CO129-523-12 Currency situation 17-2-1930 - 9-7-1930 — Page 34

SILVER AND STABILITY.

So news of our distress has at last

reached the outer world, and the

situation is being watched with some anxiety by the Secretary of

State for the Colonies. That is

something to be thankful for, but

beyond this Lord PASSFIELD at the

moment will not go. He quite naturally prefers to await the re- port of the Currency Commission; in fact, he has no option in the

matter. An inquiry into the situa- ¦

tion having been officially ordered, the result of that investigation must be awaited before any further action can be taken, or even con- templated. That is the plain, busi- ness-like manner of doing things, and this currency question is very definitely a business proposition. What is not business-like, however, is that the Commission should be taking so much time in the pre- paration of its report. The hearing of evidence was concluded on May 15, and the recommendations should be almost completed by now. With all respect, we suggest that Sir WILLIAM PEEL take steps to expedite the presentation of the Currency Commission's report. As stated in these columns a few days ago, ac- cording to present arrangements it will be at least two months before that report is ready for presenta- tion. If His Excellency were to intimate his desire to have it within two weeks, we believe it could be! got ready. With the presentation- and publication-of that report the way will be cleared for further dis- cussion of this perplexing problem.

+

In many quarters just now there is a demand for a stabilised dollar, the value of which should be fixed

at two shillings. How many of

those who are so insistent that the Hong Kong dollar should have a fixed value raised similar protests when local currency was quoted in sterling at three, four, and five shillings? It is a poor rule which does not work both ways, but we do not recall any persistent demand for stability when exchange was favourable such as is being made now the tide happens to be run- ing the other way. That a stable dollar would be a very good thing for most members of the community

may

be frankly admitted: the problem is how stability is to be achieved. And-granting achieve- ment-how it is to be maintained, seeing that Hong Kong fixed-value notes would be certainly flowing rapidly into China, just as our silver dollars have done.

HONG KONG JAILY PRESS

The

stabilising of the Hong Kong dollar would mean in practice stabilising Chinese currency.

So long as the financial machinery of that great country remains weak and unstable, so long would a Hong Kong guar- anteed currency be in keen demand far outside the limits of the Colony. Is it to be expected that the Hong Kong Government, or even the Home Government, should under- take such a task as to maintain in this Colony a fixed-value currency which was constantly flowing into China?

Apart from this very important aspect of the question, what would the proposed substitution of a two- shilling dollar for the present fluctuating dollar mean? That the services rendered by the business and industrial community of Hong Kong would cost just that much more than they have been costing, and still would cost for similar services rendered in neighbouring places. The fact must never be lost sight of that this Colony is a non-productive centre; it is first and last a dis- tributing centre for trade-a place where goods are loaded, landed, and warehoused, and where ships hand- ling that trade can be built, docked, and repaired. Hong Kong grows nothing and makes nothing; it lives solely by services rendered in the handling of trade to and from places outside its borders. A two-shilling paper dollar, when silver dollars are worth scarcely more than half that sum, would make the price of Hong Kong's services prohibitive. There would be stability so far as exchange value is concerned, but there would be considerable instability so far as business is concerned. To substitute a fixed-value dollar worth two shillings for the fluctuating dollar now in circulation would increase the cost of labour and other ex- penses in the Colony all round, and he would be an incurable optimist who imagined that Hong Kong would continue to handle the volume of business it does if the cost of the services rendered were suddenly increased by 40 per cent.

:

29

JUNE 4. 1930.

CONTINUED

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