To the Editor of the "Norru-Cuixa Dairy News."
S1m,—Being unaccustomed to rushing into print, I had hoped that a more able pen than mine, and one more conversant with local banking conditions, would have taken up the question of dealing with the crisis in the import trade.
Wer read of strikes that are going to occur, and we know of dealers clearing off to Ningpo, or some other spot, but no one ever seems to get nearer to the reason for all the trouble, nor is any attempt made to prevent the situation from becoming worse.
It will I think, be admitted thatthe political situation, families, etc., are all side issues, and that the real reason for the unfortunate position of importers to-day is the drop in exchange. The Chinese dealers hold meetings practically daily, and put forward suggestions, all more or less to the effect that if foreigners would only make very heavy sacrifices, then the situation would improve. And all the time it is the Chinese themselves, who are making the situation worse.
The chief reason for the upset in the market, certainly for a goodly proportion of the losses that are bovnd to be incurred with import goods, is Kiukiang Road. The gold dealers there, with the help of the foreign Banks, have forced down the exchange, to its present rate.
It has been observed that with a smal] fall in silver, the leading bank here has once or twice attempt: ed to keep up the market, and make no change in the rate. but the gold dealers, absolutely for speculation, have bought heavily, and forced down the market. In ret"rn, the foreign bank doing the selling, has then to wire home forcing sales of silver. and the next silver telegram shows a further fall. Again the gold men come in, and again China sells silver in London or New York. and so we ea on. the rate tumbling down until importers sea such a low rate that thew know ther cannot ment their obligations, and of course they abscond.
Who is to blame? The leading bank, some time ago. decided that it would have no further transactions with the gold gamblers, and for a time kept it, but whilst taking up such attitude, it received no support from the other foreign banks. and so had to come in again, or wisd a very profitable business, and in isolate ed_cases, useful cover.
T have no. hesitation in saying that the desiings in gold, in Shanghai, are ruling the world's price of silver. If the foreign banks had_not been forced to sell silver in London or elsewhere, to cover their sales of sterling to these gamblers in Shanghai, then we should not have had, so quickly, the heavy decline we have seen.
Silver in America, that is virgin silver, can more or less look after itself, thanks to the Pittman Act, and Continental sales in London are not in sufficiently large quantities to cause such violent falls.
But when China, a silver currency country, is continually selling in London, speculators all over the world take this as a sign, and decide to follow, and so we see ruin for the legitimate Chinese dealers, and large profits for the Chinese exchange speculators.
Tt is rumoured that the gold dealers have a very large overbought position, in fact it is openly stated to be somewhere about To-day they sold about £200,000, and then turned round and started to buy, so in the early morning we had a firm market, and then as soon as they changed the market became weak, at 4s. 9d. In the afternoon again they changed their views, with the result that at the time of writing we again seo 4s. 10d strong. Why should legitimate business houses be subject to treatment of this sort, and be at the merey of these people, and why should we be content to allow them to rule our market, and make or mar our business?
T would suggest, as a means of steadying up the exchange, and in order to get on a business basis, that the members of Foreign Bankers Association agree to only sell sterling to legitimate importers, and only buy from legitimate exporters. It may so happen that al firm, in order to safeguard against exchange fluctuations, has bought exchange to cover an order placed at home. Owing to late shipmand
may expire before goods of the cargo, the exchange contract the arrive, and in such an instance the firm has a legitiniate reason for selling exchange.
But at the time such sale is made the amount must be re-purchased, but for delivery further ahead. Any other method would be pure speculation. 2 The same arrangement would apply in the case of an exporter selling exchange, but apart frotiz these circumstances, the banks should refuse to either buy or sell. unless in the case of the former the sterling is forthcoming, not a contract showing a previous purchase, or in the latter case the taels are put up.
Tf this attitude is taken up at once. the gold men, who as mentioned have a very large overhonest position, will owing to richtness of money. be unable to take wp their purchases, and whilst it is probably mean to sav 50, We shall have the satisfaction of seeing them "in the cart" and they will be taught a lesson they are not likely to easily forget.
The native banks cannot help
Text read from the printed page and cleaned; old type leaves the occasional error.