CO129-284 - Acting Governor Major Gen Black - 1898 [7-8] — Page 82

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of Issue in Hongkong is the National Bank of China. Their issue

is so small that they need not be taken into consideration.

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Hongkong is essentially an exchange centre, it is

drawn upon both by drafts and telegraphic transfers from all the principal towns in Europe, Asia, Africa, Anerica and Australia. Such being the case, an elastic currency is an absolute necessity.A con- -tracted currency would check the prosperity of the Colony more than anything else I can think of .

The position of this Bank with regard to its note

issue is very unsatisfactory to us. We have to keep a reserve of

33.1/3 of our total note issue of ten millions of dollars in London

where a reserve to meet a pressure in China would be absolutely useless. It would be a poor consolation to a howling mob of natives such as I have seen on more than one occasion, in Hongkong, pressing

for cash in payment of Notes, Drafts, Cheques and Deposit Receipts

to be told that a reserve in approved securities was standing io

the name of the Crown Agents at the Bank of England. The proper

place for a reserve to be kept is where the liabilities are. Con-

-sequently, although we have more than the full amount of our legal

reserve in London, for our own safety we have to keep a still

larger reserve out here, aever less than 1/3rd of our circulation

and frequently 1/2 to 2/3rd.`

When the Government of the Straits Settlements

issue their own notes we will promptly withdraw ours, but in the

neantine