CO885-11 — Page 19

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before they could carry on any large volume of business.

Added

to this there is a real stringency of currency-a shortage of means of payment-which is making it impossible even for merchants with very large, though solid, assets to raise the working capital required to meet their losses and resume trade.

76. What is the cause of this stringency? In the first place some $16,000,000 of cash was withdrawn from the Chinese banks between the 19th and the 22nd June, and a good deal of that went out of the Colony to South China before the Government's pro- clamation prohibited export. Some bank-notes of large denomi- nation have been smuggled out since; more has been, and still is It is estimated by a competent being, hoarded in the Colony. authority that at least $10,000,000 of our currency is being thus held out of circulation. There is therefore an actual shortage of hard cash. We have, further, the estimate of the compradores of our leading banks that $40,000,000 of our bank-notes are out of circulation, or not in active circulation, the figure being arrived at as follows:-

Reserves in the three leading banks Reserves in other non-native banks

Held in South China (Canton, &c.)

And the above estimate of the amount hoarded

$7,000,000 13,000,000

10,000,000

10,000,000

$40,000,000

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merchants and others stiffering from the currency stringency following the crisis. On the 22nd September a deputation from the Chinese General Chamber of Commerce was sympathetically received by His Excellency the Governor and the advisers whom he had called in. I had the privilege of stating the case on behalf of the Chinese. His Excellency lost no time in telegraphing to the Secretary of State for the Colonies in London who in less than 24 hours replied, to the immense relief of the whole com- munity, that the money would be made available in a few days. The immediate financial effect of this Imperial support has been shown in the tone of the Nam Pak Hong market, and the stoppage of panicky withdrawals of deposits from Chinese banks. I cannot express at all adequately the effect on our Chinese community of It is evidence to us of the this great and generous gesture,

power of our Governor to secure for us help in time of trouble, and of his willingness to be moved by any reasonable representa- tions from the Chinese. Above all, it has convinced us that the loyalty of the Chinese of the upper and middle classes has been founded on a true estimate of British strength and justice, and of the Government's tender regard for the welfare of the people at all times.

PUBLIC RECORD

OFFICE

mmimmim

།།།།།

Reference :-

C.O.882/11

PUBLIC RECORD OFFICE, LONDON

| ALLY WITHOUT PERMISSION OF THE

BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO

Total

This leaves only Our total note-issue is about $65,000,000. $25,000,000, in active circulation, and the requirements for normal trading are estimated to be about $45,000,000. Naturally a con- siderable part of the effective currency of the Colony consists of cheques drawn against deposit accounts, such deposits being in many cases really new currency created by the banks by way of loans or overdrafts against suitable securities based on their cash reserves. Now this part of the currency has been restricted by the As the doubt as to the immediate solvency of the merchants. storm passed and the strike dragged out, it became clear that some measure would be necessary to replace the hoarded currency and to serve as a cash basis, or the extension of the cheque currency based on loans and overdrafts. It is well known that in times of stringency in the money market a comparatively small sum will serve to draw out much larger quantities of currency into active circulation if it is provided in such a way as to inspire confidence. It now became urgently necessary to find that sum, and in such a way as to restore public confidence by a dramatic action.

77. Being convinced of the existence of a stringency, and realising that it was intensified by the anxious and uncertain state of mind of the Chinese merchants, I suggested a large loan from the Imperial Government, as the result of a letter from the Chinese General Chamber of Commerce to the Government on the 19th September appealing for assistance to the amount of After discussing $30,000,000 in the shape of Treasury Bonds.

the Chamber's rather vague proposals with the Hon. Mr. D. W. Tratman I submitted that it was necessary to appeal to the Imperial Government for advances not exceeding £3,000,000 sterling on approved securities, for the relief of the Chinese

Part III.

REFLECTIONS AND RECOMMENDATIONS.

Success of Our Measures.

78. All the measures described in Part II of this Report, with the 'exception of the embargo on the export of foodstuffs to Canton (para. 17) and the possible exception of the Telephone Censorship (para. 26), have proved to be, to a larger or smaller extent, efficacious in dealing with the different problems for which If some of these measures had they were specially instituted. been thought of and taken at the commencement of the trouble. it is within the bounds of possibility that some of the unpleasant features which characterised the early stage of the strike would not have appeared.

•

Necessity for Preparedness.

79. Recommendation: Here I would stress the importance of preparation. Some of the organisations already described are difficult to improvise, and, moreover, the knowledge that they are there ready to function, will prevent attempts at a general This is not the last general strike being lightly undertaken. strike that will be attempted. I would venture to suggest that an intelligent officer might be put permanently on the work of keeping live" registers of Chinese volunteer workers for essential service, and that as many as possible should be assigned their duties beforehand. A Chinese organisation parallel to the existing European organisation for times of emergency is required. I would also suggest that the successful measures enumerated in Part II, and any others which may appear to be necessary, should be embodied in one comprehensive list, to be ready for use at a moment's notice in case of any threatened strike in future.

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