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No. 57.
Copy of despatch from Governor of Hongkong to Secretary of State for Colonies. Confidential.
GOVERNMENT HOUSE, HONGKONG, 21st November, 1912.
SIR, I have the honour to acknowledge the receipt of your confidential despatch of the 20th of September on the subject of the subsidiary coinage of Hongkong.
2. You asked for my advice as to what was to be done with the accumulation of subsidiary coins in the hands of the Government and I replied in my telegram of the 22nd of October that I recommended its sale as bullion. You approved this course and the coins that it was desired to sell have been shipped to England.
advisers 3. My reasons for my recommendation are that in my view and in that of my it would be a retrograde step to pass the coins again into circulation; while the loss of interest renders it costly to hold them. By passing them into circulation this Government would incur the liability of incurring again and again the loss in discount should the coins find their way back into the Treasury while the liability of eventual redemption would continue.
4. The policy of this Government up to the time when you sanctioned passing again into circulation the subsidiary coin received into the Treasury as revenue, was to withdraw such coins from circulation and to put pressure on the Chinese Government to restrict their issnes of stall silver coins from the Canton Mint. Had this pressure been successfully applied it is not improbable that the discount on Hongkong and Canton small silver coins would by this time have disappeared.
Failing success in its negotiations with the Chinese Government, this Government has never lost sight of the fact that probibition of the circalation in the Colony of the Canton coins would be necessary. Without such prohibition it was obvious that in the face of continued issues of Chinese coins and their influx into the Colony the withdrawal of Hong- kong coins would be a useless expense as you have described it.
5. Negotiations with the Chinese Government have absolutely failed and there seems no immediate prospect of their taking steps for the reform of their currency. This Govern- ment is therefore forced to rely on its own measures to retrieve the difficult situation into which it has drifted through want of forethought in the past.
In my
6. The crux of the problem of rehabilitation is the uncertainty of the amount of Hong- kong subsidiary coin put into circulation and still in existence.
confidential despatch of the 27th of April, 1907,* I estimated the amount at $20,000,000. That was a mere guess. There are no ascertainable facts to base an estimate on. The best opinion now is that my estimate was far too high. With a view to gaining more accurate information I caused the Treasurer to issue to the local Banks and money-changers a Circular, copy enclosed, enquiring what amount of Hongkong subsidiary coin would be offered to Government within the next 2 months if it decided to buy up all the available subsidiary coin in the Colony.
7. The result is that the European Banks offered $30,000 only at 5% discount. These banks hold a total of only $925,000 of which $850,000 is for sale at par only while $45,000 is kept for their own current use.
None of the Chinese Banks or money-changers made any offer from which it is inferred that they hold no great stock, but carry on exchange business chiefly from the coins coming in or going out from day to day.
In view of these facts I am of opinion that the quantity of Hongkong coin which would flow suddenly into the Colony if prohibition of Chinese coins were resorted to would not be large and that the problem of rehabilitating the subsidiary coinage of this Colony is a much simpler one than it has hitherto been regarded.
* No. 37 in printed correspondence 1908.
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8. It is even possible that it may be solved without probibition by discrediting the Chinese coins. With this object in view I have Tramway's Company, the High Level Tramway's Company, and the Star Ferry Company, suggested to the Low Level who are the principal sufferers among European institutions from the discount on sub- sidiary coins of which they receive large quantities daily in fares, to decline to accept
Chinese coins.
This they have consented to do on my urgent representations that they shall assist the Government in its efforts to restore the Hongkong coins to par.
The innovation was begun on Monday the 18th instant. Precautions were taken by the Police to deal with any attempts at resentment by the population at the refusal of Canton coins. No difficulty occurred and I am glad to say that other establishments are following the example of the three companies mentioned. I enclose an extract from a No. 56. local newspaper on the subject.
9. The moment is peculiarly opportune for this action and even for the more decided step of prohibition for since I wrote my despatch of the 2nd of August the Cauton Govern- No. 48. ment has prohibited the export of their silver coins nominally on the plea of their scarcity but in reality in order to force the use of their notes in the Provinces and in this Colony. They cannot therefore take exception to the action of this Government if it proceeded to co-operate with them by probititing the circulation of their coins in the Colony.
10. I shall report further to you the effect of the action taken. In the meantime I am not in favour of dealing with this difficult question in the manner described in the letter to the Treasury of the 13th January which formed an enclosure in your despatch No. 43. under reply for the reasons indicated in paragraph 6 of that letter and because 1 think it is possible that a solution may be reached in a simpler manner.
11. I have sent a copy of this despatch to H.M. Minister at Peking.
The Right Honourable
LEWIS HARCOURT, M.P.,
&c.,
&C.,
&c.
I have, &c.,
F. H. MAY,
Governor, &c.
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