CO129-449 - Governor Sir May & Acting Governor Claud Severn - 1918 [7-9] — Page 483

478

to meet China's desire for silver are not entirely real. One of them is a rise in price in Canada and Mexico; but against this the measures taken by the American and Canadian

Another is a Governments seem sufficient safeguards.

reduction of China's exports through shortage of exchange; but a similar restriction has already had to be enforced in India and there seems no reason why China should be relieved

from a like experiance.

in its

Generally speaking, the view which we take here is that the Hong Kong and Shanghai Bank must look forward to carrying on its note issue with an increased proportion of securities

reserve, just as India has had to do; that it is

and that this only reasonable that the Bank should begin now;

Since ought to be the answer to its request for more silver. we are running our note issue on a metallic reserve of little more than 30 p.c. (and have been lower) we are surely not unduly hard when we suggest that the Bank, with its metallic reserve of 70 p.c., should now be asked to dilute it with

securities.

Yours sincerely,

Grovel Mahams

My dear Collins,

27th September, 1918.

Silver for China.

We have examined very carefully the Scheme enclosed

in your letter of 24th September but I am afraid I can only say that it seana quite impossible for the Treasury to agree to it, even though India were willing.

The foundation of the whole Scheme is that the Treasury and India shall agree to obtain up to 10,000,000 ounces of silver from America for Shanghai by the end of 1918. But in present circumstances it is quite impossible for us to give any undertaking of this kind, and so far as we can Judge, thereis no prospect of our being able to obtain any substantial quantity of silver for China if the irreducible necessities of this Country and India are to be supplied.

In the present world shortage of silver we have to consider how existing stocks and new production can be utilised to the greatest advantage. In our view the objections which have been expressed from Hong Kong to the proposals

made