552
BACK TO THE SILVER DOLLAR.
THE HONG KONG WEEKLY PRESS &
nomination have been always very popular among the Chinese, and the dwindling demand for silver dollars for business purposes has (Daily Press, October 19, 1929).
been mainly responsible for notes commanding THE bankers of the Colony have
the premium they have. It is
a curious fact that agreed to the re-establishment of Hong Kong dollars have never been currency on a silver basis, and on
very popular among the Chinese Tuesday next are meeting to discuss in the Colony. A mint was estab❘ and to approve ways and means of lished in 1866 for coining dollars, carrying their decision into effect. but although moulded closely on This means-in theory, at least- the pattern of the Mexican dollars, an end to the anomaly of a paper the British currency failed to find dollar being regarded as of greater favour among the Chinese, and value than a silver one. It also within two years the mint was dis- means that the value of the Hong mantled and the entire plant sold Kong dollar will continue to to the Japanese Government for fluctuate with the price of silver. re-erection in Osaka. About thirty If the price of the metal falls, ex- years later the mints in India start- change will follow; if it rises in ed coining British dollars for Hong value, exchange will rise. With Kong, and these coins were accept silver at 23d. per standard ounce-- ed by the Chinese, although in as last quoted-the T.T. rate of weight and fineness they were iden- exchange is about 1/8d. Business-
tical with the previous local minted men will be watching the silver
currency. One reason for the Chi- market more closely now that the nese preference for banknotes rather banks have decided to re-establish than silver dollars is the fact that currency on a silver basis, and any
there is ample security behind the serious fluctuations in the price of
paper currency-and, moreover, the silver will keep the exchange-belief that much of that security is brokers busy booking forward con- not in silver but in gold. tracts.
For a long time silver in the London market has been standing at 23d., but about ten days ago it dropped by 3/16d., though it has since returned to the former figure. In some quarters, however, it is believed that the market will de- cline again very soon, perhaps going below the 22d. level. The lowest quotation recorded is 224d. in 1904, but the steady decline in the demand for silver for minting purposes is expected by some autho- rities to result in a fall below the 1904 figure. Excessive production of the metal, coupled with decreased demand, seems to be the explana- tion of the falling market, further accentuated by the unsettled busi- ness conditions in China. It is stated that the stock of silver in Shanghai at the present time is over 160 million ounces-some 20 millions
than the world's annual production of silver. If this be the case,
a brisk
more
even
revival of trade in China is not likely to affect the silver market to any extent, for the stock of metal in Shanghai is so large, and the use of banknotes so general, that no additional demand for silver from abroad can be expected to follow trade revival. In India, too, the Government dis- poses of large quantities of silver from time to time, and no increased demand is to be looked for in that quarter.
a
Payment in banknotes has been the basis of exchange and business operations in Hong Kong since 1922, when the Government pro- hibited the export of silver dollars. Prior to that, bullion had been largely shipped from the Colony to various parts of China, principally to the North, and as long as cover in the shape of T.T. on Hong Kong was obtainable against taels at rate below that obtainable
a
for imported dollars, it was possible to do business. When the export of Hong Kong dollars was prohibited, those dealing in exchange were forced to recognise banknotes as the basis for financial operations. Notes of small de-
China is a silver standard country, and likely so to remain for many years, and there is every reason why Hong Kong currency should be clearly and definitely establish- ed also on a silver basis. The dollar now quoted in exchange rates represents the equivalent in terms of gold of the notes issued by the three British banks in the Colony. In future the quotation of the Hong Kong dollar will represent the gold value of a silver coin- allowing in each case for the in- fluence of other vital factors, such as the demand and supply of mer- cantile bills. It may be found of interest to reproduce some figures recently quoted in these columns, showing the trend of the silver market and of dollar exchange :-
SILVER IN LONDON.
Highest. Lowest.
301
27
1900
1914
27
22급
1919.
791
47.7-16
1920
89
387
1921
433
30%
1922
373
303/3
1923
33.11-16 30
1924
36.1-16 31
1925
33.7-16 31.1-16
1926
1927
242
31.13-16 24/ 28
HONG KONG EXCHANGE.
Highest. Lowest.
1900
2/11 1/11
1914
1/11 1/81
1919
5/2
3/04
1920
6/2
2/11
•
1921
3/12
2/23
1922
2/72
2/22
1923
2/41
2/2
1924
2/58
2/32
1925
2/5/
2/27
1926
2/4
1/98
1927 Trade
2/02 1/11/
between gold standard countries is simple and straight- forward, but commerce between a country on a gold basis and one on a silver basis is inevitably unstable and uncertain, because any varia- tion in the price of silver must affect either the importer or ex- porter. But in view of Hong Kong's position as a clearing- house for China trade, a silver
20
[October 25, 1929.
We
basis for its currency-in spite of the obvious drawbacks and difficul- ties-is the most satisfactory system Lo follow. The Colony draws on London for the cost of its export, and remits the value of its imports. According to a well-informed authority recently quoted in our columns, Hong Kong has been im- porting too much and exporting too little living beyond its in- come. With the fall in the dollar less imports will come into the Colony, and-if all goes well-a balance of trade established. trust events will prove the sound- ness of the theory, and that the financial situation will be im- proved as a result of the bankers' decision. Meanwhile, a word of warning-there is always a tempta- tion to take risks with silver ex- change, and lucky gamblers have made much money in this way, but unlucky ones have lost as heavily. Operations of this character are not to be encouraged; business is dif ficult enough in these keen competi- tive days without introducing a purely speculative element.
1
Page 20Page 21
MORE EXCHANGE WORRIES.
(Daily Press, October 30, 1929). JUST as it has been decided that the Hong Kong dollar must come back to silver parity there are rumours of a coming change in China's currency policy. Nothing is likely to happen just yet, but it is interesting as it is most im portant to know what is going on in the direction of establishing a gold standard in place of silver. The idea is not new; it has been advocated time and again, but on this occasion the suggestion is ex- pected to come from a quarter which may be listened to with more atten- tion than was given to earlier advocates of a similar change of policy. According to the United Press correspondent in Peping, it is the opinion there among well- informed bankers that the Chinese Government will be advised to place its finances upon a gold standard as soon as possible by Mr. EDWIN L. KEMMERER, Chief of the American Financial Commission which has been surveying China's finances for the past year.
The bankers believe that Mr. KEMMERER's studies have convinced him that China's finances will never be soundly based on the present silver standard, so long as the rest of the world prefers the gold standard.
The KEMMERER Commission is the largest and most capable commis- sion which has ever come to China to make a survey. Mr. KEMMERER was given a free hand to select the most able men in their various lines, and he and his assistants have been hard at work since early this year untangling the complicated facts of Chinese finance, going into taxation, budgeting, foreign and domestic loans and debts, and all similar questions. The Commission is completing its work by the end of 1929, and will then make a report to the Central Government, which may or may not be published. Mr. KEMMERER himself is a reticent man, and his associates are well-skilled in keeping facts and opinions to themselves, but bankers in Peping believe they have learned in a general way what the Commission is likely to recommend to the Chinese Government.
His principal recommendation, they believe, will be that China should go over to the gold standard. Silver is no longer regarded by financial experts as a suitable basis for any exchange. As one banker declared, "silver has become
The by-product of lead." value of the Chinese silver dollar
mere
a
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