[CYPHER]
185
CER RELAC DISTRIBUTION
FROM SHANGHAI TO FOREIGN OFFICE
D. 5.55 p.m. GMT 10th September 1946.
His Majesty's Consul General No. 80. Remac
10th September 1946.. R.12.30 p.m. BST 10th September 1946.
K
I I I I
Th
Your telegrams Nos. 813 and 814 addressed to Hong Kong were handed to me there.
2.
I discussed with Financial Secretary two possibilities raised in second paragraph of former telegram and I understand that a reply will be sent giving the views of Hong Kong Government.
.3. My personal views based on practical experience are as follows:
a) Hong Kong notes in South China are largely used for trade purposes although there must be a substantial amount hoarded as a [grp. undec.] hedge against depreciating Chinese national dollar.
b) Practical difficulties
Finding out who holders are and
Inducing them to subscribe to a
new Hong Kong Government loan would appear insurmountable. Any such attempt might well be misunderstood by the Chinese Government with dangerous political
repercussions.
c) Should the Chinese Government attempt to seize these notes, holders would find means to evade requisition.
4.
Chinese in Hong Kong in the past have not shown any great desire to subscribe to Government loans bearing (to them) low rates of interests. They prefer something that appeals to their gambling instincts like lotteries and sweepstakes. I am informed that mortgages against goods at present earn interest of from 1 to 2% [grp. undec. ? a month]. Appeals to patriotism are not likely to be effective and it is difficult to see how pressure could be applied against wealthy Chinese. A system of heavy and adequate taxation would appear to be a better solution.
(OTP)
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Conf. Code
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