CO129-519-7 Hong Kong currency- minting of silver dollars 1-11-1929 - 5-2-1930 — Page 4

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It is clear from 6 in 52745/28 that the Government must accept silver dollars in payment of taxes.

(Intd.)R.V.V.

I do not profess to understand the Hong Kong

currency question, and there does not appear to be

any clear memorandum describing it. But the odd

thing about it appears to be that while the notes

issued by the three Banks are expressed as promises

to pay silver dollars, in practice there has been

what is described as a "Commercial Convention" under

which debts have to be discharged in notes and not

in silver dollars. For some reason which is not

clear to me, the Banks, which have power to increase

their note issues if they deposit an equivalent

amount of silver, have kept their issues contracted

somewhat below the requirements of trade, and,

consequently the notes have risen to a premium.

They have apparently now decided, and have been able,

to get rid of the "Commercial Convention" described

above, and to secure the acceptance of silver dollars in payment of debts. Following this they have taken

silver to the Mint to be coined into Hong Kong dollars

and shipped it out to Hong Kong, with the natural

result that the premium on notes has disappeared. That

premium, if notes and dollars are equally current in

Hong Kong, ought never theoretically to exceed the

cost of minting Hong Kong dollars and laying them

down in HongKong. I do not see that any particular

action is called for from here, but the situation

ought to be watched, as I should imagine that with

the present low price of silver everybody will pay

their taxes and other debts to Government in Hong Kong

dollars in preference to notes, and the Government

may, before long, find itself landed with an

unmanageable quantity of silver. I gather that this

subject