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N°
223.
Sir,
HONGKONG,
REC
C.O
33818
REG 22 JUL 15
GOVERNMENT HOUSE,
16th. June, 1915.
553
Go
тобуск
In reply to Mr. Harcourt's Despatch No. 93 of the 8th. April, I have the honour to inform you that no suggestions for remedying the condition under which the standard coin of the Colony is quoted at a discount when compared with the note issues of local banks have reached me, nor an I myself able to suggest any measures to meet the situation.
2.
A careful examination of the subject shows it would be impossible for the Government of this Colony to deal with the matter. The trade of this Colony and of China is conducted on a silver basis. Imports are obtained in the main from gold-using countries and exports are in the main to the same countries. Imports have to be paid for in gold which must be bought with silver. Exports must be paid for in silver which is bought by selling gold. It follows that the balance of trade is the determining factor in fixing exchange. If imports predominate the demand for gold cheapens the price of silver and exchange falls. If exports pre- -dominate the demand for silver raises its exchange value as com- -pared with gold.
The operation of this law of demand and supply
3.
may be watched at Shanghai where trade is conducted really and not nominally on a silver basis. At the present time in Shanghai imports predominating owing to the war in Europe which has closed
markets
THE RIGHT HONOURABLE
ANDREW BONAR LAW, M.P.,
800-
&C..
&c...