29
28
Taking roughly the population of the Colony at 400,000 it would therefore appear that a total of $2,000,000 at any one time is sufficient and assuming that the life of a coin is 20- years (which owing to past circumstances cannot yet be verified) a supply of $100,000 a. year would be ample under present circumstances."
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Moreover the trade set an example which the Government of the Liang Kuang Pro- vinces was not slow to imitate.
It is clear that when once the trade was realised prohibition should have been placed by Government ou the export of subsidiary coinage from Hongkong, if not in consideration of its unfairness, at any rate in consideration of the risk incurred by Government of having to take back its coins in larger quantities than were necessary for the internal retail trade of the Colony. This is admitted in section 2 of the Majority Report of the Subsidiary Coin Committee:-
"It is true that in past years the Hongkong subsidiary coinage played a considerable part in the trade with Canton but judging from the trouble that has arisen in the last two years it would appear to have been an economic mistake to have directed it from its true purpose."
4. The Subsidiary Coin Committee.--The Subsidiary Coin Committee was appointed "to enquire into the causes of the depreciation of the subsidiary coinage of the Colony, and to advise as to what means can be taken, with due regard to interests of trade, to rehabilitate such cuinage".
The majority found that depreciation was due to a large over-issue of Hongkong Subsidiary Coinage" and to the excessive circulation in the Colony of small coins struck at the Canton Mint" and advised "the prohibition of the import and circulation of all alien. subsidiary coinage whatever, with the exception of the Chinese Cush." Mr. Usborne agreed with the majority but recommended that the Chinese Government be given six months to put its house in order and that if after that period had elapsed it had accomplished noth- ing, probibition should be put into effect. Mr. Armstrong recommended for immediate action that the Government prohibit the importation of all coins not being legal tender in this Colony, except with a permit'. Thus two-thirds of the Committee favoured prohibition.
The minority admitted with the majority that the depreciation of the longkong subsidiary colage was due to over-issue of such coins and excessive circulation of Chinese coins bit advised that negotiations be entered into with Peking and that "in the event of the negotiations being without result *
the Committee be called together
again six months hence to further deliberate.”
On 20th August, 1908, the Colonial Secretary addressed a letter to the Members of the Subsidiary Coin Committee and to Members of the Executive and Legislative Councils informing them that negotiations had been entered into with the Chinese Authorities, both Local and Central, but that no sucess had been achieved. In these circumstances a number
of questions were addressed to them by His Excellency the Governor, amongst which was the following:-
+
"Question 2.-It was therefore proposed to restrict the circulation of Chinese Sub- sidiary Coins at once by prohibiting their import except by licensed exchange agents. (These men require it for sale to returning esigrants, etc.) No fee to be charged for a licence. Do you concur in this proposal ?
A.-Members of Subsidiary
Coins Committee.
Hon. A. M. Thomson.
Hon. Wei Yuk, C.M.G.
J. R. M. Smith, Esq.
J. Armstrong, Esq.
R. Shewan, Esq.
Replies.
Yes, but charge fee us at present.
Yes. No.
See Section
5 of Ordinance 2 of 1867 and Schedule to Ordinance 3 of 1887.
I would first restrict the importation and then
circulation would probably restrict itself.
Yes, if necessary, but I think the circulation of Chinese coins may be prevented without prohibiting their import.
B.-Members of Council.
Hon. F. II. May, C.M.G.
Hon. Dr. Ho Kai, C.M.G.
Hon. M. Stewart.
Not at present. I am of opinion that negotia-' tions with the Chinese Government should: be pushed much further than they have yet
Yes.
No."
been.
The question was also addressed to Messrs. Law (a signatory to the Minority Report), Gresson, Pollock, Slade and Sir C. P. Chater but these gentlemen preferred not to reply,
5. The Case against Prohibition.The case against prohibition is stated in the. Minority Report of the Subsidiary Coin Comunittec :—
« We
*
*
cannot admit that it is desirable, in the first instance, to take any action that might result in the further depreciation of the Subsidiary Coinage of the Two Kuang provinces as these coins form the chief, if not the only medium of payment by the Con- sumers of goods bought and exported from Hongkong for use in these provinces.
The trade of Honkong is so closely connected with that of the Two Kuang provinces that any attempt to rehabilitate the Colony's Subsidiary Coinage by restricting or prohibit- ing under penalties the use of Canton coius in Hongkong, as provided for in the proposed Ordinance submitted by the Chairman, would in the opinion of the undersigned bring about a further depreciation of these coins and might lead to financial disabilities, if not to measures of retaliation by the Canton Authorities, adversely affecting the trade of the Colony."
The argument is elaborated in a letter from Mr. Law dated 12th August, 1909 :--
"If by prohibition we in any way help to increase the discount on Chinese sub-coin it will make trading between Hongkong and Canton more difficult. The retail trade on the mainland is done in sub-coin, and if I, for example, sell Hongkong produce for shipment to anywhere in the Canton Delta at a price in Hongkong dollars, which I must do, the buyer, if the rate of discount on Canton sub-coin is 10% discount has to add that amount on to first cost before reselling it, if 15% discount is the market rate he has to add that amount on; it therefore follows that the higher the discount the more sub-coin the con- sumer has to pay, consequently there must arrive a point where owing to the cost of Hongkong exports in Chinese sub-coin the consumer either cuts down his requirements or does entirely without what may eventually become a luxury to him. It does not affect one partienlar class of goods only, everything exported from Hongkong would suffer in the same way, and consequently interfere with trade. The point, therefore, is, are we in Hongkong justified in taking any steps that may be likely to increase the discount on Chinese sub-coin seeing that such action would affect much greater interests than the loss suffered by local Companies who from the nature of their business collect more sub-coin than they can dispose of except by selling it on the market."
It is obvious as the Minority say that "for export purposes these (Chinese) coins would of course he their melting value "and that "balance of trade has to be adjusted by movements of bullion". Mr. Armstrong says:-
"Subsidiary coin is used principally for internal circulation: it is only the medium of exchange for goods to a small extent: sellers of silk in Canton insist on payment being made in Hongkong Currency: if sellers of sugar, etc., here are willing to accept Chinese subsidiary coin in payment, that is their affair, and their refusal to do so would in no way prejudice our general business relations with Canton.
It is proved without doubt that the bulk of the Chinese subsidiary coin now circulat- ing in the Colony has not been brought here for the purpose of buying goods, but by speculators who buy the coin in Canton at a discount with money they remit from here which they also get at a discount and are able to cirenlate the coin here at a profit."
The argument therefore against prohibition of Chinese subsidiary coins on account of their being a medium of adjustment of the balance of trade has not been advanced and would not in any case hold water.
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