Nov. 5.
The important action taken by the Government, in ce-operation with the Banks, for the nationalization of silver and stabilization of the Chinese dollar at its present level has met with general approval.
recognized, of course, that the proof of the pudding is in the eating, but in the meantime Dr. H, H. Kung jand his colleagues are commended for their courage in tackling the, situation. Measured comment was made yesterday by Mr. TT. V. Soong. in his capacity as Chairman of the Bank of China. Study of it will Jshow that Mr. Soong makes no extravagant claims for the new policy. He expresses confidence in the Government's ability to maintain the necessary cover for the note issue and he clearly expects the people in the interior to be more favourable to tthe acceptance of paper than former theories on that subject would have Justified. In this attitude he is by, no means without support from re~ cent experience in other countries, where traditions seemed at one time to militate against non-metallic euro Fency. Moreover, as he points out, China since October of last year, has "accepted the divorce of the currency from the world-price of silver without any lack of confidence the banknote circulation." 'The Government has been able to com-, mand the ce-operation of the foreign powers with banking interests, China, as will be seen from the faction taken to regularize the for~ jeign banks' compliance with the [prohibition on the use of slive For example Great Britain's Amba: sador has signed an emergency. King's Regulation to protect British. Banks against objections which, owing to their extraterritorial status, might otherwise be raised to their withholding payment in silver.
The main object of the Govern-iment's action is to ensure stability, which is so necessary for the. restoration of confidence and the consequent revival of the flow of trade. Following other precedents the rate is that at which the dollar stood during the five years preceding the artificial enhancement of the world-price of silver. In other words the attempt is made to, stabilize at what might be called the natural level so far as it can be, judged. The Central Bank of. China, in its role as a Central Reserve Bank, will be charged with the, responsibility for preserving this rate. Thus a most important financial reform is contemplated by the Government in association with faction taken to relieve the present, situation. Having regard to the difference between the world price Jof silver and the figure at which the dollar is to be stabilized the (Central Bank should have no difficulty in maintaining exchange. The steps to be taken to amalgamate the note issue will assist in maintaining [public confidence in the currency jand facilitate the handling of the problem by the Central Bank. There may, perhaps, be a certain dislocation in the adjustment of prices to meet the new situation, but the Prospect of securing stability should Joutweigh the disadvantages of the process. As the Government proposes to keep a vigilant eye on possible abuses of the price-raising [method and to apply corrective measures where necessary, the public will not be without protection that respect.
Dr. Kung's statement, as well as Mr. Soong's comments, will be taken to indicate an alert appreciation of the criticisms which the scheme wilt evoke. In effect the Government is, bringing into action an_ elaborate system for which the essential machinery has not been completely installed. This risk had to be run, if the situation were to be tackled at all, for the course of events lad pressed the Government hard. The proposal to creole a Cur rency Reserve Board with an. Advisory Board of Foreign and Chinese experts, affords proof of the authorities'' determination to equip themselves with the best possible guidance and advice. The Central Bank of China, in its discharge of the functions of a Central JReserve Bank, will have to make itself master of a highly specialized branch of banking. Apart from the preservation of its independence on which the Government lays proper stress, such an institution requires expert direction. The Government no doubt has that point in mind. It is of importance in more ways than one. Confidence in the ability Jot the Central Bank to perform the functions required of it will be an essential asset and on that ground alone care in providing the organiza tion with the best possible expert guidance cannot be safely neglected, Important as that aspect of the scheme is, it is not of immediate significance although it should be taken into early account when the details of the new organization are being considered. The immediate problem is the effect which the Government's proposals will have jon the general monetary position. /That will be judged as tne days pass Jand experience shows the extent to which the expectations on which it has been founded are likely to be
Text read from the printed page and cleaned; old type leaves the occasional error.