In the interim Hu Wei-te, Chinese Minister at St. Petersburg, sent in a memorial to the Throne favouring the adoption of a gold standard with the incidental gold reserve. The following extracts from Hu's memorial is interesting as showing the absurdity of the usual type of proposal then put forward for the reform of currency in China: -
"Although the question of coinage is a nation's private business, modern conditions of finance, both tradal and governmental, are such as to make the interest of different people almost coeval; business in general brings into relief foreign exchange and if the monetary systems of the countries that have relations with each other are not properly regulated it is impossible to prevent loss. A country must have a fixed coinage of gold, silver and copper at a definite and fixed ratio in order to have a proper currency. The coins must be of the same pattern, value and fineness throughout the country, if the best interests of the people are to be considered and the confidence of foreign nations retained. Such countries as have a gold standard do not, for obvious reasons, suffer any loss in exchange and international intercourse is easily arranged.
"There is a more or less correct estimate of the annual output of gold and there is no fear that the supply would prove insufficient if every country should adopt gold as its standard. As to the supply of silver there is no limit, according to present calculations; the greater the supply the cheaper it has grown, and the present high price of silver indicates more that silver is cheap than that gold is dear. China is using silver as a standard; naturally the Chinese consider that gold is growing dearer every day. Other countries are using gold as a standard; hence their point of view is that silver is growing cheaper every day. A gold standard country is like a man who has accumulated riches to buy grain; if the grain is cheap he profits. A silver standard country is like a farmer who has accumulated his grain and holds it for the rising price; if the price drops he loses. The relation between a silver standard and a gold standard country is parallel to the case of two men making a barter, in which one man's daily increase of loss (on account of his waiting each day for a higher price), is but just the other man's daily increase of gain. Therefore as we use uncoined silver for money we are exactly in the position of the man who wishes to barter grain for gold and it is thus unnecessary to point out that we are the losers. The use of uncoined silver for money is like using uncooked rice for food, or uncut cloth for clothing, for uncoined silver is nothing more than a product of the earth. Other nations consider silver merely as a commodity and not as money.
"It is already becoming hard for us to meet our obligations and a lapse of time will only make our position worse. At present all European nations use gold; even Asiatic dependencies like Russian Turkestan, India or the Philippines use gold. England is now planning to use gold in Hongkong and Russia has already begun to introduce roubles into Manchuria. Why? Because when a country plans and marks out its frontier she must reckon upon its expenses - for is not the profit of the dependency the profit of the nation as well? It is equally evident that as the value of gold increases that of silver decreases; consequently a nation will spare no efforts to regulate the expenditure in such manner as should prevent a dependency proving a burden to her. Is there another nation as rich as China in land and subjects which would not, in view of the present circumstances, speedily change her policy?
"It is very evident that nations which have the silver standard (with silver constantly depreciating in value) will suffer considerably. The system of coinage as adopted by the nations of the world is regulated on the basis of fixity in value, and although there are exchange charges the market value changes very little; banks have no charge to impose upon the people nor have any foreign merchants an opportunity for swindling. If China has a uniform national coinage she will be in the same position as the foreign nations and there will be little cause for anxiety in the matter of exchange. The three metals, gold, silver, and copper will have a fixed relative value; one silver piece being worth so many copper coins, and one gold piece being worth so many-silver coins. Once fix the relative value, and the result will be that all financial affairs, large or small, will have a large degree of definiteness. Coins can then be used everywhere, far and near, at exactly the same value. Officials and people can then use them without discount for short weight. Business affairs will then be easily managed. Rapacious underlings and dishonest traders will have difficulty and little opportunity to squeeze the public."