care 3.
277 of Chinese from the neighbouring Province during the past and the current year has been largely responsible for the increase in 282 rents. But these latter have been appreciating steadily in the
last 10 years. I calculate that cost of necessaries of life has
advanced not less than 23% since 1902 waen the sterling salaries
scheme was fixed. I attach a conservative calculation by Mr. C. McI Messer on the subject. The published market lists have also been carefully examined. I also attach a report by the Assessor in which he calculates that the increase in rentals of houses for
European occupation since 1st. January, 1902, when the sterling salary scheme and grant of double exchange compensation came into operation may reasonably be estimated at 41% in Victoria, the Hill District and Kowloon. Adopting these figures, which careful in- -vestigation show to be a moderate estimate, Mr. Lesser calculates in a minute copy enclosed that the increase in the cost of living since 1902 for an officer domiciled in Europe is 21%, which if the officer enjoys free quarters is reduced to 153%. The estimate is
a conservative one.
8.
You will I think readily understand that with such advance in prices the serious diminution in sterling salaries
paid in dollars owing to the high rate of exchange now prevailing is very severely felt. The rate at which sterling salaries (in
which category dollar salaries with exchange compensation are to be included) are now paid in the Colony in dollars, was fixed after much correspondence by Lord Elgin in his Despatch No. 122
of the 11th, of June, 1907. The rate adopted was the Hongkong demand rate when exchange is at 2/- or less and 2/- when the demand rate exceeds that figure. The average rate of exchange for the year 1902, when the sterling salaries scheme and double exchange compensation were adopted, was 1/8. The average rate of exchange in 1906 was 2/13. In 1907 it was, for the purpose of conversion of sterling salaries, 2/-. Since 1907 the average has not exceeded 1/94: in 1908 it was 1/94: in 1909 1/9: in 1910 1/94 and in 1911 1/92. In the current year the rates of conversion
have