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Annex 2,
Governor of Hong Kong to Colonial Office,
(Confidential.)
Government House, Hong Kong, 16th July 1903.
Sir,
With reference to your Confidential Despatch of the 22nd May last, I have the honour to transmit, for your favourable consideration, the enclosed copies of a letter from the Managers of the Hong Kong and Shanghai Banking Corporation and the Chartered Bank of India, Australia, and China, with reference to the approaching termination of the agreement made in 1894 between those Banks and the Secretary of State for India, for the coinage of British dollars at the Indian mints at a seigniorage of one per centum. It is pointed out that if silver deposited for coinage into British dollars is allowed to lie in the Mint for long periods owing to the priority given to Indian aud Straits coinage, the effect may lead to grave monetary crises within this Colony. It is most desirable, in the interests of the trade of the Colony, that no such risks should be incurred, and I have to request that you will be so good as to make suitable representations on the subject to the Government of India.
2. In the last paragraph of their letter Messrs, Smith and Cochrane paint out that if Hong Kong is not provided with certain means of converting bullion into currency in the quantities required from time to time, the only alternative that suggests itself is the re-establishment of a local mint. On this subject I have to refer you to your Despatch, No. 179, of the 23rd May 1901, and the previous correspondence therein mentioned.
I have, &c.,
HENRY A. BLAKE,
The Right Hon. Joseph Chamberlain, M.P.,
Sir,
&c.,
&c.,
&c.
Governor, &c.
Hong Kong. 6th July 1903.
We have the honour to inform you that the under-mentioned Banks received notice on 10th ultimo of the termination of the agree- ment made on 14th December 1894, between them, and the Secretary of State in Council of India, for the coinage of British dollars at the Indian Mints at a seigniorage of one per cent.
The said agreement was subject to six months' notice and therefore terminates on 10th December 1903.
The Secretary of State in Council of India states:--
That the Government of India propose to raise the seigniorage to two per cent, in future.
"Moreover, they anticipate that the re-coinage of rupees issued in the years 1840 to 1862, which are being steadily withdrawn from circulation, will provide work for the mints for some years to come, and that they will from time to time Lave to undertake fresh coinage from bullion in order to maintain the volume of the rupee currency, and they therefore desire further to modify the agreement so as to provide explicitly that the coinage of rupees shall, whenever necessary, have precedence over the coinage of British dollars.
"Should it be decided in accordance with the recommendation of the Straits Settlements Currency Committee, to issue a special dollar for use in that Colony, it is probable that the new coin will be manufactured at the Indian mints. In that case priority will be given to the Straits dollar as well as to the rupee, over the British dollar.'
We now wish to bring to your notice that in our opinion this attitude on the part of the Government of India would not only result in great
inconvenience to the trade of this Colony, but would be almost certain
to lead at times to serious contraction of currency, and on occasion might bring about a grave financial crisis.
It is seldom possible to foresee actual requirements a long way ahead, and with the rupee and the Straits new dollar having priority, it is readily conceivable that silver bullion deposited in the Indian Mints for coinage into British dollars might be subject to indefiuite delay at a time when coin was urgently required in Hong Kong.
It is true the Mexican dollar is also legal tender by weight of it be taels 717 1000 Hong Kong dollars, and it is quite possible may available in sufficient quantity for some time, but its supply is governed by the balance of trade in Mexico and experience has proved that it cannot be relied on with any degree of certainty. Moreover the Government of Mexico are at present considering the question of changing the basis of their currency, and if this should be carried out the coinage of the present Mexican dollar will cease, so that it is not safe to depend on relief from that quarter.
In view of the fact that this Colony is entirely dependent on outside sources for its supply of currency, we trust you may be able to make such representations to the Government of India as may lead them to re-consider their intention of giving priority to both India and the Straits, in order that silver deposited for coinage into British dollars may continue to be minted within reasonable time, and also to appeal to them to modify their present proposal to double the seigniorage.
We venture to think that this small concession to the needs of this Colony will not greatly inconvenience the Indian mints as owing to the demonetisation of the British dollar in the Straits, the amount of silver deposited for coinage is not likely to be on a large scale for some time
to come.
There is no doubt, however, that the British dollar is gradually making its way into circulation throughout China, more particularly in the North, and as this cannot help proving advantageous to British interests generally, it would seem desirable that instead of placing restrictions on the supply, every encouragement should be given to increase its circulation.
It seems to us indispensable that the Colony should be provided with some certain means of converting bullion into currency, as required, and, if the Government of India do not see their way to meet us in the matter, the only alternative appears to be to re-establish a local mint.
We have, &c.,
For the Hong Kong and Shanghai Banking
Corporation,
J. R. M. SMITH, Chief Manager.
For the Chartered Bank of India, Australia and China, T. B. COCHRANE, Manager, Hong Kong,
The Hon. E. H. May, C.M.G., Colonial Secretary.
Annex 3.
Colonial Office to Governor of Hong Kong.
(Confidential.)
Colonial Office, Downing Street, Sir,
28th August 1903. I have the honour to acknowledge the receipt of confidential
your despatch of the 16th ultimo on the subject of the coinage of British dollars.
2. You will have observed from the letter from the Government of India enclosed in my confidential despatch of the 22nd of May, that the
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