Sessional_Paper_1884 — Page 538

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2. In Sir MICHAEL HICKS BEACH'S despatch No. 184 of the 20th of November, 1879, he asked for my views as to an issue of Government one dollar notes, pointing out that, in the event of such a Government issue being undertaken, the conditional privilege granted to the Bank by Governor Sir ARTHUR KENNEDY would be

withdrawn.

3. The question put to me by Sir MICHAEL HICKS BEACH required some careful enquiry and consideration on my part; and it was not entirely unconnected with another subject dealt with by Sir MICHAEL HICKS BEACH in the same despatch, namely, the suggestion I had made that this Government should be allowed to proclaim the Japanese Yen current in Hongkong.

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4. I am now in a position to inform Your Lordship that the Directors of the Hongkong and Shanghai Bank agree to withdraw their one dollar notes in the event of the Government wishing them to do so. They have not yet sent me their formal reply to my enquiry on the subject, but I am aware of the decision at which they have arrived.

5. For reasons given from time to time by the Lords of the Treasury, I regard this decision as very satisfactory; but, though it clears the way for a Government issue of one dollar notes, I am not, at present, prepared to recommend it.

6. It is, however, my duty to ask Your Lordship to bring again to the notice of the Lords of the Treasury the advantage, I may almost say the necessity, of allowing me to proclaim the Silver Yen a legal tender in this Colony.

7. I observe from Mr. HERBERT'S letter of the 13th of January, 1879, that the Colonial Department was inclined in favour of this course, but Mr. FREMANTLE, referring to the state of things in 1878, gave many sound reasons for thinking that it would not be of sufficient advantage to the commercial community of Hongkong.

8. Within the last two years, however, changes have occurred which I venture to think would be regarded by Mr. FREMANTLE as justifying him in reconsidering his opinion. In the first place the trade between Hongkong and Japan has immensely increased. The Mitsu Bishi Company are now running their fine line of steamers direct to Hongkong, and by this means the commercial emporium of Japan, Osaka (through its port Hiogo), is brought into direct com- munication with this Colony and South China. The issue of the Yen has also increased, and its extensive mintage seems to be well secured.

9. With our increased Japan trade, the inconveniences of our defective currency in Hongkong have seriously increased. At the beginning of this year, the managers of two of our banks, the principal European merchants, the principal Chinese traders and the Chamber of Commerce all urged me to declare the Japanese Yen current in the Colony. I enclose for Your Lordship's information a copy of the letter to this Government from the Chamber of Commerce asking me to take action on the subject. But as Sir MICHAEL HICKS BEACH'S despatch of the 20th