Sessional_Paper_1885-1886 — Page 136

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No. 14.

HONGKONG.

DESPATCH RESPECTING THE POSTPONEMENT OF THE PROPOSED LOAN.

Presented to the Legislative Council by Command of His Excellency the Officer Administering the Government.

Colonel The Right Honourable Fred. Stanley, M.P., to Governor Sir G. F. Bowen, G.C.M.G.

HONGKONG,

No. 5.

SIR,

DOWNING STREET,

30th June, 1885.

I have the honour to acknowledge the receipt of your Despatch No. 187, of the 24th of April, enclosing, and favourably recommending, a memorandum by Mr. MARSH, in which it is suggested that the raising of the proposed Loan should be postponed, and temporary advances procured from the Hongkong and Shanghai Bank.

2. I am quite of opinion that money should not be borrowed, until it is abso- lutely necessary, but I find myself unable to accept Mr. MARSH's proposals for the following reasons :—

(a.) The system of temporary advances from the Bank, which Mr. MARSH recommends, has been adopted by the Crown Agents in the case of some of the Colonies on more than one occasion; but whereas the Hongkong and Shanghai Bank, would lend money at 6 per cent., the Crown Agents can at the present time obtain it at 2 per cent. provided only that an Ordinance has been passed, authorising the issue of Debentures.

I have not lost sight of the fact that Mr. MARSH wrote during a period of finan- cial panic, when rates were exceptionally high, and I have not failed to observe that the Directors of the Bank were prepared to make some reduction in their charge to meet falling rates, but, unless rates have fallen sufficiently to induce the Bank to take 2 instead of 6 per cent. for its advances, it would clearly be more advantageous to obtain temporary advances in London rather than in Hongkong.

(b.) The grounds on which Mr. MARSH advocates a system of temporary advances are, that the time is unfavourable for the issue of a Loan; but I am informed by the Crown Agents that the circumstances which, in April last (the date at which the Colonial Secretary drew up his memorandum), would have inilitated against the success of a Loan, now no longer exist; and that at the present moment a Loan could be raised at 4 per cent., possibly at 4 per cent.; nor is it to be expected that 12 months hence it will be possible to borrow on more reasonable terms than can now be obtained.

(c.) In paragraph 8 of the memorandum, Mr. MARSH states:-"I do not take into consideration the loss that the Colony would sustain by the sale of its Debentures considerably below par if arrangements were made for a Loan at an unfavourable moment, nor the loss on exchange on the remittances to pay the interest, nor the commission that would be payable and the other attendant expenses."

Governor, Sir G. F. BOWEN, G.C.M.G.,

&c.,

Fe..

&c.