CO129-467 - Governor Sir Stubbs & Acting Governor Claud Severn - 1921 [1-5] — Page 24

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On the basis of exchange of 3/4d per 8, the total reserves of

the Bank will be well over 250 millions.

The Japanese Exchange Banks, in recent years have

largely increased their paid up capitals, and several new

American Banks have established themselves in the East within

the past two years. If the Hongkong and Shanghai Banking Corpor ation is to maintain its present leading position and be equal

to all the calls likely to be made on it for the financing of

British trade and enterprise in the East, it must have fresh

capital available when required. In view of the developments of trade in China confidently to be expected, and the Bank's

present reserves, the increase of $30 millions nominal capital

asked for seems no more than adequate.

With regard to the request that the conditions as

regards the note issue set forth in Section 13 of the Ordinance

be amended so as to allow an issue equal to the full amount of

the paid up capital, say $20 millions instead of $10 millions,

(the present limit under these conditions) we would submit the

following for your consideration.

Practically the whole trade of South China is now

financed by means of the note issues of the Hongkong Banks, as

during the past fifteen years silver dollars have nearly dis-

appeared from active circulation. About the time of China New

Year and at other times when business is active, there is a

large demand for notes and the circulation of this Bank's notes

at such times increases temporarily from 20 to 30% in a very short period.

The present conditions whereby the additionel issue

of 15 millions above the $10 millions is secured by securities

and/or bullion and specie, and any excess over $15 millions by

the deposit of dollar for dollar with the Hongkong Government

does not allow of sufficient elasticity, and, consequently trade is hampered at times by the Bank being unable to supply suffi- cient currency to the public under this system.

HOU KOUR•