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11th ultimo, there were three banks issuing notes, the Ta Ching Bank, the Chiao Tung Bank, and the Shan Hou Chü, their issues being to the following amounts respectively, 500,000, 100,000, and 1,500,000 dollars, The Ta Ch'ing Bank's issue was wholly guaranteed by the Government; the Chiao Tung Bank, being connected with the Ministry of Communications, was probably also so guaranteed; while the Shan Hou Chu had a reserve fund of 1,000,000 taels in bullion. The last-named bank, moreover, was then calling in its notes, at the rate of about 50,000 dollars a-month. At the date of the report, a deputy from the Ministry of Finance was engaged in making investigations into the working of the regulations, but the result of his enquiries had not been made public.
At the following places the regulations are reported to have been ignored The altogether: Tien-tsin, fchang, Kiukiang, Wuhu, Hângchow, and Swatow. report to this effect from Tien-tsin corresponds with information received from the agent at Peking of the Hong Kong and Shanghai Banking Corporation, to the effect that owing to the continued resistance of the Peking Chamber of Commerce, the The chamber of regulations have been suffered to remain in abeyance here. commerce, it appears, have warned the Ministry of Finance, through the Ministry of Commerce, that the withdrawal of notes in the proportion proposed would create a This means financial stringency which might result in a very serious crisis. presumably that the note circulation has been allowed to grow so far in excess of the bullion at the command of the issuing banks, that the notes cannot be redeemed at the rate of 20 per cent. per annum. At Ichang the only bank issuing notes was the Ta Ching Bank, of which a branch had been at the date of the report (the 26th March, 1910) recently opened. At Wuhu, the taotai had no information on the subject, and local officials and merchants took little or no interest in it. Three official banks had branch offices there and a note circulation, but the note issue of the third of these, the Ta Ch'ing Government Bank, was gradually superseding the issues of the others. At Swatow the local banks had in October last received no official intimation of the regulations. A branch of the Ta Ching Bank had been recently established, but was doing only a small business.
At
At the following places the regulations were issued, but not enforced: Newchwang, Hankow, Chinkiang, Foochow. At Newchwang notes were issued only by the Ta Ching Bank, which owing to its official character did not apparently consider itself to be bound by the regulations in the same sense that other banks were. Hankow the failure to put the regulations in force was due to the objections made by the bankers' guild representatives on the Chinese Association of Commerce, who asserted that the enforcement of the regulations would cause numerous failings and another financial crisis. No bank-notes are issued at Chinkiang. At Foochow, as at Hankow, the local native banks strongly objected to the regulations, and were of opinion that the present state of affairs had better continue.
His Majesty's consuls at Changtu, Chungking, Amoy, Wuchow, and Tengyuch reported that the regulations did not affect their respective districts, there being no issue of native bank-notes therein. An exception to this statement, however, has to be made in the case of Chungking and Amoy, where the issue to a small extent, of Ta Ching Bank notes has been successfully reported.
His Majesty's consul-general at Mukden reported last month that in Manchuria no banks but the official banks were allowed to issue notes. The issue of notes by the official banks in the three provinces had been largely in excess of the quantity required, and the notes were at a considerable discount. The report in question made no reference to the regulations.
A
His Majesty's consul-general at Shanghai, who reported on the 22nd February last, had also no remarks to make on the actual working of the regulations, but he forwarded copy of a letter from the Shanghai General Chamber of Commerce subjecting the regulations to detailed criticism. I have the honour to transmit herewith a copy of this letter as representing the views entertained by the mercantile and banking communities in China as to the inadequacy of the regulations. very similar criticism by the agent of the Hong Kong and Shanghai Bank at Hankow was forwarded in the Hankow report already mentioned (dated the 15th October, 1910). The latter took exception especially to the mutual guarantee of notes as being equivalent to no guarantee, to the impossibility of judging the reliability of firms guaranteeing cash shops, and to the absurd inadequacy of the penalties.
The chief impression left by perusal of His Majesty's consul's reports, however, is that the detailed provisions of the regulations are of but little consequence beside the question of what steps are taken by the authorities to carry into effect the general
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control over the issue of notes aimed at by the legislation. It hardly seems so far that this measure has had more practical effect than the abortive memorials and decrees on the cognate subject of currency which have appeared one after the other during the last few years only to vanish into oblivion.
I have, &c.
(No. 22.). Sir,
W. G. MAX MÜLLER.
Enclosure 1 in No. 1.
Consul-General Sir P. Warren to Sir J. Jordan.
Shanghai, February 22, 1910. WITH reference to your circular of the 13th September, 1909, on the subject of the provisional regulations for controlling the issue of Chinese bank-notes. I have the honour to forward herewith copy of a letter from the Shanghai General Chamber of Commerce, given their views on these regulations.
I also enclose a translation of the Nanking Viceroy's reply to the provincial assembly's enquiries regarding the note issue of the Government banks at Soochow and Nanking which appeared in the Hsin Wen Pao," of the 20th November, 1909.
I have, &e.
PELHAM L. WARREN.
Sir,
Enclosure 2 in No. 1.
Shanghai General Chamber of Commerce to Consul-General Sir P. Warren.
Shanghai, February 7, 1910. I IIAVE the honour to acknowledge receipt of your letter of the 19th November enclosing a translation of the provisional regulations issued by the Ministry of Finance, with the Imperial sanction, for controlling the issue of Chinese bank-notes, and asking for any observations on the operation of the regulations in the Shanghai district.
The chamber has been in communication with the associated exchange banks and their and my committee's opinion is that the regulations, speaking generally, are totally inadequate so far as safeguarding the public, or preventing fraud is
concerned.
The following observations upon the respective regulations are unanimously agreed to by the foreign exchange banks and may committee :--
3. This will tend to make a circle of banks and is most insecure from a creditors point of view. One bank with beavy liabilities may be the means of making five other banks insolvent, and further there is nothing to prevent any group from guaranteeing twenty or thirty others.
4. Cash notes should be at once recalled as the discount on these is extremely heavy, and in Manchuria it is very difficult to have any notes redeemed by cash. If merchants are allowed to guarantee cash shops, it will in all probability tend to increase instead of diminish note circulation.
5. The authorised capital, amount paid up and reserves against note issues should be at once called for by the Ministry of Finance.
6. The last sentence should be deleted, as it is an encouragement for increasing note issues by the establishment of more banks.
few
10. Forty per cent. of ready money is not sufficient as there are very natives, bankers, or others, who hold Government bonds. Are deposit notes meant to be native orders?
14. No further issues should be allowed till the subsidiary coinage is circulating ut par.
16. No powers of an official nature should be vested in the Chamber of Commerce.
18. The penalties for a breach of the regulations are quite inadequate.
[2788 dd--1]
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347