Sir Arthur Salter's Findings on the Problem: Why Heavy Outflow Will Continue New York, Sept. 22.
Meavy exportation of silver from China within the next year or two is almost inevitable, according to Sir Arthur Salter, noted British economist who recently completed a survey for the Chinese Government, based on his Work as official advisor to the Chinese National Economic Council.
Tu. "China and Silver," which has just been published here as the con-surprise nor anxiety." he writes. lensed version of his oMeial repost, What is important is that the normal it Arthur pointed out that the dete-jarge import has stopped and that Floration in China's external tre there was in the same period a very '28 well og the reduction in internal export of gold, which probably prices and trade, within the last, two foreshadows an increase "in the years have to a large extent been future export of silver. caused by the departure from gold "Whenever there is\ an adverse of the former gold currencies, and balance of payments, that is when-the consequent appreciation of silver ver the inpayments coming to China and the Chinece dollar in terms of respect of exports or invisible' these currencies. items, including the import of capi "The process is continuing and {al, are less than the export of gold likely to cause further grave injury," cutpaymenis, the difference is and he wrote. "There are great dangers ust be met by the export of gold aimieulties in any departure op silver." from the present silver basis of the Expanding Debit Balance Chinese dotter. this connection Sir Arthur Importance of U.S. Polley predicts an expanding unfavourable "Without that, however, China can balance of payments, and asserts lenly escape the injury of further de-hat China will be unable to continue ation if silver ceases to rise sub-0 export gold in large quantities to stantially in relation to the foreign offset' that balance. currencies and to the world prices rise in the world price of of commodities. The principal fac silver," he continues, "that is out of for is the silver policy of the United line with the world prices of com: States. It seems important, there modities In general is certainly, in fore, that China (whose real interest its net results, injurious. When such in silver is overwhelmingly greater a rise is of a speculative character than that of any other country) likely to result in a later reaction, should make her position clear to the itis doubly injurious, as subjecting government. of that country."
China, through her sive currency, Sir Arthur describes the surpris-two successive disloctitions, ingly prosperous condition of Chin-Embargo Impracticable ese internal trade during the years 1930 and 1931 and states that the "The chief immediate factor is the explanation for this activity, as well the silver policy of the United fas for the fact that China's' external States. China's real interest in silver trade did not decline as much as that is, of course, overwhelmingly greater fof other countries in the two yet than that of any other country; was the silver backing for her cur-a commodity silver is a small thing in the world's production, and ency.
America's production ig only a "During this period," he writes, small part of the world's.
"China was completely saved from clearly time—more than time—for the effect of any currency deflation China's voice to be influential in of her own upon her internal enter-regard to policy designed to affect prise and activity by the fact that, the world price of silver.
Unlike the rest of the world, her "An embargo on silver must_be currency was silver and not gold. regarded as impracticable, The em-'Silver was depreciated in terms of bargo on gold, of 1030, by' depressing gold as much as (In fact rather the internal price below the external more than) gold appreciated in created a great smuggling terms of commodities. gold, and undoubtedly Stable Internal Prices caused more gold to leave the "The consequence was that China's country than if an embargo had internal prices either remained never been. imposed, "silver, it is true, is much more in terms of her own currency, showed some tendency to increase, aimeult, "aswell as being les while remaining, nevertheless, on proffable, to smuggle, But it favourable competitive basis in terms may nevertheless be doubted fof gold for external trade." whether an embargo would be China first entered the general de-be really effective, Moreover, at the pression two years chiefly because best, it would if effective have {he pound, sterling, the Indian rupee result of reducing China's ability, to and the yen went off gold in Sept-buy even the most needed imports. ember, 1981, Sir Arthur declares.
This restriction of purchasing power Now that the United States has also would not operate with any disc mination abandoned gold, he adds, the Chin fosse dollar is appreciating in rotation necessary imports. On the contrary, to that currency also and currency these would be the most likely to [deflation "is now contributing to the forces which are depressing China' has sometimes been argued that internal prices and dislocating silver has gone out chiefly because internal (as well as her external) the expectation of a silver-raising policy in the United States has ma the speculative external price more attractive than the domestic price of Export of Silver silver, and that China's position Sir Arthur remarks that the export enables her to dominate the silver of silver is a recent phenomenon exchange market if she desires. But, China and that in no single year while the speculative external rise between the end of the World War} in silver prices hay have been the and 1932 did China sell more silver immediate cause of any given ekthan she imported. In 1032 and] port, this is the superficial and not 1933, however, there were net silver! the fundemental- cause of the out-exports of eleven million and fourteen million Chinese dollars, respectively.
"A movement of a few millions of dollars would in itself cause neither! flow, which is to be found in the adverse balance of foreign payments, The outflow will continue while this fundamental cause Is in operation." United Press,
Text read from the printed page and cleaned; old type leaves the occasional error.