CO129-457 - Public Offices - 1919 — Page 123

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123 Hong Kong.

ALL COMMUNICATIONS

TO BE ADDRESSED TO THE

GROWN AGENTA FOR THE COLONIES,

THE ABOVE REFERENCE AND THE

DATE OF THIS LETTER BEING QUOTED.

TELEGRAMS, "OROWN, LONDON."

TELEPHONE 7730 VICTORIA.

Gov

sir,

CO

43550

RECE

Rent

19

4, MILLBANK,

116

3<

WESTMINSTER,

LONDON, S.W.1.

26th July 1919.

I have the honour to acknowledge the receipt of your letter No. 38044/1919 of the 4th July, enclosing for our observations a copy of a further despatch from the officer Administering the Government of Hong Kong on the subject of the conversion of the sterling loans of the Colony into one of local currency.

2.It is true, as pointed out by Mr.David Landale, that by redeeming the existing loan at an exchange of 3/- the cost in dollars to the Hong Kong Government would be considerably less than the amount of dollars received at the time the loan was contracted. But this fact does not seem to have any bearing on the question whether it would be profitable now to effect the conversion-the answer to which depends on the course of the dollar exchange in the future and not in the past.

3. It is also true that there is an element of speculation in the exchange whenever a colony borrowɑ in a currency other than that of its own revenue. The Hong Kong loans were, however, raised in London in sterling, not for the sake of this element of speculation but for the advantages in other respects of borrowing in London the chief of these advantages being that money can be obtained here at a considerably lower rate of interest.

4.We do not follow the argument in the 3rd paragraph of Hr. Landale's memorandum with regard to the Hong Kong and Shanghai Bank. It is no doubt true that the process of lending the money to the Government would be completed by the Bank within a very few days; but that would not end the affair from their point of view. They would then remain in possession of the dollar securities in exchange for sterling securities, and the profitableness of this exchange would depend, in the manner shewn in our previous letter, on the sterling value of the dollar not falling too heavily during the next twenty four years.

5.

As a matter of fact, the dollar has risen further since we wrote, and is now worth over 3/60.

I have the honour to be, sir,

Your obedient servant,

Rachuse

-

Under Secretary of state,

Colonial Office.

for Crown Agents.