CO129-576-10 Estimates 1940 6-10-1939 - 22-10-1940 — Page 203

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HONG KONG LEGISLATIVE COUNCIL.

purchases of foreign currencies by the public to authorized dealers who are instructed by the central authority as to the purposes for which exchange may be sold. This again is backed by a system of import licensing which requires the approval of some Government authority before any imports can be admitted. As yet a further measure, direct steps are taken to prohibit absolutely the import of commodities which are regarded entirely as luxuries. The circumstances of Hong Kong and particularly the great entrepot trade and financial business upon the Colony lives render impossible or at least highly dangerous the adoption here of the full measures of control adopted as above in the home country and elsewhere in the British Colonies. The measures we have taken are, therefore, only as follows. First we have limited purchases by the public of foreign exchange generally to authorized dealers, who include all the larger banks, both British and foreign, in the Colony. Those authorized dealers act on instructions from Govern- ment as to the purposes for which exchange may be sold and speculative transactions and transfers of capital are absolutely forbidden. Secondly, Government has required the surrender of foreign exchange holdings but this requirement has been limited to British subjects because of the difficulty of applying it more generally in this international com- munity of ours. Such exchange transferred to Government is of course paid for in Hong Kong dollars or sterling. We have taken power also to require any British subject to surrender to Government any foreign exchange which he may subsequently acquire but it is not the intention to apply that to exchange acquired in the ordinary course of business. Such exchange is normally sold to one of the authorized dealers and through the control of sales of exchange it thereby remains within the control of the sterling system provided that we have the full co-operation of the banks concerned. I should like to take this opportunity to state my belief that we shall get that co-operation from all the banks operating in this Colony and my gratitude to those banks for the help they have given to Government so far and the patience with which they have borne with our somewhat fumbling first attempts in this unfamiliar field of control.

Because of our peculiar circumstances we have had to make certain exceptions even in the field of sale of exchange. Both exports of Hong Kong and Chinese bank notes and remittances of small sums to the interior of China are either completely free or subjected to only a loose control. In view of that the authorities at home have felt obliged to refuse absolutely unrestricted dealings between London and Hong Kong lest there should be a leakage of funds from London through Hong Kong. We have however been assured that the authorities in London will provide exchange for all legitimate purposes and sterling transactions in Hong Kong itself are completely unres- tricted.

The Secretary of State for the Colonies has also agreed that it would be unwise to impose in Hong Kong a full system of licensing of imports and exports. Search has therefore been made for other means of checking undesirable imports, that is, imports which are

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