No. 11.
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purpose by the Governor General of the Liang Kuang provinces with such assistance as you yourself may be able to give. At present the Provincial Authorities do not appear to be taking any effective steps to remedy a condition which must be injurious to the interests of the Two Kuang Provinces and of this Colony.
H.B.M. CONSUL-GENERAL, CANTON,
I have, &c.,
No. 12.
F. D. LUGARD,
Governor, &c.
Copy of despatch from H.B.M. Consul-General, Canton, to the Governor of Hongkong.
No. 68.
H.B.M. CONSULATE-GENERAL,
CANTON, 1st June, 1909.
SIR,-In reply to your despatch No. 58 of the 26th ultimo, I have the honour to inform you that I am communicating to the Viceroy, in an informal manner, Your Excellency's suggestion that Your Excellency's Government and the Chinese Provincial Authorities should depute officers to discuss the question of subsidiary coinage, and am asking the Viceroy to give this proposal bis careful consideration.
Should I receive a favourable reply to this communication I venture to suggest that Your Excellency should send me an official despatch, indicating in general terms the various points at issue which the deputies would be instructed to discuss, and stating your wishes in regard to the form in which the results of the conference should be presented.
It is unlikely that the Viceroy, in the event of his agreeing to Your Excellency's proposal, will authorise the Chinese delegate to agree to any resolutions or make any recommendations on the subject, His functions will probably be limited to the preparation of a confidential report based on the information supplied to him by Your Excellency's representative.
His Excellency
THE GOVERNOR, HONGKONG.
I have, &c.,
No. 13.
HARRY H. Fox,
Acting Consul-Genera¡,
Scheme for Rehabilitating Hongkong Subsidiary Coinage.
9th October, 1909.
On the 6th August 1909 the Executive Council advised "that the withdrawal of subcoin for the purpose of demonetization should be discontinued for the present"; and this is at present the last word on the subject.
The recommendation that all subcoin received by this Government as revenue should be collected by the Treasury and be periodically sent home to be disposed of by the Crown Agents was originally made in paragraph 5 of Mr. F. H. May's confidential despatch to Lord Elgin, dated the 27th April 1907: and Lord Elgin replying in a confidential despatch dated the 18th June 1907 wrote: "The measure proposed in paragraph 5 of your "despatch will obviously give no immediate relief as, on the figures supplied by you, it 'would have to be in operation for 50 years before the whole of the excess coins were 'thereby withdrawn from circulation; but it is a step in the right direction, and I, there- "fore, approve of your proceeding as you suggest, pending a consideration of the question "whether it will be necessary to take further measures on a larger scale.”
11
For subsid ary coins received by the Treasury on and after the 1st January 1909, a sum of 14% is placed on the Treasury books as loss, and I am told that 14.82% would more accurately represent the loss at present rates; while the average annual loss to revenue on account of subcoin (including the loss by demonetization of unissued stocks) bas been $184 204 for the last three years (1906-8). The average loss on the same period, which would have been incurred by payment of discount instead of demonetization, was only $26,777 per amun and it was this fact which led the Executive Council to decide against further demonetization.
There are, however, grave objections to giving effect to the decision of Executive Council for either the subeoin received by the Government must be retained in Government custody or it must be reissued by the Government. In the first case (a) its constantly increasing bulk will render its enstody a matter of difficulty and expense, and will perhaps necessitate the construction of special vaults: (b) it will have to be insured at a steadily increasing cost: (c) the steadily increasing capital sum will He idle producing no interest: or rather there will be a loss to Government of compound interest on the increasing value of the stock. On the other hand to reissue the subcoin while it is still at a discount, would mean abandoning the attempt to rehabilitate the subsidiary coinage.
It must also be noted in this connection that the withdrawal of British subroin will certainly result in on increasing influx of Chinese subcoin, which would probably appre- ciate in value as the Hongkong coins appreciate. Thus in the last 8 months Chinese subcoins have appreciated from 84% discount to 5 15/16% discount, following the rise of the Hongkong subcoin, while always remaining somewhat lower. The effect, therefore, of the present measures especially if as Lord Elgin anticipated a period of 50 years must be allowed for their full effect to be realized, would be that in the meantime the subsidiary coinage of the Colony would cease to be British; and that Chinese coins would become increasingly popular.
Having regard to this fact, it is apparent that some measure is required which will im- mediately rehabilitate the Hongkong subsidiary coins; and if the money now being sunk in measures which will not produce their full effect for 50 years, can instead be paid as interest on a scheme which will be instantly effective, the Colony can at any rate congratu- late itself on getting its money's worth instead of throwing good coin after bad.
I, therefore, suggest that a solution may possibly be reached along the following lines:-
1. Subsidiary coins were issued by this Government from the year 1883 down to the 19th April 1906, when further issue was stopped. The total face value of the subcoin issued during this period was $46,783,727.00 and the first step must be to ascertain what proportion of this toral sum the Government would have to pay if it undertook the redemption of its subcoins at par. With a view to making such an estimate:-
(a.) a return should be obtained from the Treasury of all considerable purchasers of subcoin from the Government and of the amounts purchased by them. Presumably the larger part of the total sum of 46 3/4 millions was issued inconsiderable quantities at a time, and the names of the purchasers may afford some indication of what became of the subcoin purchased:
(b.) the local banks (European and Chinese) and any other larger holders of Hongkong subcoin should be asked to supply confidential statements of the amount held by them, together with any statistics they may have on the subject of the Hongkong subcoin:
(c) an attempt should be made to ascertain the approximate face value of the Hong- kong subcoin required for the every day needs of the population. On this point Mr. May in the despatch above quoted writes:-"It is considered that a sum of about 15 lakhs of dollars "of subsidiary coins would be ample for the requirements of the Colony's business for a period of years and that an issue of under $100,000 per annum would be quite sufficient "to provide for deficiencies in the amount arising from loss, wear and tear, etc., and for "any probable increase in the population after the currency has been put on a proper
"footing."
if
(.) an attempt should be made to calculate the probable face value of the Hongkong subcoin which has gone into China or elsewhere out of the colony. In this conuection it should be remembered that for many years Hongkong subcoin was the favourite currency of the river valleys in Kuangsi to the exclusion of Chinese subcoins.
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