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counterfeiting of the silver coinage would also be a serious danger
and would probably lead to considerable loss to the Colony, as coining
operations could be carried on without much interference in parts of
China, there being no need to produce a worse coin in weight and fine-
ness but simply one similar in every respect, the profit being derived
from the difference between the coin as valued in Hongkong and the
cost of the silver bullion from which it was produced plus the cost
of manufacture. If to prevent such illicit coinage the intrinsic
value of the coin were to be made near to the value at which it was
issued by the Government, then another danger would arise in that
should the Gold price of silver advance beyond the circulating value
of the coin it would all be withdrawn from circulation and passed in-
to the melting pot. As the export and import trade conducted here is
practically that of South China, this Island being merely a distribut-
ing centre, producing nothing and consuming little beyond the actual
food and clothing of its inhabitants - only a very small proportion of
which is European in its origin, the great mass of the population
being Chinese living on rice the incidence of exchange would still
continue to affect the trade as now even were we placed on a workable
gold basis assimilated to that of the British Isles. Then where would
the trade benefit? It might to some extent remove the burden or the
worry from the European to Chinese shoulders, but would not remove
the difficulty in so far as it tends to interfere with the movement
of merchandise. The European merchant at present need not be very
seriously affected by the rate of exchange, as although he buys in
gold and sells in silver dollars, he can go to his Banker and fix his
exchange six months or even twelve months ahead to provide time for the preparation and shipment of the goods ordered as well as for the
time
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