Since November 4, 1935, the date upon which China's currency reform movement came into force, there has always been doubt felt in one quarter or another as to whether the Chinese Government would be able to maintain the rate of 1/2% and 29%. However in spite of adverse trade balances—which in recent years were being progressively reduced—and the effects of internal strife, domestic troubles, ete., the rate has remained unshaken. The present hostilities have added pressure on the reserves of currency. An extensive movement was made to buy foreign currencies by all concerned, and it is 000,000, money, were converted into estimated between $70,000,000 and $80,-
sterling or U.S. currency. The cover for this demand was met partly by sales of the Central Bank to local banks at 1/2% and partly by export paper, while a certain amount of resales of purchases unable to be taken up, helped to stem the one-way operations. Other expedients were resorted to, such as the "gentleman's agreement" on the part of foreign banks with the Chinese Government not to sell to speculators, and not to sell forward exchange, to get as much cover as possible and to apply as little pressure upon the Central Bank as possible for cover against their own sales to meet merchants' demands or requirements. The Chinese Government issued regulations governing current accounts and Wei-wah, The former were restricted to withdrawals on a percentage basis, and the latter eventually became cash on the payment of a fee which has ranged from 5 per cent. to % of one per cent. The amount of Wei-wah in circulation is unknown, The interest due last December on internal loans was paid in Wei-wah and was rapidly changed into currency. This tended to ease the stringency of the money market and, accordingly, to reduce the differences between- cash quotations for foreign currencies and forward quotations. This phenomenon imparted a tone of confidence in local currency. The creation of a Reserve Bank in Peiping, and the policy there of replacing Central Bank reserve notes by a new issue, has caused renewed misgivings concerning local Chinese currency. Fears are being expressed on the part of those who were always somewhat sceptical of China's ability to maintain present levels of exchange due to the possibility of these Central Bank's northern notes appearing on the market here for the purpose of conversion into foreign currencies. The amount it said to approximate $40,000,000. This fact should give rise to no very great concern, The Chinese Government's foreign reserves are reputed to be very considerable, and the fact seems to be overlooked that the Chinese Government is in a very much better position to deliver the foreign currencies contracted for than, in many cases, are the buyers able to take delivery. Since November 4, 1935, all forward buyers of exchange have been forced to resell at a loss such exchange as they were unable to take up.
Text read from the printed page and cleaned; old type leaves the occasional error.