- 4.
(1) The premium affects ordinary retail transactions
in the Colony and has helped to reduce the cost of living on the basis of Hong Kong currency. If the premium was suddenly withdrawn, retail stores would, as they have invariably done in the past, put up the price of imported goods "owing to the fall in exchange". As regards exports the sellers
in South China do not lose by the premium on the
Hong Kong note as they sell in subsidiary coinage and get more of same for the appreciated dollar. (2) All transactions with Foreign Banks at the Shameen,
Canton, are based on Hong Kong notes and therefore on Hong Kong exchange. As you know, the Native currency of Canton is Chinese subsidiary coinage and Chinese Bank notes repayable in such subsidiary
coins.
Hong Kong is not the only place where the note is
at a high premium. In Indo China at the present moment er change stands at a premium over Hong Kong exchange of 2 in spite of the fact that the silver contents of the piastre are practically the same as that
of the British dollar.
A high and low level basis for exchange is in my opinion only practicable when such exchange is on a gold basis and cannot apply to a silver currency with its
wide fluctuations in its bullion value.
I consider the correctness of the answer given to
the Peninsular and Oriental Bank in the Colonial
Secretary's letter of 10th January 1927 has been thoroughly justified by subsequent events.
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