21
C.
21444
HONGKONG.
RE
Report of the Finance Committee of the Legislative Council of Hongkong
on the Proposed Loan Bill.
With reference to the Bill to authorise a Loan of £200,000 sterling which has been referred to the Finance Committee, the Committee beg to report as follows:-
2. Before the Bill was formally introduced, the Committee, aware that such a measure was in contemplation, could not but feel seriously uneasy with regard to the steady depreciation in the value of silver. Exchange has been persistently going down, and though those who wish to take the best view possible of the situation are inclined to think that the lowest point has been reached, the same opinion has been held, and wrongly held, again and again within the last twenty years. The Com- mittee see little reason for any such confidence, and even if a further serious drop in silver is not almost a certainty, it is at least a contingency so likely to occur as to make a neglect to provide against it wholly inexcusable. Special attention is called to the appended Table tracing the down- ward course of exchange since 1860.
3. In face of these facts, the Finance Committee consider that the further depreciation of silver so likely to occur is an insurmountable obstacle to any prudent borrowing in gold. Yet it seemed difficult at first to suggest any other course. If, as was formerly held to be the case, money could be had here only at six per cent, it would perhaps have been preferable to run the risk of a further fall in silver rather than to burden the Colony with the certainty of having to pay so high an interest.
4. There can be no doubt, however, that money is becoming cheaper in China as it is elsewhere. Not many years ago twelve per cent, was regarded as the normal rate of interest in this Colony; now investors are glad to get seven, and the Committee have ascertained on the most undoubted authority that the Government will be able, not only to obtain as much money here as it may require at five per cent., but also at the same time to bestow a much needed boon on the numerous class of small investors, who are practically kept out of the market by the bigh prices of nearly all the local stocks.
5. The possibility of getting money here at five per cent., of which there is now no doubt, presents the question under an entirely different aspect, and leaves, the Committee consider, no doubt as to the course to be adopted.
6. There is no analogy between the circumstances of this Colony and those of perhaps any other British dependency which has gone into the loan market. Where a gold currency is maintained there can of course be no objection to borrowing in gold; and even where the currency is silver, the only convenient borrowing market may be a market that lends in gold. Here, however, we are not only shut up to a silver currency, but also silver money is to be had in any reasonable amount. capital and reserve funds alone of the local Companies, Insurance and other, of this Colony are com- puted to amount to about the equivalent of ten millions sterling, and most of these Companies will The Committee probably be glad to place part of their funds on Government Security at five per cent.
The
do not doubt the Governor's concurrence in the view that it is wiser at any rate to exhaust the local market before borrowing at much the same rate elsewhere.
But such a loss will
7. It may of course be said that if a silver loan be raised here a loss on exchange will take place in keeping the Crown Agents supplied with funds, That is no doubt the case. apply only to part of the loan, whilst if the Colony were to borrow in gold it would apply, and might apply much more heavily, to the whole of it. No arrangement can prevent some loss on exchange; it is desirable however to make that loss as small as possible.
8. Lord DERBY, in his despatch on this subject, expressed a hope that it might eventually be foun l unnecessary to borrow up to the full amount of one million of dollars. The Committee have every reason to believe that this hope will be realised.
9. The period of about thirty-eight years which would be required to pay off the loan proposed by the Crown Agents is too long. This community changes very rapidly, the Colony developes rapidly, and ten years may fairly be called a generation. For this reason alone it is desirable to raise our loan piecemeal, by small instalments, just as they are wanted, and to pay it off as quickly as possible. The Committee do not doubt that the Legislative Council will be in favour of setting aside one and a half, or even two per cent. for a sinking fund, or redeeming a certain amount of the Debentures by purchase from time to time as it may be convenient.
10. Under all the circumstances, therefore, and especially considering that funds will be needed about March next, the Committee have no hesitation in recommending that the Loan Bill as it stands should be withdrawn, and that a Bill to authorise a local loan in silver should at once submitted to the Legislative Council.
arg
ently
b
*
Table