CO129-470 - Public Offices - 1921 — Page 595

This Document is the Property of His Britannic Majesty's Government.]

CHINA

CONFIDENTIAL.

[F 1544/1303 10]

(No. 141.) My Lord,

No. 1.

C

pril 2.1

2374.1

SECTION 3.

215 MAY 201

Sir B. Alston to Earl Curzon.-(Received April 27.)

Peking, March 12, 1921. WITH reference to my despatch No. 101 of the 23rd ultimo, I have the honour to inform you that in connection with the arrangement therein referred to between the Chinese Bankers' Association and the Chinese Government, for the provision of the funds necessary for the installation of a central mint at Shanghai, some interesting correspondence exchanged between the Association and the Ministry of Finance has appeared recently in the local press.

The arrangement in question provides for the issue of a loan of 2,500,000 dollars in Treasury notes, to be underwritten by the Chinese banking group, and the terms of the agreement, of which a summary is given in the enclosed extract from the "North China Daily News" of the 7th instant, would appear to be sufficiently strict to ensure that the proceeds of the loan will actually be applied to the erection and equipment of an up-to-date mint at Shangliai.

In their letter to the Ministry of Finance and the Currency Bureau the Chinese banking group put forward some very practical and definite recommendations as to the procedure to be adopted in fixing the weight and fineness, and in regulating the issue of the new coinage with a view to its ultimately replacing the tael as the standard currency of the country. It is encouraging to note that in many respects their proposals follow very closely those put forward by the Foreign Bankers Association and communicated to the doyen of the Diplomatic Body in February last year. They agree with the foreign bankers in recommending that the fineness of the new coins should be fixed at 90 dollars, and that a new die should be employed so as to obviate confusion with previous issues. They suggest a seigniorage of 15 per cent. in place of the 2 per cent. suggested by the foreign bankers, and consider that a mint capable of producing 600,000 dollars a day would be sufficient for present requirements, whilst the foreign bankers recommended that provision be made for a daily output of 1,000,000 coins.

As regards the question of foreign supervision of the mint, on which the foreign bankers and the Associated British Chambers of Commerce have laid so much stress, the Chinese banking group have, as was expected, gone less far in their recom- mendations. Whilst the former proposed the appointmeut of a foreign Associate Director-General, two assayers, three inspectors, and an accountant, the Chinese bankers merely suggest the engagement of a foreign assaying expert to take charge of that branch of the mint's work. They further recommend, however, the nomination of a committee, on which foreign as well as Chinese financial interests would be represented, to consider and discuss the best methods of introducing the new coinage in substitution for sycee, and to supervise the general working of the mint.

The decision of the Chinese bankers to provide the funds required for the new mint is sufficient evidence that they are fully alive to the urgent necessity for currency reform in China, and the correspondence now published shows that they are quite prepared to approach the problem in a reasonable and business-like way. If however, the scheme is to gain the full confidence and support of the foreign banks and merchants, without which it is doomed to failure, much more adequate provision for foreign expert assistance will have to be made than the appointment of one assayer, as suggested by the Chinese banking group. As regards this point one is justified in hoping that the committee whose appointment has been recommended by the group will be able and willing to exert sufficient pressure on the Chinese Government to ensure more adequate foreign co-operation in maintaining the mint's efficiency.

In replying to the bankers' letter the Ministry of Finance and the Currency Bureau state that the recommendations therein contained have their hearty approval, and that the mint authorities have been instructed to act upon them. Should any

| 6047 dd-3]

592