passage, as recorded by Dr. Eitel. In 1873, when the value of the notes in circulation had reached three and a quarter million dollars, “the Governor (Sir A. E. Kennedy) received an intimation that the Lords Commissioners of Her Majesty's Treasury disapproved of the issue of one dollar notes on the ground that the notes would be largely in the hands of the poorest Chinese, who might be even more subject to panics than the mercantile classes. The Governor was instructed to order the withdrawal of these notes unless serious public inconvenience should result from such a course. When the Governor accordingly called upon the bank (February, 1874) to show cause why the one dollar notes should not be called in, the whole community took up the matter, and a numerously signed memorial, supported by a special resolution of the Chamber of Commerce, was forwarded to Her Majesty's Government (March, 1874) in favour of the retention of these one dollar notes.”
The Hongkong and Shanghai Bank is authorised, in accordance with its Ordinance of Incorporation, to issue up to 10,000,000 dollars’ worth of bank-notes, including notes issued in Hongkong as well as by any of its agencies in any part of the world. Beyond that the Corporation may issue notes to any extent, provided that the actual bullion is deposited previously in the joint custody of the Colonial Secretary and the Colonial Treasurer. The Chartered Bank of India, Australia, and China, is the only other bank in Hongkong authorised to issue notes by charter from the Home Government. Their limit for the Colony of Hongkong under the charter is 4,000,000 dollars’ worth. At the same time if they deposit, dollar for dollar, bullion value, they also may issue in excess of that amount. In 1895 the National Bank of China began to issue notes, unauthorised by the Government either by ordinance or charter, and the result of this was the passing, at a special sitting of the Legislative Council, of Ordinance No. 2 of 1895, prohibiting the issue of notes in the Colony except by permission, but allowing the circulation of any notes actually in circulation before March 20, 1895, a schedule of which had to be supplied to the Colonial Treasurer on application. The National Bank has, therefore, 450,000 dollars’ worth of notes in circulation, though these notes are not recognised by the Hongkong Government.
Two big bank robberies are recorded in the earlier annals. In July, 1862, a huge fraud was perpetrated upon the Chartered Mercantile Bank by an Indian merchant, who, with the assistance of an Englishman in charge of the opium stored in the receiving-ship Tropic, forged opium certificates to a total of $2,000,000. In 1864 and 1865 there was great activity on the part of certain ingenious Chinese burglars who came to be known as “drain gangs.” The godowns of Smith, Archer & Co., and the jewellery store of Douglas Lapraik were raided in 1864, and, emboldened by these successes, a masterstroke was planned early in the following year. The story cannot be better narrated than in the words of Mr. Norton-Kyshe, in his “History of the Laws and Courts of Hongkong.” He writes: “A serious bank robbery took place between the evening of Saturday the 4th and the morning of Monday the 6th of February, when the Central Bank of Western India was robbed of $115,000 in notes, gold, and silver, by thieves who entered the bank’s treasury vaults from the drains. The principal labour seems to have been that of tunnelling a passage of twenty yards from an adjacent drain to a spot exactly below the treasury vault. A perpendicular shaft, ten feet in length, of sufficient diameter to allow the passage of one man, was next made, and this brought the borers to the granite boulders on which the floor of the vault rested. These naturally sank down as they were undermined, and nothing remained but to force up a slab, when ingress became free. Sixty-three thousand dollars in mixed notes were carried off, along with £11,000 in gold ingots marked with the stamp of the bank.” As far as could be ascertained, the gang consisted of nine men, of whom three only were brought up for trial—one being discharged, and the others being sentenced to four years penal servitude. They would be
smart thieves who could effect such a burglary at the present day !
Owing to the fluctuations of the dollar the Hongkong banks do an immense business in exchange quotations. A merchant who purchases in Canton goods for export to England, must have some firm basis upon which to make his calculations, otherwise, if pending delivery of the goods the dollar increase in value, the sterling remitted to him on the completion of the transaction will represent in the local currency something less than he anticipated. For example, if at the time of making the purchase the dollar stood at 2s., the merchant would have to pay $1,000 in Canton for silk which he agreed to sell in London for £100, plus, of course, his profit and the cost of freight, which may be ignored for the purpose of this illustration. On arrival of the goods in London six weeks or so later the dollar might have risen to 2s. 2d., which, in the ordinary way, would mean that when the £100 was cabled out to him he would receive only about $923. In order to guard against this, merchants arrange with their bankers for a fixed rate of exchange, and are thus guaranteed a specified number of dollars whatever may be the fluctuations of exchange. An importer of European goods for the Chinese market, adopts of course, a similar method of insuring himself against loss. The bank's quotations in such cases depend upon whether the dollar is considered likely to become cheaper or dearer.
In the European banks the whole of the Chinese business is controlled by a compradore, a Chinaman of considerable financial standing, who has to lodge a large sum of money with the bank as guarantee. The compradore acts as an intermediary between the bank and its Chinese clients. If a native bank or a substantial Chinese Government official or merchant wants a loan, the compradore, having satisfied himself as to the financial soundness of the applicant, negotiates with the manager of the bank for the required amount, and enters himself as surety for its repayment. In other respects the compradore has much the same functions as an ordinary general broker, buying and selling sterling bills, sovereigns,
