CO129-382 - Public Offices - 1911 — Page 350

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has no alternative to submitting to the inconvenience of a depreciated subsidiary

currency.

If the new policy of the Chinese Government is successful, the Hong Kong coins will probably fall almost immediately to slightly below bullion value, and then rapidly disappear from circulation, both on the mainland and in the colony, until the problem is reduced to manageable dimensions.

If, on the other hand, it is unsuccessful, the measures to be taken will be dependent upon the course of events in China, and cannot with advantage be determined until this becomes apparent.

In the meantime, my Lords do not think that any useful purpose would be served by offering advice to the Chinese Government as to the administration of their scheme of currency reform, nor, indeed, are they in agreement with Sir F. May's view that the restoration to face value of the existing Chinese subsidiary currency must be effected before the new coins can be successfully brought into circulation.

The law that base coin drives out good would of course operate in the manner he suggests, if by law or usage the two varieties of subsidiary coin were to be admitted to concurrent circulation at the same rating. As, however, the scheme provides for the reduction of the rating of the old currency from face value in the first instance to present exchange value, and ultimately to bare bullion value, it is clear that (unless the operation of the edict is defeated by popular sentiment) Gresham's law will operate in the opposite direction-e., to encourage the substitution of the new (overvalued) coins for the old coins, which will be rated at their intrinsic value only.

Indeed, in their Lordships' opinion, the scheme is a sound one and well calculated, if firmly administered by the central Government, to achieve success.

Nor do my Lords think it desirable that representations should be made to the Chinese Government with respect to the coins, whether standard or subsidiary, issued by the colony which are now circulating in China.

The Wai-wu Pu have informed His Majesty's chargé d'affaires at Peking that such coins will, when the new coinage is in circulation, be "treated in accordance with the established practice of all nations."

My Lords understand this statement to mean that the circulation of such coins will be prohibited, and inasmuch as the adoption of a national system of currency discharges a treaty obligation which His Majesty's Government have pressed upon the Chinese Government, they see no ground on which representations could be urged for the exceptional treatment of Hong Kong coins in the Empire.

The displacement of foreign coins circulating within its territories is, in their Lordships' opinion, an operation which any Government is entitled to undertake, only such regard being paid to the convenience of the issuing Government as circumstances will permit.

It appears to this Board that the Government of Hong Kong could not reasonably ask more than that the displacement should be spread over a series of years, and, as such a concession would, in the circumstances, be at best of doubtful advantage, my Lords are satisfied that the better policy will be to leave the Government of China to take its own course.

Much, however, will necessarily depend on the degree of success attending the efforts of the Chinese Government to carry out the provisions of the edict, and my Lords will thereforo be glad if Mr. Secretary Harcourt will cause them to be informed from time to time of the progress of events, both in the colony and on the mainland,

I am, &c.

G. H. MURRAY.

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of the Treasury,* from which you will gather the views of His Majesty's Government on the matter, and the reasons which led to the decision, conveyed to you in my telegram of the 10th instant, that I could not approve the scheme which you i proposed.

3. You will no doubt report further on the situation from time to time, in accordance with the desire of the Lords Commissioners of the Treasury.

4. As regards the question of the acceptance of worn coins, dealt with in your despatch of the 14th January, 1910, you will notice that it is not alluded to in the Treasury letter of the 21st December. I am asking their Lordships for an expression of their views on the matter.

&c.

I am,

L. HARCOURT.

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(Confidential.) Sir,

Enclosure 2 in No. 1.

Mr. Harcourt to Governor Sir F. Lugard.

Downing Street, January 13, 1911.

I HAVE the honour to acknowledge the receipt of your confidential despatch of the 20th January last, dealing with the question of the Hong Kong subsidiary coinage. I regret that it has not been possible to answer your despatch at an earlier date.

2. I now transmit to you a copy of correspondence with the Lords Commissioners

* Colonial Office to Treasury, April 8, ditto, September 13; Treasury to Colonial Office, December 21, 1910.