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as compared with exchange in the neighbouring ports, at one time as high as between 25 and 30% discount, but generally in
the neighbourhood of 15% discount. This policy had the immediate consequence that money-changers and others exchanged bank-notes in large quantities for silver dollars,
with the express purpose of smuggling the coins out of the Colony; and it was found necessary to take special steps to
cope with the situation. Persons taking large sums in silver
from the Banks were watched, considerable rewards were
offered for the detection of smuggling, and by private
arrangement with the Hongkong and Shanghai Bank the exchange
of notes for silver at that Bank was made an operation of some difficulty. These measures had the desired result and it was not found necessary to interfere in any way with the
convertibility of the note.
4.
As Your Lordship is no doubt aware the currency in use in the neighbouring ports is the Chinese
minted dollar which is not legal tender in the Colony and
when the local (British) dollar is exported it is melted into
sycee or chopped and therefore cease to be available for
currency here.
There are no means of replenishing the
metallic reserves of the Colony except by minting British
dollars in India or procuring Mexican dollars, and as the Indian Mints were closed to the coinage of this coin and the Mexican dollar only obtainable in small quantities, the Banks concerned being unable to procure the necessary coin for reserve purposes would have been compelled to safeguard their position by adopting such stringent measure to curtail their note issues as would have paralysed trade in the Colony. The only alternative would have been an inconvertible note issue and such a step should only be taken as a very extreme
measure in the case of a note issue which circulates to a
large extent in the neighbouring Provinces and is the means
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