No. 24,
104
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4. Lord Crewe is inclined to think that no effective action could be taken to rehabilitate the Hongkong coinage in Hongkong until Chinese coin is excluded, since, if a margin of value were established between the Hongkong and Chinese coins, it does not seem likely that two similar coins of the same intrinsic value would for long circulate at values differing in a fixed ratio, and the Chinese coins, being of lower value, would tend to drive the Hongkong coins out of circulation; the Hongkong coins would then have to be redeemed or would Moreover the establishment (even temporarily) of a eventually lose their higher value. higher value for Hongkong coins in the Colony would attract the enormous masses of Hong- kong coins now circulating in China, and their importation would either sweep away the increase of value or would oblige the Government to continue their operations at a cost which is quite beyond the present means of the Colony. This last difficulty would also arise if Chinese coins were excluded from Hongkong.
5. Sir F. Lugard's proposal seems, therefore, likely to be both expensive and ineffectual and Lord Crewe cannot suggest any alternative method of a similar character; the mischief is on so large a scale that the continuance of the system of withdrawal of subsidiary coins paid in to the Treasury is a useless expense. The only way of proceeding in this un- fortunate matter is, apparently, by co-operation with the Chinese Government-Chinese coins being allowed to circulate in Ilongkong and Hongkong subsidiary coins continuing to enjoy the currency which they now possess in the large area through which they circulate. At the same time it seems desirable to move the Foreign Office to bring the strongest possible pressure on the Chinese Government with a view to a substantial restriction in the issue of their subsidiary coins in the interests of China as well as of Hongkong. Should the Chinese Government refuse to assist His Majesty's Government in this matter it appears to Lord Crewe that the coinage whether Chinese or Colonial must continue to depreciate until it reaches the intrinsic value of the silver.
6. A сору of another despatch from the Governor on the subject of the acceptance of worn coins is also enclosed and I am to ask for the favour of their Lordships's observations
thereon.
7. I am to add with regard to the main matter that the Governor has been informed by telegraph that pending full consideration of the question with the Lords Commissioners of the Treasury his sebeme cannot be approved.
8. It is very regrettable that this enormous supply of Hongkong subsidiary coin 800 fine should have been provided for circulation in China without the provision of a reserve fund to guarantee the face value. Profit on subsidiary coin is, his Lordship understands, usually paid to current revenue, and, where the issuing Government has control over the currency in the area to which the coin is limited, the danger may be small. But when, as in this case, the over-valued coin was supplied for use in a foreign country, as well as in a British Colony, it was clearly desirable to hold a portion of the profits in reserve to provide for redemption.
THE SECRETARY TO THE TREASURY.
I
am, &c.,
No. 25.
H. BERTRAM COX.
Copy of despatch from Secretary of State for Colonies to the Treasury. No. 27045/1910.
DOWNING STREET, 13th September, 1910.
Sin-With reference to the letter from this Office of the 8th of April last, on the sub- ject of Hongkong subsidiary coin--to which no answer has yet been received and which is no doubt still engaging the attention of the Lords Commissioners of the Treasury,-I am directed by the Earl of Crewe to transmit to you to be laid before their Lordships, a copy of a despatch* from the Officer Administering the Government of the Colony regarding the measures recently taken in China for the establishment of a new uniform currency on a silver dollar basis.
23
These measures, if carried into operation, will profoundly affect the situation described in the letter from this Office above referred to, and it appears that the Mint at Canton has already suspended coinage operations. I am to request that you will invite their Lord- ships' observations on the whole matter, more especially as regards the advice which should be offered to the Chinese Government in connexion with the new scheme, and as to the representations which should be made with regard to the Hongkong subsidiary coins now circulating in China.
A copy of this correspondence is being sent to the Foreign Office.
I am, &c.,
THE SECRETARY TO THE TREASURY.
No. 26.
G. V. FIDDES.
Copy of despatch from the Treasury to Secretary of State for Colonies. No. 16893/10.
TREASURY CHAMBERS,
21st December, 1910,
SIR, The Lords Commissioners of His Majesty's Treasury have given their careful consideration to the questions arising out of the condition of the subsidiary coinage of No. 24. Hongkong, which were brought to their notice by Mr. Cox's letter of the 8th April and to No. 25. the further representations on this subject made in Mr. Fiddes' letter of the 13th September last (27045/1910), together with the various documents which accompanied these letters, and they now direct me to request you to submit to Mr. Secretary Harcourt the following reply.
My Lords recognize, with the Secretary of State, that the situation as described in the despatch from the Officer Administering the Government of the Colony written earlier in the year, has been considerably changed by the promulgation by the Chinese Government of the Scheme of currency reform for the whole Empire set forth in the Decree of 24th May last and the explanatory Memorandum.
Before the promulgation of that decree the difficulty facing the Government of Hong- kong was caused by the issue since the beginning of the year 1906 from the provincial Mint of Canton of vast quantities of subsidiary coin which fell to a heavy discount, and cansed the Hongkong coins to fall to a discount almost equally marked both on the mainland and in the Colony.
If diplomatic representations could have succeeded in causing a check to be placed on the operations of this Mint it is conceivable that in course of time the subsidiary coins of both Governments might under prudent control have recovered to par.
Now, however, the Chinese Government has expressed its intention of creating a uniform currency for the whole empire based on the standard dollar and of demonetising all the coins, both Chinese and foreign, at present current.
Whether this policy proves successful or not, it appears to my Lords to be in the highest degree improbable that future currency arrangements of China will be such as to permit of the continued circulation of the enormous quantities of Hongkong coinage at pre- sent in the country at rates in excess of its bullion value.
If this anticipation is realised, such coins will necessarily flow back into the Colony until their value there falls to, or below, bullion value, and any measures calculated to retard such fall would, so far from producing any permanent remedial effects, merely involve the Colony in fruitless expenditure upon the redemption of coins imported for that purpose which if ordinary econoinic forces are left to their operation will disappear from circulation by being melted down as soon as their exchange value tends to fall below their value as bullion.
* Not printed.
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