50
4
17. Before the war, the practice was for the Chinese to fix a conversion rate for their currency vis-a-vis the Hong Kong dollar each half month. The rate fixed for a fifteen day period was the average rate for the preceding fifteen days and was termed the "transaction rate". The fare from Canton to Kowloon was fixed for the fifteen day period at the equivalent in Chinese National currency of the basic Hong Kong dollar fare converted at the transaction rate. At the end of the fifteen day period the British Section's 20% share of the takings was converted into Hong Kong currency at the "transaction rate" and was set off against the 80 share due from the British Section in respect of its takings at Kowloon.
18. This procedure worked very satisfactorily for so long as the Chinese National dollar remained relatively stable. This state of affairs did not obtain after the reoccupation, and it appears that in the period of the Military Administration under some arrangement which it has proved impossible to trace back satisfactorily, the British Section's share of the receipts of the Chinese Section were credited, not at the "transaction rate" but at the market rate of the day, which in some cases was more than double the transaction rate. This arrangement continued until the 31st. August 1946 and the loss thereby incurred during the period of Civil Administration totalled
£4.95 $78,320.59.
Mily. Admin
endent &
Par
Civil
1Ray 46
19. For some reason again not ascertainable the pre-war practice was reverted to as from the 1st. September 1946. But in the course of the negotiations for the return of rolling stock the Chinese authorities brought up the matter and at the Conference at Hengyang already referred to, the General Manager again agreed with the Chinese that the British share of the Chinese Section receipts should be credited at the market rate, and not at the transaction rate, for a period of three months from the 16th. May 1947.
20.
The General Manager was at fault in making such a concession without approval, but he was facing great difficulties in his dealings with the Chinese representatives and doubtless hoped by this concession to obtain an earlier settlement of the rolling stock question. His expectations were of course not realised, but even before this became apparent, Mr. MacDougall had instructed him that the concession made was unjustifiable and that it should not be renewed, although the three months agreement he had made would be honoured.
21.
The Chinese authorities have made ceaseless representations since the 15th. August 1947 for a renewal of the concession. They take the attitude which appears to be prevalent in Chinese official circles, that it is the privilege as well as the duty of this Government to assist China in her difficulties, and in the course of an interview with the Assistant Financial Secretary they went so far as to threaten to stop through traffic if their wishes were not met. It was explained to them that this Government was both anxious and willing to assist where any degree of reciprocity and co-operation was forthcoming in return, but that such reciprocity and co-operation were completely lacking in this case. Not only so, but they themselves could readily have avoided any loss by the very simple expedient of adding to the through fare calculated in accordance with the working arrangements a surcharge sufficient to make up for the fall of the Chinese dollar over the fifteen day period.
22.
The threat to stop through traffic has not been implemented, nor is such a step likely. The suggested remedy of adding a
/surcharge
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