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would bear but a small proportion to the amount of the loss incurred, and I see no course by which the Government can equitably relieve itself to a greater extent from the risk of the recurrence of the evils complained of. They have arisen principally from an abnormal condition of the trade with China. So long as the exchanges are unfavourable to this country, British merchants having payments to make in China will have to do so at a disadvantage, and the Government cannot exempt itself from a like contingency. It is probable, from present appearances, that the extreme pressure has passed away, and that a reaction has commenced; but it is impossible to foresee the turn which trade with that country may take. One thing only is certain, namely, that if the importations of goods from China are continued on the scale on which they have been conducted for several years past, without the return in equivalent quantities of European produce suitable to the market of that country, a demand for silver must arise, which no mere monetary regulation can obviate or control.
If the foregoing observations be well founded, there may, indeed, be ground for revising the Proclamation of 1844, not for the impracticable object of procuring currency for the sovereign in China, but with the view of removing the anomalies and inconveniences at present prevailing, by an assimilation of the Government regulations to the established mercantile system.
It may be observed that, since the date of that Proclamation, the force of circumstances has brought about a change in the habits of the people, which no proclamation could effect. The prejudice in favour of the Spanish pillar dollar, which then prevailed, opposed, it must be admitted, a great impedi- ment to the settlement of the currency on a sound basis. When contracts were
based on an obsolete coin, increased supplies of which could only be obtained in inconsiderable quantities, the usual resource of rectifying the exchanges by the importation of coin was of no avail. The value of the dollar varied with the demand for its use, and the fixity of a metallic standard was wanting. This defect in the local system created great inconvenience when the rate of exchange rose, under the circumstances which have been already adverted to; and the impossibility of obtaining Spanish dollars in sufficient quantities for the require- ments of trade led to a combined action on the part of the merchants of Canton, in concert with the Chinese authorities, for the establishment of a sound and intelligible system of currency. The movement led to the adoption of the Mexican dollar as the current money of the place, and that coin is now recognized as the established medium of exchange on which all contracts are based.
A similar movement at Shanghai failed from want of unanimity among the foreign merchants; but, after an unavailing effort to maintain the currency of the Spanish dollar, the system broke down from sheer inability to obtain supplies of that coin, to replace the quantities which disappeared from circulation. In this emergency recourse was had to the primitive system of payment by weight, and transactions are now carried on at Shanghai in the medium of Shanghai sycee (silver of inferior standard to the Imperial sycee), a tael weight of which is considered the equivalent to the Carolus dollar. It appears, however, from the letter of the Consul at Shanghai to Sir John Bowring, dated the 6th January, 1858, that, owing to the great inconvenience of bar or shoe silver as a medium of value, the Mexican dollar is coming largely into favour.
Co
From Sir John Bowring's despatch of the 8th February, 1858,* inclosing an extract from the Pekin Gazette," it further appears that a general movement in favour of the adoption of the Mexican dollar is in progress in the various ports of China.
These latter occurrences have no immediate connection with the currency of Hong Kong, which must be governed by the practice of Canton; but the general tendency of the views of the mercantile bodies and of the Imperial functionaries in one direction, confirms the impression that the Mexican dollar must be regarded as the recognized basis for the regulation of the currency of the place.
The course which I would suggest is simply to repeal the Proclamation of 1844, and subsequent Royal Proclamations affecting the currency of Hong Kong.
I am aware of no valid objection to the adoption of this course.
For many years the Treasury were governed by the impression that the coins of the Sovereign were a legal tender of payment throughout the British Empire, and
Parliamentary Paper, No. 287 of 1858.
that it was necessary to adjust the currency of the Colonies to this basis. The legal question was, however, set at rest by an opinion of the Attorney and Solicitor-General in 1852, to the effect that the coins of the realm are not the standard measure of value, or a legal tender, in the British Colonies, unless declared so by Order in Council or other legal enactment.
As a question of policy it may have been desirable to promote, as far as possible, the general currency of British money; but it is idle to attempt to maintain a system where it cannot be enforced. The Proclamation at Hong Kong has hitherto been productive only of inconvenience to the Government functionaries of the Colony and to the Government itself. It has no practical effect on the currency of the place, and is, indeed, necessarily evaded by the Local Government. The rents of Crown lands, like other contracts, are payable in dollars; and, in order to secure a money revenue which shall be available for public purposes, the attempt has been made to secure the payment of licenses and other dues in similar coin. In Mr. Caine's letter of the 18th March last, to Deputy Commissary-General Power, which closes the correspondence annexed to Sir Charles Trevelyan's Memorandum, it is stated that, when the Post Office is transferred to the Local Government, Sir John Bowring will endeavour to accommodate its receipts to the general currency of the Colony. The meaning of this is, as I apprehend, that the postal rates will be fixed by local enactment at certain amounts in dollars or fractional parts of that coin. I am informed that such a course has been followed in the case of other local dues, but that some doubt exists as to whether payment in British money can be legally refused. Whatever may be the state of the law on this point, it is obvious that an antagonism prevails between the aim of the local enactments and the Proclamation. The existence of such an antagonism is itself an evil, and brings discredit on the functions of Government. It ought to be put an end to, and I conceive that the most politic and graceful course for the Home Govern- ment to pursue, is to give up the enforcement of a barren and cumbrous principle.
I think that, if the Proclamations were repealed, all matters of local concern which it may be necessary to adjust to the dollar currency, might be regulated by local enactment. The Imperial transactions, such as the pay of the troops, might be settled by orders to be promulgated by the Home Government, and would probably be necessary hereafter to frame new regulations regarding the rate at which the dollar should be issued for and salaries.
pay
G. ARBUTHNOT.
Treasury, August 20, 1858.
Hong Kong Commissariat Negotiations on England.
1844.-49d. to 51d. per dollar 1845. 48 d. to 51d. do. 53d. do. do.
1846.-50d.
Par in sterling. 1847. Par in sterling.
50d. dollar.
per
1848.47 d. to 503d. in dollars.
(South American).
do.
(Spanish).
(South American).
Par, to 198. 9d. per cent. discount, sterling.
1849.-47 d. to 50d. in dollars.
Par, to 5 per cent. premium, sterling.
1850.-Par, dollars.
Until about May 1850, when the Commissariat officer reports the exceeding scarcity of coin, bills on England at six months' sight being quoted at 4s. 7d. per dollar.
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