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3. I have given this subject my best consideration. I would remark, in the first place, that the profit on the coins, which is little more than what this Colony would obtain, without any expenditure of labour or trouble, by simply placing money in the Banks here on fixed deposit, has not suggested the obtaining of a single coin more than would have been asked for under any circumstances short of a prohibitive loss. If the coins were obtainable only at par I should have recom- mended every requisition I have recommended. If they were obtainable at a slight loss, I should have asked for as many as we could afford. I cannot see that the Government is less bound to provide coin than it is bound to provide roads, water, or police; and I consider it as much my duty to see that the supply of coin does not run out as I do to take the same precaution with regard to the stock of Postage Stamps.
4. I would further say that this Government does not encourage the exporta- tion of coin to China, but it is powerless to prevent it. We used to issne subsi- diary coins only on a written uudertaking that they would not be exported. The promise was not worth the paper it was written on, and its exaction was such a transparent farce that I substituted for it a system of granting any reasonable ap- plication for coin according to the circumstances of the applicant. A shopkeeper in a large way of business, for instance, is allowed more than a petty trader, an employer of labour more still, and so on. This system works smoothly, but of course the export of the coin goes on as it always has done.
5. It would in many ways be inore convenient to this Colony to keep the coin here, but no means of doing so could be devised.
6. It must not be forgotten that Hongkong is very badly provided with cur- rency, and for this reason the Managers of the Banks have repeatedly begged me not to allow the Colony to be left, as it used to be, for months at a time, with small coin unobtainable except at 10 per cent. premium. A shipment of $50,000 worth would arrive perhaps once in two years, and, however charily distributed, it was absorbed in a fortnight. Change was given only as a favour, a request for it was often regarded as positively unreasonable.
7. When I took charge of the Post Office, twelve years ago, it was regarded as the normal and almost legitimate state of affairs for the Shroffs employed to sell stamps never to have any change. Of course the real reason was that, with small coin at a high premium, they put aside all they got from the public for sale to money changers and others, and no consideration of the inconvenience they were inflicting on the public or on their employers deterred them from doing this. It is only of late years that I have been able to insist upon change being kept both in the Post Office and in the Stamp Office. As the premium on small silver coin, under ordinary circumstances, is now only about 3 per mille, the temptation to make away with it surreptitiously does not exist to any great extent.
8. The trying time is of course Chinese New Year, at which period it is the custom amongst Chinese to pay all debts and close all accounts. Only two years ago, during the three or four days before the Chinese old year's eve, small coin was at 200 per cent. premium. The Treasury had none to issue, the Banks bad none, and Bank Notes were not to be had for love or money. The inconvenience to those who had many small payments to make, to the Commissariat, the Dockyard, to employers of labour, and public companies, was so great that I resolved on no account to allow such a state of things to recur if any vigilance of this Department could prevent it.
9. On the approach of the last Chinese New Year (January 24th, 1887) there was $180,000 worth of small coin in the Treasury, and this supply, amounting to no less than two and a quarter millions of coins, I considered to be ample. Never- theless, two months before the new year, such a steady demand set in that, though the requisitions were cut down as much as they reasonably could be, in four weeks the whole was exhausted, and the issue had to be suspended, if only to keep a few coins for the use of the Police, &c. It was at this juncture that an urgent request was received from the Army Paymaster for $10,000 worth of coin. I was enabled to make the issue, because I knew that after the New Year I could, if necessary, purchase small coin for Government use at a merely nominal premium. It has not been necessary to do so, but until the next shipment arrived we were on famine allowance, and the issue to the public was suspended. I should say, however, that no inconvenience appeared to arise from the exhaustion of the supply of coin at that time, as the Chinese community, in exhausting the Treasury stock, had suffi- ciently supplied itself. The new shipment arrived on March 22nd, and $48,000 of it, or nearly one-third, was issued in a week, to the Banks, the Commissariat, and the public.
10. It must not be forgotten that we have the wants of the Army and Navy to provide for. Every ship, before going North, obtains a supply of coin, because these coins pass anywhere in China or Japan, and, except broken silver or Ja- panese money, nothing else is to be had.
11. The total amount of subsidiary coin supplied to Hongkong to date has been $2,133,881, including some copper, which has not been exported. Of the silver, probably not ten per cent. is in the Colony.
12. I trust I have shown the necessity for keeping this Colony supplied with small coin, and the impossibility of the Government's exercising any check on its exportation except by declining to issue it at all. I now pass on to consider the risk of these coins being hereafter thrown upon the Colony for redemption in a worn or mutilated condition. I venture to think that this risk is very small, and that, even if it exists, which is doubtful, it would be easily averted. It should be borne in mind that these coins are not a legal tender for sums of more than $2.
13. The subsidiary coinage of Hongkong has been in circulation nearly a quarter of a century. During all that time no worn or inutilated coin has ever been seen in the Treasury. am inclined to think silver coin would never become worn in China as it does in England, for the people do not carry it loose in their pockets, but always most carefully in a pouch or purse, or wrapped in paper; nor is it passed about to anything like the extent that silver coin is in Europe. Be this as it may, the fact remains that our silver coins are as yet practically unworn. 14. Chinese are great hoarders of coin. The popularity of our five cent pieces very greatly arises from their common use as little presents to children and servants. Thousands of them are made into buttons. It would probably be difficult for a speculator on the mainland to buy any quantity of these coins at profitable rates. 15. Let it be supposed, however, that in the course of another 25 years there will be, on the mainland of China, thousands of five and ten cent pieces in the same condition as old sixpences and shillings in England, namely, mere discs of Let it be silver, with perhaps slight vestiges of the original design of the coins. further supposed that a speculator has brought up $10,000 worth of these, and proposes to flood this Colony with them, forcing them on the Treasury as coin at a discount is always forced upon it.
16. It appears to me that the only course open to the Government would be to decline to recognise any coin which could not be shown to have been issued from the Treasury here. This would practically amount to refusing to redeem all worn coins except in very rare cases,
17. If it once were known that the Hongkong Government was receiving at par value coins which purported to be tokens worn out on the mainland, we should be at once inundated with coins by the thousand which had never been in or near Hongkong at all. There has already been some trouble with spurious ten cent pieces, so well made as almost to defy detection by ordinary observation. What then might be expected if forgers could imitate picces worn out beyond recognition? 18. How easily the remedy would be applied may be seen from what happened some years ago in the case of Japanese 20, 10, and 5 cent pieces. These coins had years circulated side by side with our own, and were received here, as Singapore ten cent pieces now are, at their par value. The Japanese Government suddenly lowered the intrinsic value of its subsidiary coinage, and, at the same time, the coast of China was flooded with it. The Banks here then refused to receive Japa-
The Government departments of nese small coin, the Treasury did the same. course followed, and within a few weeks tradesmen begin to print on their accounts, Japanese small coin not taken. The coin sank to something like 16 per cent. discount, at which it remains, and even a chair-coolie in the street will not take a Japanese ten cent piece as his fare if he can help it.
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19. It only remains to enquire whether such a course as is suggested would give rise to any hardship. 1 venture to say that it would not.
20. It must be borne in mind that this Government never sanctioned the export of subsidiary coin, and never undertook to redeem it on its return from the mainland in a bad conditiou.
21. Quite apart from that, however, every person who, on the mainland of China, takes these coins, does so becanse they are worth to him the value for which he receives them. Nobody ever accepts a coin in China on any other conditions; and these conditions are, as I shall show, absolutely independent of any idea of a central authority which will eventually redeem the coin at its par value if nobody else will take it.
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