MR. THOMPSON ON THE TRADE WITH CHINA.*

ALTHOUGH it would not be speaking with precision to say of our trade with China, that it is conducted upon peculiar principles, yet it cannot be denied that its incidents distinguish this channel of our commerce from those with which it communicates with the rest of the world. The British trade with the empire of China has, for example, grown up to maturity in the hands, chiefly, of the East-India Company, whereby its operations became blended with the finances of the Indian territories; and, since it has been liberated from the restrictions of the Company's charter, as well from the nature of the trade itself, as from its convenience as a medium of Indian remittance, the China commerce continues to be a very extensive scene of money-transactions, requiring great accuracy and nicety of calculation. It would have been far better, as is observed in the work before us, if a longer period had been allowed between the determination to throw open the trade and the actual commencement of the trade on the new footing;" but all the measures of that ministry were precipitate; things were left. to adjust themselves, according to one of the favourite maxims of political economists, and they have been in some cases adjusted much as nature, without the aid of a surgeon, will adjust a fractured bone.

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Mr. Thompson, with the recommendation of nearly half a century's experience in the Company's home-service, has published the little work we are about to examine, with a view of "contributing, in some degree, to the information now sought to be more generally diffused" on the subject of this trade, especially its transactions in money-exchanges and remittances.

In Part I., he enters briefly into the history of our silver currency, and then into that of the silver coinage of India, and the reforms introduced into the currency of that country by the East-India Company, with the view of ultimately establishing one uniform coin, of the same weight, fineness, and impression, throughout the whole of the British possessions.

Part II. is devoted to the exchanges between India and China, and between China and England, with especial relation to the remittance to Europe from India of funds to defray its territorial charges.

The Company effected their remittances through the China trade in two ways; first, by means of merchandize shipped from India to Canton, the proceeds of which were applied to the purchase of teas; secondly, by bills drawn in China on India, in return for dollars. As the vehicle of trade has ceased, the remittance is thus effected: the British establishment at Canton receives a certain sum in dollars, in return for bills on India, which dollars are advanced to British traders for investment in teas for the English market, and the value of the advances is paid out of the sale-proceeds in England; the rates of the several exchanges depending upon the current rates in China, in each season.

This last point is one which requires a good deal more consideration than

* Considerations respecting the Trade with China. By JosEPH THOMPSON, late of the East-India House. London, 1835. Wm. H. Allen and Co.

his Majesty's ministers could, of course, give to it. The trade between India and China (including opium) leaves a large balance, at the end of each year, in favour of the former country, which the Chinese merchants discharged in dollars and sycee silver. A portion of the dollars was paid to the Company's supra-cargoes for bills on India; the sycee silver and remaining dollars were remitted to India, the former for coinage: the merchants and supra-cargoes looked, generally speaking, to the produce of the dollars in the mint of Calcutta, as the basis for calculating the exchanges between China and India. Where higher rates of exchange have been demanded than the mintage would warrant, bullion has been remitted to China, on the Company's account, both from England and India. On the average, however, of fifteen years, from 1814-15 to 1828-29, the dollars received in China were paid in Calcutta with nearly Rs. 6 per 100 dollars less than their intrinsic value, and Rs. 1 less than their net produce in the Calcutta mint. This fact seems to demonstrate that the supra-cargoes considerably influenced the rates of exchange. The same influence, to a considerable extent, must exist in the hands of the king's establishment at Canton, which, if judiciously directed, Mr. Thompson thinks, may procure dollars for bills on India on nearly as favourable terms. He speculates, therefore, upon the great probability that government, instead of leaving the exchanges, under the operation of free-trade, to the course of events in China, will take the arrangement at once into their own hands, and receive dollars in China for bills on India, on such terms as their agents may consider just.

A deficiency in the importation of dollars into China, and in the supply of sycee silver, might render the exchange less favourable to the drawer; but should such a difficulty occur in obtaining an adequate supply of silver for payment of the Indian surplus trade, it might, he thinks, be thus obviated. The Indian traders might receive from the Chinese merchants receipts, expressed in dollars, for the difference in value between the imports and exports of each trader, which receipts they might hand over to the superintendents, for bills on India at rates of exchange agreed on between the parties; and, to effect the remittance of the amount of bills so drawn on India, in England, on account of the crown, the receipts might be handed over by the superintendents to English traders intending to purchase return cargoes from China by bills on England, who might transfer the receipts to the Chinese merchants with whom they dealt. A system of this kind, on a small scale, he adds, has been acted on with advantage by the Company's supra-cargoes in their dealings with the hong-merchants.

This we can readily believe; but we are decidedly of opinion that such a system could never be practicable in free-trade.

Should it happen, in the future progress of the trade, that the merchants of England find it profitable to place funds in India or China, so as to be available for the purchase of merchandize for this country, which would reduce the demand for bills on India, a remittance to England on account of India, through China, might yet be beneficially secured, he thinks, by

making part of the proceeds of the opium-sales in Calcutta payable to the superintendents at Canton on the realization of its produce in China. The purchasers of opium at the sales might have a portion delivered without payment, on depositing promissory notes of the Bengal government, with a premium added to the amount; and engaging to pay to the superintendents in China the purchased value in dollars, or sycee, or hong-merchants' receipts; the superintendents giving a receipt for the same, on the production of which, at Calcutta, the securities deposited to be returned to the original purchasers at the opium-sales, on their paying interest on the sale-value of the opium from the period of its delivery at Calcutta to the payment of the purchased value in China.

This scheme would, no doubt, as Mr. Thompson remarks, be attended with many extensive advantages; but every mercantile man must perceive its complexity, the doors it opens to fraud, and its incongruity with the general course of commercial transactions.

Sycee silver would appear, at first sight, to be a more favourable return to India than dollars, or bills at a rate based on the produce of dollars in the Calcutta mint; because sycee (which is considered by the Chinese as pure silver, though never found finer, in the mass, than 981⁄2 parts out of 100 of pure silver), owing to the absence of silver coin in China, for which the dollar is a convenient substitute, frequently exchanges weight for weight with dollars, though the latter may be 9 per cent. worse. But the fineness of sycee, through Chinese inexpertness or fraud, is uncertain; moreover, there is no native supply of silver known in China, and the government prohibit the exportation of sycee. For these reasons, it is not likely to

interfere with bill-remittances on India.

At the time of writing this work, Mr. Thompson was not aware of the exact rate of exchange between India, China, and England, since the opening of the China trade. He, therefore, assumes the rate of 205 sicca rupees per 100 dollars (which is about their net produce in the Calcutta mint, and is the average rate at which the Company's bills on Bengal were drawn in the fifteen years before mentioned) as an equitable rate of exchange, which may serve as the basis for future calculations in government negociations for bill-remittances from China to India; and for the opium-remittances to China, before suggested. We shall follow him in his observations, founded upon this hypothesis, before we enter upon the details contained in his "Conclusion."

The rate of 205 sicca rupees per 100 dollars, however, is assumed as the present standard of the sicca rupee, namely 175-923 grains fine silver. When the proposed standard for the Indian universal rupee, namely, 165 grains fine, is adopted, this rate must, of course, be increased, say from 205 to 218 sicca rupees per 100 dollars. This result, Mr. Thompson thinks, must be soon brought about by the circumstance that dollars produce in the mints of Bombay and Madras, where the rupees are 165 grains fine silver, about 6 per cent. more than in the Calcutta mint a fact of which traders will soon avail themselves.

The trade between England, India and China, he is of opinion, is capable of considerable enlargement, from its convenience as a medium of remittance, as well as from its presenting so extensive a field for British speculation. In order to encourage this trade, he recommends every practicable reduction in the charges of Indian mintage, so as to secure the greatest outturn; that the exchanges between the three countries should be regulated on principles which would give the British trader his utmost just advantage, and that the commercial intercourse of the countries be as unrestricted as possible. He also suggests that the impediment to the returns of the Bombay trade should, if possible, be removed, so that bills from China might be drawn on Bombay as well as on Calcutta, since, when the Calcutta rupec is equalized with those of Bombay and Madras, bills could be drawn in either presidency at the same rate of exchange. Some arrangement in the finances of India might enable Bombay to draw, in the first instance, some portion of the surplus revenues of the Bengal and central provinces.

With respect to another branch of the subject of these exchanges, namely, the rate at which dollars advanced by the superintendents in China should be repaid in England, he observes that, were the basis of this exchange to be formed from the relative intrinsic value of the coins exchanged, the computation would stand thus: comparing the quantities of pure silver contained in the dollar and in the shilling of the present standard, 100 dollars are intrinsically worth £23. Os. 2d. The trader would, therefore, pay for the depreciation of our silver money (which Mr. Thompson shews in the preceding part is to the extent of nearly 6 per cent. compared with the silver monies of France and the United States*) to the whole extent of the bills drawn, though, in fact, little or no part of such bills would be actually discharged in the current silver money of the realm. These considerations would invalidate a rate of exchange founded on such a basis. If, however, the rate were formed on the principle of taking the ounce of standard silver at 5s. 2d., the computation would stand thus: the fine silver in a pound of standard silver is 5,328 grains, and in a shilling, at the old rate of 62 to the pound troy, would be 85935 dec., making the dollar (371.514 dec. grains fine) intrinsically equal to 4s. 3d., 878 dec., and 100 dollars equal to £21. 12s. 4d.; the difference between this and the former product being £1. 7s. 10d., "the amount of the depreciation in the present silver money when compared with the standard of our silver money from 43d Eliz. to 56th Geo. III."

Government, says Mr. Thompson, are not to take advantage of their own wrong (having reduced the intrinsic value of the shilling for their own benefit); and, therefore, he contends that, in justice to the trader, as well as from motives of policy, the basis of the exchange for repayment of advances in China should be formed on the principle of the price of standard silver, i. e. 4s. 3d., 878 dec. per dollar: adding interest, the dollar taken

"At the standard of our silver money, in respect to France, francs 24-743 were intrinsically equal to 20 shillings; but at the present standard of our silver money, francs 23-243 are intrinsically equal to 20 shillings. And, in respect to the silver money of the United States of America, the dollar of the standard of their mint was intrinsically equal to 4s. 3d. 840 dec. of our old silver-money; but the same dollar is now equal to 4s. 7d. 152 dec. of our present standard silver money."

up in China should be repaid at the rate of 4s. 5d. If, by any accident, the dollar could be obtained in China at a less cost than 4s. 5d., the government must submit to a proportionate reduction of the rate of bills on England drawn in repayment of advances in China. "It may, however, be presumed that, if the government were to declare at once, in England, that they would advance dollars in China to be paid for in England by bills at 30 days' sight, and at 4s. 5d. for each dollar so advanced, those terms would be accepted by many traders, previously to the commencement of their outward voyages; and, as rates so fixed would have a very great influence on such bills as might be negociated only in China, it may be inferred the government might make the whole annual remittance from China at or about that rate of exchange."

In his "Conclusion," Mr. Thompson states that, since the opening of the China trade, bills drawn from China, in favour of the Company, for dollars advanced by their agents at Canton, have been at 4s. 7d. per dollar, and six months' sight; bills drawn from China by Company's agents, for dollars received by them at Canton, on the Bengal government, have been at the rate of 206 sicca rupees per 100 dollars; and bills drawn in England by the Company on India for cash received in London, and at 60 days' sight, have been at the following average rates; namely, on Calcutta, at 2s. the sicca rupee; on Bombay and Madras, Is. 11d. the new rupee.

Now, with respect to the exchange with China, as the trader receives a dollar in China for his bill on England at 4s. 7d. and six months' sight, the real price of the dollar at Canton (deducting the 12 months' interest before the bill is payable in London) would be equal to 4s. 4d. 381 dec., and as it would cost the trader 4s. 5d. 241 dec. (according to Mr. Thompson's calculation*) to send a dollar from England to China, it would be more advantageous to purchase dollars in China, by a bill on England, at 4s. 7d., than to send a dollar from England to China, by rather more than 1 per cent.

the rupee costs The exchange

As respects the exchanges with India; the Company now receive in London cash for bills on Calcutta at 2s. the sicca rupee, and at 60 days' sight. Add the loss of interest during transit, Od. 60 dec.; the trader, purchasing in London, in China, 2s. Od. 60 dec. on Calcutta from Canton being 206 sicca rupees per 100 dollars, to place 100 dollars in China by a Company's bill on Calcutta, purchased in London, would cost £21. 2s. 3d., or for each dollar 4s. 2d. 676 dec.; hence it would be more advantageous to give 2s. Od. 60 dec. per sicca rupee in London for a Company's bill on Calcutta, and to sell that bill in China at 206 sicca rupees per 100 dollars, than to purchase a dollar in the London market for remittance, by more than 5 per cent.; and the bill purchased in London would be more advantageous than purchasing a dollar in China by a bill on England at 4s. 7d., by more than 31 per cent.

*He takes the price of dollars in the London market at 4s. 10d. per ounce, which gives the cost of a dollar 4s. 2d. 228 dec.; add 3 per cent. for insurance, brokerage and shipping charges, and interest during transit to China, 6 months at 5 per cent., 2 per cent., equal together to 0s. 3d. 013 dec.: total 4s, 5d. 241 dec.