T
COPY.
Private Memorandum by Mir. N. J Stabb.
C.O
33818
555
REC REG 22 JUL 15
The present large premium at which Bank notes stand com- -pared with Silver dollars is to a great extent due to the heavy fall in price of Silver which occurred last Autuan, as the Course of trade in South China and the way it is conducted did not permit of exchange following to the full extent the decline in Silver.
At the present moment Mexican and British dollars can be purchased in Shanghai and laid down in Hongkong at about 1/81 against the exohenge rate here of T.T.1/98 a difference of say 62%.
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Although British and Lezican dollars are the legal
tender of the Colony, they do not circulate to any extent, in fact they are hardly ever used except in very small quantities, and for many years past all business transactions and all exchange
●perations have been based on payment in notes.
So long as the course of trade in South China maintains exchange above the Silver parity, it is impossible for Banks to receive dollars and pay out notes in exchange for obvious reasons. In times when exchange is on the level of Silver and Bank notes and silver dollars are nominally at par, the latter are seldom seen, as they are not required for business purposes, and it is only be- -Cause notes are at a high premiun that the question has become so to speak acute one grievance being that holdere of notes cannot take advantage of the situation to exchange the notes for silver dollars at a difference of 7 or 8 in their favour and then get the silver dollars accepted at par with notes. So long as the trade of South China continues to be conducted on the present lines ie. payment in Bank notes, it is difficult to see how a consider- -able difference in value between silver dollars and notes at times com be avoided. The volume of the trade of South China which is financed through Hongkong is very large and runs into many millions of sterling per annum. Apart from the export of Silk and other produce from Canton against which Herchants sell Bills,