114
No. 23.
No. 20,
42--
No. 40.
Copy of despatch from Governor of Hongkong to Secretary of State for Colonies.
Confidential.
GOVERNMENT HOUSE,
Hongkong, 22nd December, 1911.
SIR,-In my confidential despatch of January 20th, 1910, I had the honour to submit à proposal for dealing with the problem of rehabilitating the subsidiary silver coinage of this Colony, which at the time was circulating at about 7% discount and involved an annual loss to the Revenue of about $70,000 per annum as well as great injury to trade.
2. The basis of that proposal was that the Government should secretly buy up a very large quantity of coin at the prevailing discount, which in consequence would rapidly decrease, till the coins reached par. The coins purchased would be demonetised at no very great loss since the bulk would have been purchased at a high discount, and the sudden diver- gence between the Ilongkong and Chinese coinage would compel all shopkeepers and receivers of subsidiary coins to institute two scales of payment one for payment in Hong- koug and the other for payment in Chinese coins. Once this discrimination had been inaugur ated it would continue, since British firms which receive large quantities of subsidiary coins, such as the Tramway and Star Ferry, would gladly avail themselves of this chance of reducing their losses. If the Hongkong coin should however tend to fall to a discount gradually by the influx of coin from China, the operation could be repeated. In view of the probability of the non-recognition of foreign coins in China under the scheme of cur- rency reform, it appears to me that some action is advisable lest this Colony should suddenly find itself swamped with coins, of its own issue, returned from China under the operation of such a scheme as anticipated by the Lords of the Treasury in their letter of 21st December, 1910.
3. It has occurred to me that the objection (if it can be considered to be one) to a government purchasing its own coinage at less than its face value, can be overcome by entrusting the operation to a bank of high standing such as the Hongkong and Shanghai Bank. I venture, however, to suggest to you another method of dealing with this problem.
4. When the Chinese Government puts its new scheme into operation it will com- mence minting the new currency in large quantities. In order to have an adequate quantity of the new coins in hand, China will no doubt for a short time be a buyer of har silver, the mint supply of coins being kept up later by the melting down of existing
currency.
The new Chinese subsidiary coinage is to be 800 fine, and I suggest that this govern- ment should buy in (either directly or as suggested in $3) a large quantity of its own superfinous subsidiary coinage, melt it into bar silver (being 800 fire) and offer it for sale to China. The Chinese Mints could immediately re-coin it for their new issue. This would save the cost of shipping, insurance, Crown Agents' and brokerage expenses, etc., and reduce the loss to something very small indeed if the coins are bought in as I have suggested, at the discount of the day.
5. So soon as China prohibited the circulation of foreign coins in China, this Colony would enact a similar prohibition of Chinese coins here. This would displace the enor mous quantities of Chinese coins now in circulation, and afford room for a corresponding quantity of the Hongkong coins which would pour into the Colony. With this large absorption, and the scheme of demonetisation by melting down on the spot which I have suggested in my last para., I anticipate that the loss to the Colony and the dislocation of trade would be reduced to a minimum, the more so that I have always had considerable doubt whether the "vast quantities" of Hongkong silver subsidiary coins supposed to exist in China, are in fact existent, or that any very impossibly large quantity would come suddenly into the Colony. I submit that my suggestions will cause a much lesser disloca- tion of trade and loss to Revenue than the alleniation proposal of the Lords of the Treasury
43
to do nothing and allow the coins to fall to such a discount that they will reach a fall below
bullion value.
The Right Honourable
LEWIS HARCOURT, M.P.,
St
&c.
I have, &c.,
No. 41.
F. D. LUGARD,
Governor, &c.
Telegram from Governor of Hongkong to Secretary of State for O mies.
HONGKONG, 21st December, 1911.
Refers to despatch of 9th June, requests authority to introduce Ordinance and No. 96. states that $108,000 copper coin has accumulated.
No. 42.
Telegram from Secretary of State for Colonies to Governor of Hongkong.
Approves introduction of Orlinance.
No. 43.
23rd December, 1911.
Copy of despatch from Secretary of State for Colonies to the Treasury. No. 41096/1911.
DOWNING STREET,
13th January, 1912.
SIR,With reference to the letter from this Office of the 13th September last,* regard- ing the question of the redundancy of Hongkong subsidiary silver coin, I am directed by Mr. Secretary Harcourt to transmit to you to be laid before the Lords Commissioners of the Treasury, copy of a despatch from the Governor of the Colony.
2. In view of the attitude and public declarations of the Governor and of the Unofficial Members of the Legislative Council, Mr. Harcourt does not consider it feasible to proceed with the scheme described in the letter above quoted, and some other solution of the difficulty must be looked for.
Not printed.