CO129-523-12 Currency situation 17-2-1930 - 9-7-1930 — Page 18

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credit; she has no effective administrative

machinery; she has very little experience in

such matters to fall back on; and she is

in a political condition which renders dependence on foreign aid--which is essential-- peculiarly difficult. A wild unreasing national-

ism dominates the situation, reinforcing the trad-

itional dislike (and to a large extent,

·

contempt of the foreigner.

(b)

So long as China is on a silver basis,

Things

it would seem,prima facie, that Hong Kong will

have to remain on a silver basis also.

could be managed if Hong Kong were on a gold

basis;but there would be many difficulties,

particularly as regards the trade conducted

by Hong Kong between points in China. I gather

that the Treasury view is that, so long as China

is on silver, the best interests of Hong Kong

require that the Colony should be on a silver

basis also.

(c) The present situation is obscure in many

respects; but one point emerges clearly--the

existing system is most unsatisfactory, and should

be remedied at the earliest possible moment.

Hong Kong has at present neither the advantages

of a gold basis,or of a silver basis. The

currency is in fact arbitrary; and it fluctuates

materially,and in an unpredictable manner.

Apart from their convenience premium,notes

have a scarcity premium also. The basis of the

issue is illogical--depending as it does,

apparently,on the capital of the issuing Banks.

(a) It seems unlikely that the local committee

will effect anything of value. Its composition

does not command confidence. But,as it is now