3M Youny
Durther report
18.10.
о
Wery
on
subsidiary Compance
Страни
رمی
q
This letter deals to a certain extent with
currency matters, and I assume that is why it has
been sent to me in the first place, but the main gist
is on the banking question. On that issue it gives
further information to supplement that in No. 1., but
does not, I think, require any action.
The banking situation has itself a bearing
flation in
on currency in two ways. The first and more
ephemeral bearing is that sustained Hong Kong might bring down the concerns referred to
by Mr. Young and, owing to the repercussions of
their collapse. might produce widespread financial
difficulty. In view of the fall of the Hong Kong
rate in the last ten days, that is perhaps not a
matter with which we need concern ourselves very
much. The second and more lasting bearing of this
banking situation on the currency position is that
the difficulties of the Wing On and Sincere groups
arise, at any rate partly, from speculations on
Exchange. This is only another aspect of the evils
of an unstabilized Exchange. It also strikes me in
this, and in every other discussion of Exchange
operations in Hong Kong, that the rate which every-
body has in mind is the rate on London, not the
rate on Shanghai; there is every indication that
the bulk of the business transacted is with London
not with Shanghai, and this does not lend support
to the time worn plea that the essential thing for
Hong Kong is to maintain its stability on the Shanghai rate (it is not the case that the absence
of speculation in Shanghai Exchange is due to any
absence of variation, because in the last twelve
months
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