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Undesirable, however, as its fluctuation on this account may be, any artificial measures aiming at "pegging" it or severing its relationship with other world com- modities would be even more disastrous. Silver's rise and fall in the past has inexorably followed the rise and fall of other commodities, and has therefore greatly facilitated the world's trade with the silver-using countries. The belief which ap- pears to obtain in America that under any circumstances a high exchange must increase China's purchasing power is a fallacy. To accomplish that admittedly desirable object, high exchange must be accompanied by an equivalent high world commodity price level, otherwise China's products are too dear for the rest of the world to buy; she cannot export, and if she cannot export she cannot import however high the purchasing power of her currency. Therefore, while violent fluctuation due to speculation is the overseas merchant's bugbear, moderate fluctuation in accordance with legitimate trade requirements is desirable. The time may not be ripe for international action in regard to the world's exchanges, but when it is, we can only hope that the problem of silver will be disposed of with wisdom and foresight. So much depends upon this in the Far East, that one cannot but view with misgiving the many factors of minor importance operating in America to-day tending to confuse the issue.
7. So far from being unwilling to finance trade and industry, certain of the local native Banks lend money too freely on property on insufficient margin albeit at high rates of interest. This practice tends to make credit too readily obtainable. The capital thus acquired is often mortgaged again to the full and an unstable structure of credit results, which is susceptible to any set-back however small, and which renders a financial collapse inevitable when a major depression occurs. It may not be practicable to legislate against this danger, but any step tending to the adoption of sounder banking methods would increase the Colony's stability.
8. Another matter of Finance we view with some misgiving is the recent estab- lishment of "Savings Banks". This class of institution should always be kept in a fairly liquid state so as to be in a position readily to meet withdrawals of depositors who, though small in wealth, are great in numbers. It seems to us that Government should pass some regulations governing the class of investments in which "Savings Banks"
may place spare funds and make a percentage limit, which may not be exceeded, for fixed loans or mortgages. Savings Bank depositors are usually people of small means and if there should be a failure of one of these institutions the loss and misery caused would be widespread.
Chapter XII.
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4. In order to be of economic value. air lines must follow and be ancillary to established trade routes because on these are the great trade centres through which the life blood of the world pulses. Hong Kong, being the fifth largest port in the world and a great intermediate trading station has all the facilities and all the advantages to render desirable its development as an air port linking China with the near East and Europe on the one hand and Manila, America and Australia on the other. Already aviation has developed sufficiently to make this mechanically possible and all that is needed to make it an accomplished fact is enterprise and goodwill. In view of the immense advantages to be gained by all concerned from the facility of world wide rapid communication we are of the opinion that a vigorous attempt to co-ordinate the various interests which would gain by this air-link should be made and that the goodwill necessary for co-operation and the security for enterprise on an economic basis will be forthcoming.
5. It is natural and right that we should first consider Hong Kong as a Port for British air lines, but as with shipping in the past, so with aviation in the future, and we consider that having secured reasonable British participation Hong Kong must maintain an open port and welcome the aviation interests and air lines of all countries.
6. We must envisage a very definite growth in air-traffic and air-mindedness. With established air routes it will be much easier for business men and others to pay short visits to the Far East. The more wealthy classes of tourists and holidays makers may well be induced to visit Hong Kong and China if they can do so without the need of a long sea journey. The primary reason for through air traffic must, however. be the carriage of mails. We are aware that even though the air-mail to Europe only commences at Singapore the traffic from and to Hong Kong by that route is steadily increasing. With an air connection through to Hong Kong we are confident that there would be a tremendous increase in air-mail traffic. A further considera- tion is that the definite establishment of Hong Kong as an air-port would, apart from affording increased facilities to Hong Kong and China, tend to create a new business and a new industry which may, to an increasing extent, replace waning business in other directions.
7. With regard to Air Mail we were informed that in spite of the depression there has been a steady increase in the use of the Air Mail services from Hong Kong
to Europe as follows:-
1932. August to December
1933. January to December
8,618 letters
81,635
17,864
J1
AVIATION.
1. Aviation has developed rapidly in the last few years and, as will be seen from the Report on the Progress of Civil Aviation, 1933, recently published by II.M. Stationery Office, the British Empire has not lagged behind in this respect. China is also becoming air-minded, and in such a country with vast spaces having no road or rail communication the gradual establishment of air routes will be a logical development.
2. So far, however, China is not linked up with the rest of the world by air and this, in our opinion, is a matter which should occupy the serious attention of that country to which through air communication will be of great value, and of the British whose Far Eastern route extends as far as Singapore and thence continues to Aus- tralia.
3. It appears to us that this new means of rapid communication which will have a greatly increasing commercial value should now receive from Hong Kong the same careful consideration as has been given to its position as a great port of ocean ship-
ment.
1934. January to June
8. The increase in 1934 was about 10 per cent and the Air Mail letters sent were 2.46 per cent of steamers' letters. We were informed that was generally estimated that to operate an Air Mail service 5 per cent to 10 per cent of the postal matter should pay air premiums. It must be remembered, however, that the premium on letters from Hong Kong to Europe is heavy and that, owing to lack of direct air communication the saving in time is at present not very great. In view of the fact that a direct Air Mail from Hong Kong to London would probably take no more than seven or eight days we are of the opinion that it would well pay the business man to use such service and that a great increase could therefore be ex- pected.
We
9. The subject having been exhaustively discussed we finally express our opinion that no time should be lost by the authorities in conjunction with British air interests in connecting Hong Kong by air to the air routes already established realise that the matter has already received the attention of both the Hong Kong Government and the United Kingdom authorities and that there are a number of difficulties in the way. We feel, however, that the advantages to all concerned are so considerable that a vigorous attempt to co-ordinate all interests will not meet with failure.
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