The announcement by Sir John Simon in the House of Commons of a plan whereby Great Britain and China will ce-operate in the protection of the latter's currency, through the establishment of a stabilization fund to which British and Chinese banks will equally contribute the total sum of £10,000,- 000, was made appropriately enough just upon the announcement of exchange control in North China designed to restrict the operations of foreign merchants in that area. The scheme is not to be taken as being in the nature of a retaliatory measure, in reply to the discrimination in which Japan has been indulging against Great Britain, but a perfectly legitimate move for the protection of interests which Great Britain has every right to protect. However this new development will be regarded in Japan, it will undoubtedly be welcomed by Britons in China, as well as the Chinese, as indicating a stiffening of the British attitude with regard to developments in East Asia, and an earnest that no steps will be left untaken in order to protect rights, and interests built up honourably, and in the course of legitimate trade. The more effective the stabilization fund proves to be, the better, and it is clear that there should in no way be any change in the British determination to do everything possible to prevent damage io Anglo-Chinese trade, and by maintaining China's exchange permit of that trade being continued, and even further developed. There has already been a good market reaction to the announcement of the scheme, and there is every reason to believe that when the fund is in operation the benefit will be substantial. As a political ges' therefore, as well as a financial manceuvre the scheme has everything to commend it Psychologicaily it will encourage British traders in China to continue facing their pres difficulties with that cour: hich has been so excellently demonstrated.
One of the immediate results of this new development should be the return of much Chinese capital to the country. It will be remembered that after the outbreak of hostilities there was a perfectly natural flight of capital abroad. Chinese capitalists were quite willing to sacrifice the comi pacify of their money by sending it overseas, in order to maintain its safety. It has been earning very little in the nature of interest, and the attractive remuneration which can be obtained by putting that money again to work in its own country will, since it is now to be protected by the stabilization loan undoubtedly set in motion the process of return. There is another and very important feature which should not be overlooked. The loan will stabilize the value of the large quantities of Chine which are still to be found in 1 though they have been driven underground by the action of the Peiping government. Their value will be equally as guaranteed as those circulating in other parts of China, and while the Peiping authorities may be able to prevent their open circulation—something which has proved more than a lo difficult up to the present,—they will have an established value which in other circumstances might have disappeared. To that extent the scheme may serve as something in the nature of an offset to the discriminatory exchange control regulations which are to come into force in the North on Saturday, and, even though it may not prove to be a complete answer to everything which is being done by the Japanese proteges in the North, will at least benefit those Chinese who have displayed a consistent ty to the old currenc: The scheme may not assist foreign trade in that area though it will elsewhere, and taken as a whole it should serve to minimize the difficulties which China might otherwise have experienced in purchasing supplies from abroad. It is plain, therefore, that the mutuality of interests between China and Great Britain is to receive that protection against Japanese attacks which it is only common prudence to provide, and if only foi that reason alone the proposal is to be most warmly commended.
The action of the United States with regard to financial assistance to China, taken some weeks ago, the British credit of £500,-
000 which was simultaneously announced, and the. latest pronouncement that France intends to grant credits to China, is now rounded out by this latest development, which emphasizes the determination of those three nations to do their utmost to protect their interests in this part of the world. There is in it all no departure from the doctrine of neutrality, and, if there were, it would be justified by the manner in which Japan, Gespite all her assurances, is secking to destroy the rights and interests of those countries in China. If there is any criticism of the scheme to be made at all, it can only be that it has come so late, when so much damage has already been done, but, if it is possible to peg the Chinese dollar at something approximating its present value, and maintain it there against the onslaughts of the Japanese, a very considerable service will have been rendered to China, and to those nations trading with her. It is obvious that other nations besides the three most intimately concerned will profit by what is being done. That is no reason militating against the virtue of the scheme. If China's general trade is to benefit by it so much the better, for it is to the improvement of her trade that she has to look for the sinews of war. The moral effect of the scheme upon the Chinese is something which cannot be overlooked. It will undoubtedly strengthen their determination to continue their resistance, ánd at the same time reaffirm Chiang Kai-shek in the loyalty of his followers, thereby reinforce ing his position if that were at all necessary. Thus without indulging in retaliation against Japan for all the wrongs she is inflicting upon third Power neutrals the first means have been found for the protection of threatened interests. It is to be hoped that this is only the forerunner of other steps which can, and ought to be taken if only for the purpose of impressing upon the Japanese Government the determination of the nations concerned not to yield their trading positions in China simply because Japan conceives it her duty to bring about what she chooses to call a
Text read from the printed page and cleaned; old type leaves the occasional error.