Page:Indian Journal of Economics Volume 2.djvu/400

884 J. HINTON more speculative business is carried on. It is clear that the t?rade conditions will and it is far more also a fact speculative market. all ports, market is not be the same in that the Shanghai and perhaps more Hongkong freely competitive than the It is not surprising, therefore, to find that in the summer of 1916 when the price of silver made a spectacular of silver rose, for'Shanghai. advance, the rates in Shanghai and Hongkong lagged behind by a percentage which increased as the price and was greater for Hongkong than In Fig. 8 this disparity is shown by the distance above or below the line marked "parity ". T. he black line representing the Hongkong disparity nsos higher and falls lower than that representin? the Shanghai disparity. In rat? more nearly follows does the Hongl?ong rate. It would appear, therefore, that the other words the Shanghai the price of silver than premium on dollars ? occurred (see Fig. 2) when the Hongkong and Shanghai sterling rates of exchange were more than ? per cent below silver parity, the Sh.anghai rate being below parity or only slig. htly above it when the Hong- kong rate was above panty. When the Hongkong rate was more than 8 per cent below parity, generally by a considerable percentage more than the the notes explanation the rate imported by the Chinese who ? ent to a discount. The of this is that silver is is more than 8 per cent when it is above. deal in Shanghai rate, This most exported below parity silver probabJe when and is obtained this business, not by ? Whioh is the 8sme s8 s disoount on notes. in the money-changer's market, or by bringing down silver from Canton in exchange for notes. That silver will ordinarily be dollars and it is limited in amount presenting notes to the Hongkong and Shanghai B. ank for encashment, but by exchanging notes for silver