4. I consider it very probable that, if the Chinese Government is able and willing to keep up the quality of its coins, it will in time get the entire issue into its own hands, notwithstanding the fact that in consequence of their greater confidence in the integrity of the English Government, the Chinese would if left to themselves, prefer those issued from Hong Kong. It is however very doubtful whether the Central Power will be able, even if desirous of doing so, to effectively control the action of the Canton mint Authorities, and I should not be at all surprised if the quality of the coin issued by them were ere long materially to deteriorate, if it has not already begun to do so.
5. It will be within your recollection that the Treasury was (and, I believe still is) apprehensive of a possible danger to Hong Kong in the issue by it of an amount of coin out of all proportion to its own requirements, as it considered that, if in future such coin were from any reason to depreciate in China, they might be returned to Hong Kong and forced on the Government, which would then have to hold a very large amount of practically useless coin.
6. When the issue of silver subsidiary coins was first undertaken by the Hong Kong Government, great efforts were made by the Treasurer to keep them in the Colony, but it was soon found that they refused to be bound by other than ordinary economic laws, and that it was impossible to prevent their finding their way to the market where they were most needed—viz: China. The attempt to arbitrarily limit the supply has now been abandoned, but great care is taken to prevent its outstripping the demand.
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8. I have consulted the heads of the Banks in Hong Kong and find that they agree with me in thinking that when our coins enter China they sink into a morass and become absolutely absorbed by her teeming millions, and that it is exceedingly improbable that they will ever be thrown back upon Hong Kong.
9. The issue last year amounted in nominal value to one million six hundred thousand dollars ($1,600,000), of which only a very small percentage was required by the Colony itself. The profit amounted to eighty thousand dollars ($80,000), and would have reached a much higher figure but for an adverse exchange.
10. I may mention that a considerable Canton coin circulates in Hong Kong, it being, I have been informed, offered by the Chinese Authorities to Chinese bankers and others at five per cent (5%) discount. The opinion has been expressed that it is derogatory to our dignity and prejudicial