Central Reseroe Bank <The approval by the ii'Be'ocleomed' at a further lative Yuan of the bil for the establishment of the en, torgards hints cure Suture tu matters Should ecordinply be of particular taterest at "the" present tee "Tue" following "toecialy contributed sree When the National Government! on Jyovember 3, 1935 took the moment ous step of complete divorcing! [China's currency from sliver, Dr. Kung os Minister of Finance an. nounced that, in order to make effective the system of currency management then adopted, the Central Bank of China would be reorganized to function as a central Feserve bank, and that plans of Jdnanelal adjustment had been made whereby the national budget would be balanced in eighteen months.
Since then news reports have appeared from time to time concerning the progress of the Central Reserve [Bank scheme, with some details its capital structure. Now com the announcement that the bill for the establishment of the bank has received the approval of the Legislative "Yuan, and we shall await with Interest the oficial publication of the provisions of its charter.
The National Government, when it decided to abandon silver as a currency basis, recognized the neces sity of establishing a new link between the Chinese dollar and other currencies, and indicated its inten-'Hon to maintain the then existing level of exchange by' instructing the three Government banks to buy and sell foreign exchange in_un-Imited' amount. This, in effec placed China on a managed foreign exchange standard, but the financial machinery appropriate for such jo. aystem of currency management lad yet to be created. A. brief Ineursion nto theory may help to explain the general objective of the new bank to be established for this pure pose and the sort of problems it will have to handle.
An November, 1935, the Government was forced by the' dimiculties fof time to take the risk that the Fate of exchange chosen for stabilization "would prove unnatural, and, though it might be possible with the ald of the resources at ils disposal fo meet a temporary lack of balance between demand and supply in the exchange market, If the new system, was to be permanently satisfactory' It" was essential to establish tural equilibrium at the chosen rate of exchange so. that the need for oMmeial intervention in the exchange' market would be reduced to a mini mum. In other words it was neces-ary to make the Chinese paper dollar' worth 1/2%4d. or 30 cents US, currency. What was to happen if there should be an appreciable movement in the rate of exchange between erling and the U.S. dollar is a mat-for that need not be dealt with her
Text read from the printed page and cleaned; old type leaves the occasional error.