tant it total holdings will at first ber lony would become practically in value, the expert price of goods effects on the business of Hong change corrective with the object vouchers already issued. This will they were acquired since new ecu- made in a silver country, would be Kong. "lower than the export price of simi- |
of preventing the dollar from ris enable them, if demands for addisignments of identical goods could lar goods made in Hong Kong, and aspects of the question but the onlying substantiaily above the thecreants the choice of tendering sterk
Much might be written on cther in gsubstantially above the theore- tional notes arise, to offer apple be sold at lower dollar prices. though the cost of living would prone to which we think it necessary tie upper bullion point. It is howing (instead of bar silver) in ex-ing, ship-building, ship-repairing, (e) Such local enterprises as dock- bably dading in Hong Kong ito refer is its bearing on the wel ever fundamentally wrong that the change for notes, the bank issuing and manufacture would be brought would be diflout to reduce wages fare of the Chinese wage-earning exchange value of a Colony's cur. the actes being given silver vouchers to a standstill because there would rapidly enough to meet the co-popakition. petition of the silver-using country:
rency should depend on one person, covered by the excess stock, until be a varying lag in the adjust The requirements of this clues, and no less wrong that that person that is exhausted, and the sterling ment of dollar salaries, wages, and whereas if the value of silver rose, Legoed housing, are very simple should be put in a position where being retained and invested by the stocks to the new conditions, and though Hong Kong would then be and amount to little more than he may constantly have to decide that they should be given power, to Hong Kong would not be able at first in a more favourable post-food-suffs, clothing, and vocation between the conflicting interests of this. tion for exporting its goods, this ally Chinese medicine,
Board. We accordingly recommend until the adjustment was complet. "advantage would soon be nullified. Famount, particuintly dried fish, gis
A certain the Colony and the bank.
to completa for orders on an imports to Hong Kong from produced within the Colony; the
equal Secondly, if further issues of sub-terms with such places as Shanghai. silver-using countries would become dearer, the cost of living would
ross must be imported.
sidiary coin are required, we recom An esti-
(7) Goods arriving in the Colong become higher, and it would be dif- Chinese gentianan, which shows mate has been prepared for us by
mend that the Board should be em after stabilizatica on orders placed powered to issue them against pay before stabilization would probably ficult to reaist applications for that from 33 to 50 per cent. of the
ment in sterling, or to lasue them to a large extent be left on the im higher wagas It is teus that in expenditure of a wage-carner goes
against payments of cash in Hong porters' hands because the dealers, either ovent time should bring about upon goods imported from gold
Kong and to convert sume so an adjustment, but it is notorious
(2) that the notes of the present coived into sterling.
reif they held Hong Kong currency, that the lag in reducing wages is bared that the largest item in this countries. But it must be remem-
note-issuing banks' be made
would be able to use it to better always longer than the one in in-class of goods is rice, the price of
Thirdly, if demands for addition-advantage in purchasing goods im the sole unlimited legal ten-al notes continue to arise after the ported at the latter and higher dol creasing them, and in the former which, as we have already pointed
dor, except of course by the exhaustion of the excess silver cover lar rate, or if they hold only Can- event Hong Kong's business might out, tends to vary with the price di
banks themselves in payment originally held by the Board, weton or some other silver carvency, suffer irretrievable damage.
the purchasing power of the Chi-..
of notes tendered for redemp recommend that they should nover would not be able to carry out their silver. It follows, we think, that
tion.
theless bo empowered to continue undertakings to pay Hong Kong much more than it does now if nese wage-earner, would fluctuate.
(3) that the notes of the Hong to offer applicants the choice of currency at the higher rate, Hong Kong currency were stabi-
Kong banks be made convertondering sterling in exchange for There are three additional objec lized.
tible, on presentation of a tes and to leave the correspond-tions:- prescribed minimum, into siling silver vouchers uncovered by ver, bullion,
A ship-building firm represented thut in competition with rival firms in gold-using esantries it was at a disadvantage when a tender for a contract to be paid for in gold had to be kept open for a consider. able time, as it was impossible to do so without risk of grave less owing to exchange fluctuations.
I
If ship-building, represent large proportion of Hong Kong' industrial activity this would be a strong argument for stabilization. Effects of Stabilization on Ene Busi
ness of Hong Kong. (1) Hong Kong, considered mere. ly as a port and as the principal storehouse for goods in tenuit to and "from South China, would rot be likely to be affected adversely so long as trade continued to rui in its present channels.
(9) The special position watch Hong Kong at present occupies for the Chinese settler and capitalist as a place of law and order and a city of refuge would to a large extent be lost.
¿
(3) A producing centre, t might lose to neighbouring silver centres much of the business which it at present trammnets, but on tho other hand ship-builders would us- doubtedly benefit in so far as the change would enable them to ten- der for and curry out large long- term contracts on a basis of equality with their competitors in gold-using
countries,
(4) As a financial and trading centre, the effects on Hong Kong would be as follows:-
We need not dite on the evil consequences of such fluctuations to both employer and employed.
Although from the point of view of the Government and of some persons not engaged in trade it seems that there would La certain distinct advantages to be obtained from stabiliss- tion on a gold. basis, and although certain trading in- torests would benefit thereby, we are unable to arrive at any other conclusion than that it would be of serious and direct disadvantage the business of Hong Kong and to large BBC. tions of the population. Conse- quently in the general interests of the Colony--including thors
of traders who, though they might reap immediate benefit from this course, would prob ably find the results in the long run by no means satisfactory- we recommend that in the pre- sent circumstances Hong Kong, should remain on a silver basis," The Use of Hong Kong Currency in China,
Main Proposals for Reform. Those are our recommendations: (1) that the legal tender status of the dollar coin be limited
to $10.
(1) Such a course, however secret silver, so long as the proportion oily the policy might be pursued. (4) that any person on toudering vouchers covered by silver does not would surely lead to speculation, as,
ailver bullion of a specified fall below a safe figure.
experience in other countries has minium fineness and of should be fixed at 60 per cent and
Wo recommend that this figure shown, specified minimum weight and
that, the Board should be allowed ta stifled and merchants would find it (2) Logitimate business would be on payment of a specified Lee redues it only with the ocnsent of almost impossible to fix forward con the Secretary of State for the Co-tracts of exchange at a reasonable lonies. The figure in our opinion rate.
should be entitled to obtain legal tender in the form of
bank-notes.
(5) that the Government should any contraction of the currency,
allows a very ample margin to meet (3) Starvation could be applied take charge of all the silver
only in the Colony and not in South coin and bullion at present the ways mentioned above will, in freely, and as soon as the intention. Fourthly, any sterling obtained in China where the note circulates held against the note issues, so far as it is invested in interest to increase the value of the dollar except for such amounts as bearing securities, increase at a rate became known there would almce: #the three banks concerned of compound interest.
may require for current bum-
certainly be a rapid transfer ci ness, and give to the banks consideration.
There is one further point for every available note in the Colony The Colonial Gov-to South China, with the effect that in lieu thereof vouchers unsrament at present receives an in- the situation would soon pass-be-
dertaking to deliver silver on demand on the bank's certi- fying that notes for an equi valens amount have been or ment issues of currency notes no
the 1 per cent tax on bank-notes. come of about 8880,000 a year from yond control.
and
In Colonies, which have Govern-
The Question of a Parallel Sterling Nate Issue. When the question of Hong Kong
are about to be withdrawn, profits on those issues are paid into currency was discussed by the Co (0) that silver which in future rency authority is in a thoroughly London, a suggestion was made that the General Revenues until the curlonial Office Currency Committee in may be tendered for exchange secure position. We therefore con-
into notes should be received sider that the Hong Kong Currency Government issue of currency by the Government (not the Board should be regarded as hav notes expressed in sterling, to err nota-inuing bank), the touring a lien on the revenue deriven culate side by side with the exist derer to be entitled to resolve from this soures and wo would go the double object of providing" a notes of whichever bank he even further and recommend that medium of currency for the conduct ing currency, might be made, with may prefer (provided that it should be very seriously conside. -
bank's issue has not reached ad whether it would not be proper of business in sterling and of ob its maximum limit) and the to pay over to the Board the whole taining some indication whether a bank to be given vouchers for revenue derived from this source inable for general use in the Colony. sterling currency would be accept- the equivalent amount of sil-order to accelerate the building up
Ter,
Ultimately be Stabilized.
the political boundary of China, the Although Hong Kong is outside twe are attached to each other by such close economic and financial connections that Hong Kong is in fact one of the exchange centres of China, and its bark-nete currenty (a) In relation to imports into is one of the currencies of China.
of a sterling fund in preparation several of our witnesses but have We have put this proposal before The Government would no doubt for ultimate stabilization. South China, the onus of cayer-
find it convenient to appoint a Cur- ing the heavy gold-silver ex banks, and particularly those of silver and to make any arrange-
The notes of the Hong Kong ranes Board to take charge of the The Rate. at Which Dollar Should
found no support for it. change risks involved would be the Hong Kong and Shanghai Bank, monts to receive and issue silver in
Banking Legislation. transferred from the importing circulate widely throughout South the future. Such a Board would the dollar had remained more or that, apart from certain provisions In the course of our enquiring In werchant in Hong Kong, who has China where they are regarded as also have the tlf more important loss constant for some time past; in the Companies Ordinance, there If the sterling.oxchange value of Hong Kong we have ascertained ample facilities for doing this, to the most stable and desirable form function of accumulating a sterling it is unlikely that any suggestion is no legislation relating to bank. the dealer in South China, the of currency, Lodoed it was repre-fund to provide for ultimate stab would have been made that the rate ing in Hong Kong, though the ques owing to its imperfectly develop.sented to us by credible witnesseslization on a gold basis as will be to be laid down should be other than tion of such legislation has been ed currency system would, with that no less than two-thirds of the explained in Part V below. We the current rate or one approximat under consideration. Hong Kong on a gold basis, have outstanding issue of this bank was therefore recommend. no means for the purpose. the other hand, white bulk indent ese witnesses expressed the view that On held in China, and one cf our Chin-
it was known in all the eighteen provinces of China,
ד'
(7) that business and depôt business (in
Hong Kong Currency trend of the exchange value of the ber of banks and the great import ing thereto. The recent downward Having regard to the large num Board should be appointed. dollar, however, has produced cluding robal trade in Hong
It would be in accordance with strong demand in some quarters for appears to us very desirable that ance of banking in the Colony, to Kong) would to some extent be Hong Kong Dollar as an Exchange should be set up in London and rent, rate, the highest rate which we banks to publish periodical retur
usual precedent that this Board the fixing of a rate above the cur-provision should be made requiring facilitated, the wholesale trade would lose its present facilities
Currency.
should be represented in the Colcay have seen advocated being 28, 4d., of their assets and liabilities and for covering the gold-silver ex- Hong Kong has a very active ex-by, Currency Officer, who might and the rate which has received to keep a minimum amount of ready change, risk and would not be change market, particularly with appropriately be the Colonial Tres most support 28. Indeed it is ovi cash bearing a fixed-proportion-to- able to find a substitute The London and Shanghai, and orduge surer:-- trend of the argument in this its highly-developed banking system
dent from all that we have heard their demand and time abilities. section depends upon the rela-can readily convert its dollars inte
and raid that among those who ad An appropriate proportion: would, tive importance of these different any other well-known currency, To
vocate, immediate stabilization ex we think, be, 10 per cent of demand kinds of business, and as all the appreciate the importance of this have been seen, our recommanda copt stabilization at or near 18,
(i) The dollar coin-As will tremely few would be ready to ac and 3 per cent of time liabilities evidence goes to show that the point it is only necessary to con- tion is that the legal tender status It seems to us that there are the geat, be deferred until the currency Such legislation should, we sug wholesale importing business into trast the Hong Kong currency with of this coin should be limited to strangest objections to stabilitation has been reformed on the lines we Bouth China is one of the main-I any other South China currency.
at any level substantially higher have proposed.
810,
to Oom.
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