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HONG KONG DAILY PRESS, TUESDAY, NOVEMBER 17, 1931.
AGAINST STABILISATION
CURRENCY COMMISSION'S REPORT.
PROPOSALS FOR IMPROVING LOCAL CURRENCY
The long awaited Currency Commission Report was issued yesterday. As expected the verdict is against "stabilization, but sundry reforms in our currency and banking systems are recom mended, and also a scheme of preparation for a change over to gold, with minimum" of expense and trouble, should this become.
necessary;
The argument of local bankers and other experts that Hong Kong must, for the present, keep step with China in the matter of the stiver standard has been upheld.
THE REPORT SUMMARISED.
In the course of a summary of the investigations and recommen- dation's the Commission state:--
We first considered the general arguments put forward in favour of stabilization and come to the con- clusion that by far the most im portant matter to be considered in determining the desirability or otherwise of changing Hong Kong currency to a gold standard is the effect which such a change might be, expected to produce on the trade: and financial business of tho Colony,
We accordingly examined effect of stabilization on the ness of Hong Kong.
1.-As a port
Silver or Gold,
A
Discussing whether it would be desirable' to change the basis of Hong Kong currency from silver to
gold.
The report states inter ulja:
To stabilize or not to stabilize" is to day probably one of the most widely-debated questions in Hong Kong, affecting as it does, directly
every section of the community. or indirectly, the fortunes pf wearly
動
"minkig, "having rega
sennomic and Enancial relations with: China winch is the mora im2? portantra Hong Kong, that ex- change should be kept steady with. China or with the rest of the world.
Since the rosperity of Hong. Kong is depondeat on its trade and financial business it is mainly a quotion of how that business would be affected by a change-over to a gold or sterling standardWare gard this, as one of the most im portant factors to be oɑnsidered in solving what we have described as the frat part of the problem that has been put before un-and- as will be seen our Report deals fully with this point later..
Another argument often adduced in favour of stabilization in the case it would give to the Governments. Annnces. Important as such öon. siderations are, however, it does. not appear to un that they can be allowed to weigh as determining. factors if the decision on the ques tion of advantage or dinisyantage to the business of the Colony na a whole is in the opposite scale. As regards public debt obligations, the interest charges on future loans might be stabilized by raising local loans whenever the money could be found in the Colony, and the risk of investing sinking funds in ster-
ling accurities could be avoided by
ich a method as the adoption, of the system of "drawing" oans.
-The position with regard to: cup-- rent incomes, or at least salaries, is different. There is no doubt a pendants to support in England: large number of persons, with de or elsewhere, who accepted employ ment in Hong Kong at rates of salary suficient at the time to allow them to mako adequate, remittances to their dependant, but who are no longer able to remit enough! change rates. For this class of per aons we have the fullest sympathy. would be very short-sighted to allow At the same time we feed that it their position to carry any great weight in the decision of this ques: tion whether the currency of the Colony should be stabilized or a gold basis. As we have already in dicated, it seems to "us that the whole prosperity of Hong Kong 15 bound up with its trading and a- ancial business and that anything which harms that will harm Hong Kong as a whole, including the persons whose special plea we dis now considering.
It received a great deal of atten- tion at the hands of the Local Comsterling owing to the fall in ex mittee last year, and has been dis the
cussed at public meetings and bus-violently agitated in the newspaper
· pres-of-Hong-Kong both before and since" our arrival Gèneral-Argument Put Forward-in
2-As a place of law and order --- and a dty of nifuge
3.As a producing centre." 4.-As a Bouncjal and trading centre, breaking up the sub- ject in its turn into heads. (4) Imports into South China, (b) Trade between North and
South China.
•
(e) Remittances from Chinese
communities overscas. (d) Primary production and Dall trades and industries in South China, a (e) Exports from South China. Our conclusion is that, willo etabilization would facilitate the conduct of certain «classes of business within the Colony, it would gravely prejudice the im- port and export, trade of South" China conducted or inanced through Hong Kong, which is the sheet anchor of the Colony's. prosperity, and would affect in-" Juriously many other branches of business; and we therefore, advise against.it (paragraphs 80 to 84)
Continuing their summary of the report the Commissioners state
We next describe the present currency system of Hong Kong and point out that it must be considered in its relations to the currency system of China.
We then give an account of the functions of the Hong Kong dollar As an exchange currency and draw spccial attention to the fact that it supplies the Inck of a fully de- veloped exchange currency in parts of South China.
4༔
A
We then describe what seem to as to be the defects of the present currency system and make the fol- Towing proposals for its reform:--
1-The legal tender status of the dollar coin to be limited to $10
Favour of Stabilization,
**The argument for conversion tu a god basis is sometimes based on the view that gold is the only true ensure of value. This proposition may not always have heen stated in so brief and absolute & form, but it would seem to have been tacitly assumed as true by several writers in the Press, and the opinion has been expressed that siivor, being a commodity, is not a quitable basis for a monetary "sys. tem. While, however, silver, is only a commodity in terms of a gold currency, it may equaly, well be said that gold is only a commodity in terms of a silver currency: Few. would deny the general proposition that gold is the most satisfactory measure of value which the world has yet found, but it cannot be nocepted as self-evident that goid is always and for all countries the most satisfactory measure, or that the conversion of the currency of a country from a silver to a gold basis will invariably be to its advantage. course of prices over the last fifteen Looking for instance at the general
or twenty years we believe that it would be found that the silver prices of such staple commodities a rice and other food stuffs con- suined in the Colony of Hong Kong have remained for more stable than their gold prices,
Again if comparison be made with the neighbouring countries which were formerly, but are now no longer, on n silver basis, it would appear that Hong Kong bas weathered the present economic blizzard " far more successfully than they have.
It is moreover pertinent 19q ob- serve that among the Chinese population of Hong Kong and the neighbouring areas adver has been. -Bank-notes to be made un-accepted for generationes the limited legal tender;
measure of value, so that what its advocates describe as stabilization would from the Chinese poist of view be de-stabilization.
3.--Notes to be convertible into silver bullion;
4-Notes to bo obtainable for silver bullion;
Nevertheless it cannot be denied 5.-"Government to take chargements which have been or may be
that there are several broad argü of the silver reserves of the note adduced in favour of a gold stan. issues;
6-Silver bullion presented in fature in exchange for notes to be handed to the Government;
A Hong Kong Currency Baard to be set up, We then give further details of our proposals relating to coin and make a suggestion that the existing issue of silver subsidiary coins should be withdrawn and replaced by an issue of base-metal taken scinat
dard for Hong Kong, and which are not without validity so far as they go."
The farge silver dollar makes privata transactions, “shroffing" and storing expensive items. It is, however, possible to get over there difficulties to a great extent, and we think that this wil be done if the plan which we recommend be law is adopted.
It is true, again, that China is the only important country now left We next make recommendations on a silver basis, while, practically for the accumulation of a sterling the whole of the rast of the world Fund by the Currency Board with is, or is trying to place itself, on a the object of preparing for the gold basis and that so long as ultimate conversion of Hong Kong Hong Kong remains on silver, the currency to a gold basis, if and fluctuations in the price of that when it appears desirable. Ka motal in relation to gold, which Finally we offer some miscellane have been and may continue to be ous observations on the rate at £requent and rapid, will result in which the dollar should ultimately divatbing Auctions in the levet be stabilized on the question of a of Hong Kong's exchanges with the parallel sterling note iste on the gold worth. On the other tand, nood for banking legislation in the the establishment of a gold stan- Colony, and on the fixation of dard in Hong Kong would cause bullion points under our scheme and similar thotuations in ita exchanger. its effects on oxchange spéculation, with China, and the question really
(Continued on Page 7.)
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