CO129-470 - Public Offices - 1921 — Page 508

505

38

9. The rate of conversion of the existing stocks of sycee to dollars can be fixed by arrangement with the Chinese Government and the foreign banks, on the basis of the actual amount of pure silver contained in the sycee. It should be coined free of charge as it is not desirable to compel the public to bear the expenses of the change.

10. The rate of seigniorage might be agreed on at 2 per cent., which is what the Indian Government charged when the mints in India were open to the public for the coinage of rupees. Presumably that was considered a fair charge to the public and to the Government.

11. It is recognised that the expense of establishing a mint may be inconvenient to the Chinese Government at present. The foreign banks, therefore, would be willing to give what temporary financial assistance might be necessary for the purchase of land and machinery and the erection of suitable buildings."

The Chinese Government have accepted the advice so far as the establishing of a mint in Shanghai is concerned, but appear unwilling to place such mint under expert foreign control.

"As pointed out in the above memorandum, it is a cardinal essential to the success of the proposal that the weight and fineness of the new coins be absolutely reliable and invariable. Without this essential it would be quite impossible for foreign banks to accept the new dollar currency in substitution for sycee, the reliability of which has stood the test of time, or for the foreign trade of the country to be conducted in it. There can be no doubt, however, that the introduction of a thoroughly reliable coin, circulating freely throughout the whole country, would prove an immense stimulus to trade, a large increase in the volume of which could confidently be looked for as a result of such reform. The country is ripe for its introduction, for public confidence in paper issues, unsupported by adequate metallic reserves as they have been, has of late years received a rude shock, and dollars minted at existing mints, variable, as I will show them to be, have been going freely into the interior, while considerable quantities of silver must also have been hoarded there.

6

In 1908 two parcels of silver dollars, minted at a Chinese mint which I will refer to as A, were forwarded to the Indian Government mint in Calcutta for assay. The result was:-

A dollar weighing 415 26 grains 899-5 fine.

11

Average

Variation

414-90

415.08

-276 per cent.

897-8 898-65

''

You will note that the fineness is much higher than that of the dollars being minted to-day. The reason no doubt is that in those days the desire was to produce a dollar which could circulate at par with a British or Mexican dollar, rather than form a new national currency. I mention this assay, however, as I will draw your attention presently to a curious coincidence in connection with the large variation of more than 1 per cent. between these two assays.

*

The following assays of Chinese silver dollars have all been made at the Indian Government mint, Bombay. In each case two parcels were sent and each parcel was assayed separately:

Co

Mint B-

1916 (1) Weight 414-80 grains 891-

414-40

Average 414-60

fine. 891.2 19

891-1

Variation 074 per cent.

1920 (1) Weight 414-20 grains 890-3 fine.

(2)

414-

Average 414-10

889-8 890-05

"

Variation 104 per cent.

It will be noted that there was less variation between the dollars minted at this mint in 1918 than between those minted in 1920, while the value of the 1916 dollars is 239 per cent, higher than that of the 1920 one.

Mint C

39

1920 (1) Weight 414-48 grains 891-

(2)

LL

Mint D-

414-20

"

וי

fine.

891.1 891-05

J

J

Average 414-34 Variation -056 per cent.

1915 (1) Weight 414-639 grains 859-6 fine.

414-639 Average 414-639

Variation

889.5 889-55

17

-0112 per cent.

"In these assays the weight is constant, while the variation is only 0112 per

cent. From that point of view this is the best assay obtained.

iL

1918 (1). Weight 414-76 grains 891-4 fine.

(2)

414-32

Average 414-54

890-9

891.15 13

Variation · 162 per cent.

יי

**

}

1919 (1) Weight 415-80 grains 891-4 fine. 415-20

890.5 890-45 Average 415-50 Variation •133 per cent. Weight 415-40 grains 890-8 fine.

414-40

890-5 890.65

1920

+1

Average 414-90 Variation -275 per cent.

::

While there was a gradual improvement in dollars minted at this mint up to 1919, there has been a depreciation of 122 per cent. in the dollars minted in the early part of this year as compared with those minted last year. It is also noticeable that the variation between the 1920 dollars is practically the same as the variation between dollars minted as (A) in 1908, viz.. 276 per cent.

"Dollars as variable as these are not coins in the technical sense, for they have no definite intrinsic value. At the best they are but a commodity whose expressed value in the accepted tael unit must necessarily fluctuate considerably.

"During 1919 the Nanking mint turned out 37,860,000 dollars. To the end of September this year they have turned out 44,841,000 dollars. The mints at Tien-tsin and Wuchang have also been busy, while a new mint was established at Hangchow towards the middle of this year. "This mint up to the end of September had turned out about 7,000,000 dollars.

"The stock of dollars in Shanghai on the 31st October, 1919, was estimated to be 10,550,000 dollars and the middle price was 74 44. On the 31st October, 1920, the estimated stock was 26,200,000 dollars, the middle price being 72-25. On the 4th ultimo the quotation was 72.

The cost of minting 100 dollars weighing 416 grains of silver 800 fine, exclusive of mint expenses, in Shanghai currency taels 71-685. At current prices it would not be a profitable transaction to mint such coins under the present system on which Chinese mints are conducted a further depreciation of their dollars would probably result if that system is continued. The first step on the road to currency reform is the minting of an absolutely invariable dollar for circulation throughout the country. If this step be now taken by placing the proposed Shanghai mint effectively under efficient technical control, it should not prove a very costly one for the Government, while the increased volume of trade which should result will more than repay the country. The longer the minting of the present unreliable dollar is continued, the more expensive must reform become. If the trade of the country were to be financed through the medium of a dollar as variable as those at present avail- able, an unnecessary tax would be placed on it, which could not but retard its full development.

"I cannot, therefore, too strongly urge that every possible effort be made, with as little delay as possible, to persuade the Chinese authorities to place the Shanghai mint under a management and staff which will ensure the desired result.