Mr. Jenks met the argument that silver should continue the standard for a while by the statement that during the interim, before the national currency was put on the gold basis, there would be a great disturbance of business. The first effect of such a situation would be to increase the gold value of silver because of the necessity to restrict the fluctuation in the gold value of silver coins. Any other method but that of adopting gold at once, Mr. Jenks believed, would be followed by a period of unsettled business conditions. It would be advantageous for my readers to learn Mr. Jenks' plan, and I give below his own summary of it:
"I. The Chinese Imperial Government promptly to take effective steps, satisfactory to the majority of the Indemnity Treaty Powers, to establish a general monetary system consisting chiefly of silver coins with a fixed gold value.
"2. In the establishment and management China was to invite and employ acceptable foreign assistance.
"3. In pursuance of this plan, the Chinese Government to appoint a foreign comptroller of the currency who shall have general charge of the system for China; he to have acceptable associates in charge of the mint or of such work as he may prescribe.
"4. The comptroller to make monthly reports in detail of the condition of the currency, including amount in circulation, loans, drafts and foreign credits, etc. His accounts, but not those of the general Government, to be open at reasonable times to inspection by accredited representatives of the Powers interested in the indemnity, provided the Chinese Government judges that such a provision would be wise in order to secure confidence in the system. Such representatives, as also the associate comptrollers, to have the right of suggestion and recommendation.
"5. The Chinese Government to adopt a standard unit of value. The unit to consist of .....grains of gold and to be worth presumably, approximately, the gold value of a tael, or somewhat more than a Mexican dollar. Provision to be made for the free coinage of suitable pieces, multiples of this unit, 5, 10, and 20, on demand, for a reasonable coinage charge. Eventually some to be coined on Government account.
"6. China to coin as rapidly as possible . . . . silver coins, with an appropriate device, about the size of a Mexican dollar, for circulation in the country. These to be maintained at par with a standard gold unit at a ratio of about 32 to 1. More to be coined thereafter, according to needs, as indicated by provisions following. Subsidiary and minor coins, silver, nickel and copper, of suitable weight and value to be provided.
"7. Both the gold and silver coins to be receivable at par in payment of all obligations due to the Chinese Imperial Government in any of the provinces. When such obligations have been made in silver, the new coins may be tendered instead at their coin value.
"8. The Government at its discretion, in conjunction with the viceroys, from time to time to declare, by proclamation, in the various provinces the new coins legal tender for debts incurred after the date fixed in the proclamation. Previous debts to be paid as contracted.
"9. For the maintenance of the parity of the silver coins, the Chinese Government to. open credit accounts in London and other commercial centres against which it may draw-gold bills at a fixed rate, somewhat above the usual banking rate. For example, if the usual banking rate on London under the system, were about one of the new coins for two shillings, the Government might sell if the rate rose to 1.02 of the new coins for two shillings. Such drafts to be made only under the direction of the comptroller of the currency, but to be made on demand for all depositors of the new silver coins in sums of not less than, say, Tls. 10,000.
"10. Should it be necessary to make the loan for the establishment of a general monetary system with adequate exchange funds, it to be secured by sources of revenue sufficient to yield an amount which will provide for the needed interest and sinking fund, such revenues to be managed in a manner satisfactory to the parties interested.
"11. The seigniorage profit from coinage to be kept as a separate fund. Whenever Tls. 500,000 shall have been accumulated, it to be placed as a gold deposit with the several foreign depositories in proportion to the drafts made upon them. This process to be continued till at least.....taels worth shall be in the gold fund on deposit.
"12. For replenishing the gold fund after its reduction by drafts, the comptroller to honour silver drafts drawn by foreign agents of the Treasury in exchange for gold, at rates fixed by the comptroller.
"13. Provision to be made for a banking law under which bank notes kept at par with the legal-tender currency may be issued by an Imperial bank or by other responsible banks under the supervision of the comptroller.
"14. As rapidly as is practicable the new currency to be introduced into the various provinces, the comptroller making use of the local governments, banks, business houses, and such other agencies as are best suited to the purpose.
"15. Within five years the new system to be introduced into all the treaty ports and as far as possible elsewhere, and all Customs duties to be collected in terms of the new currency. Local taxes to be collected in the new currency as fast as it is adopted in the provinces, and provision also to be made for the keeping of the tax accounts under the new system.
"16. The new system to be put into effect when......of the new coins are ready for circulation.
"17. The comptroller and the representatives of the Powers to be authorised to recommend economic reforms to the Imperial Government."
The advantages of this new monetary system for China were represented to be five-fold. First of all, it would bring about a fixed rate of exchange, would eliminate the element of risk and uncertainty from international commerce, and thus bring about a large increase in the volume of China's foreign trade. The finance of the Government would also be more certain and less embarrassing than when the value of the tael was fluctuating. The second advantage was that during the first four or five years of the introduction of the new currency, China would make a profit of about $50,000,000 in coinage. It was stated that because of the uncertainty as regards currency, foreign capital was fighting shy of China - except that of speculators and others who had special schemes. Therefore, the third advantage was that China would, under the new conditions, obtain enough capital to develop her resources at lower rates of interest. Not only would China be enabled to borrow cheaply, but it would also be possible that some of the obligations could be met by loans bearing a lower rate of interest. A considerable saving in interest, sufficient to pay interest on the new loan for currency proper, was stated to be the fourth advantage. The last, but not the least, benefit on account of the adoption of the gold standard, it was emphasized, was the maintenance of the value of the taxes collected. Under the old conditions the gold value of Chinese revenue kept reducing on account of the decline in the gold value of silver, thus making it increasingly difficult for China to meet her foreign obligations.