2
of worn coins is also enclosed, and I am to ask for the favour of their Lordships" observations thereon.
7. I am to add with regard to the main matter that the Governor has been informed by telegraph that, pending full consideration of the question with the Lords Commissioners of the Treasury, his scheme cannot be approved,
8. It is very regrettable that this enormous supply of Hong Kong subsidiary coin 800 fine should have been provided for circulation in Chiua without the provision of a reserve fund to guarantee the face value. Profit on subsidiary coin is, his Lordship understands, usually paid to current revenue, and, where the issuing Government has control over the currency in the area to which the coin is limited, the danger may be small. But when, as in this case, the over-valued coin was supplied for use in a foreign country, as well as in a British colony, it was clearly desirable to hold a portion of the profits in reserve to provide for redemption. I am, &c.
My Lord,
Enclosure 2 in No. 1.
Sir H. May to the Earl of Crewe.
H. BERTRAM COX.
Government House, Hong Kong, July 29, 1910.
I HAVE the honour to forward for your Lordship's information the enclosed copy, furnished to me by the courtesy of Mr. Max Müller, of a despatch addressed by him to the Sceretary of State for Foreign Affairs, giving cover to a translation of a decree, and of regulations to give effect to it, establishing in China a currency on the basis of a silver dollar.
2. This innovation, if carried out by a strong hand guided by expert financial advice, would, I need scarcely point out, be a great boon to trade and commerce generally throughout China, and would therefore result in advantage to the trade of the colony, which is at present considerably hampered by the chaotic state of the currency in the neighbouring provinces.
But if the operation proposed under the decree is handled in a thoughtless and ignorant manner, the existing condition, due to the want of a properly regulated currency, is likely to be aggravated rather than improved. I venture, therefore, to suggest that the serious attention of the Chinese Government be drawn to a few leading principles which must be observed if success is to be attained.
3. In reply to an enquiry of His Britannic Majesty's consul-general at Canton, I learn that on the 28th May the provincial mint received orders to cease the minting of all coinage on the 6th ultimo; that minting accordingly has been suspended, and that the mint is awaiting instructions with regard to the minting of the new coinage. Mr. Jamieson adds that he understands a central mint will be established at Tien-tsin, with branches at Canton, Wuchang, Yunnan, and Chengtu.
Past
It is to be presumed that the Chinese Government is alive to the vital importance, in the interests of the scheme, of absolute control of these branch mints. experience leads those in this colony who are qualified to form a judgment to believe that the success of the operation depends, as far as the two Kwang provinces are concerned, upon the closing of the Canton mint. The temptation to manipulate the coinage is too great, and the ignorance of the provincial authorities of the disastrous results of tampering with currency are too profound, to justify the keeping open of
this mint.
4. The next point I wish to emphasise is that, sc long as the existing largely over-issued silver coinage of the Canton mint, consisting of 10- and 20-cent pieces (of which the 10-cent pieces are believed to be below the authorised weight), remains at a discount, none of the new subsidiary coinage should be put into circulation. I gather from the fact that the necessity of first dealing with the existing small silver coinage is not mentioned in the regulations that the Chinese Government is ignorant of the clementary principle that if two coinages are in circulation side by side the baser will drive the better out of the market.
The Chinese Government should either wait till the existing silver coins issued by the Canton mint reach par, or they should hasten that event by a scheme of redemption before any issue of the new subsidiary coins is made; and I would ask that this fact be urgently pressed upon the Wai-wa Pu.
3
5. The point alluded to in the preceding paragraph is also important when section 14 of the regulations is considered. Apparently it is contemplated to repudiate the existing small silver coins after a date to be fixed upon. Unless some selleme of redemption is adopted at any rate for the 20-cent pieces, which are at present the real currency of the two Kwang provinces, an act of very grave injustice will be done, which will touch the pockets of rich and poor alike, and will therefore be likely to lead to very serious difficulties.
6. I question whether the Chinese Government realise that the coinage of standard coins, which is both necessary and desirable, involves expenditure of about 1 cent.; and that the establishment of a good dollar currency with a properly limited sub-coinage will cost it money instead of producing it.
per
7. Lastly, I notice that no mention is made of the Hong Kong subsidiary coinage
in circulation in China and of how it is proposed to deal with it.
This is a point upon which this Government would like information.
8. I have sent copy of this despatch to His Majesty's chargé d'affaires at Peking.
Sir,
I have, &c.
HI. MAY,
Officer administering the Government.
Enclosure 3 in No. 1.
Colonial Office to Treasury.
Downing Street, September 13, 1910. WITH reference to the letter from this Office of the 8th April last on the subject of Hong Kong subsidiary coin to which no answer has yet been received, and which is no doubt still engaging the attention of the Lords Commissioners of the Treasury ----I am directed by the Earl of Crewe to transmit to you, to be laid before their Lordships, copy of a despatch from the officer administering the Government of the colony regarding the measures recently taken in China for the establishment of a new uniform currency on a silver dollar basis.
2. These measures, if carried into operation, will profoundly affect the situation described in the letter from this Office above referred to, and it appears that the mint at Canton has already suspended coinage operations. I am to request that you will invite their Lordships' observations on the whole matter, more especially as regards the advice which should be offered to the Chinese Government in connection with the new scheme, and as to the representations which should be made with regard to the Hong Kong subsidiary coins now circulating in China.
3. A copy of this correspondence is being sent to the Foreign Office.
I am, &c.
G. V. FIDDES.
198
;