"As the exchange proceeds from exports are falling into the hands of Japan, a large part of the original fund, in effect, has been handed over to Japan, while another large portion has been handed over to facilitate exchange speculation and capital export, "Although the latter loop-holes are now closed, it will still be necessary to institute still more rigid control of imports to ensure that they are not paid for simply with Japanese currency.
"Provided that is done, further assistance might possibly achieve ins end, for currency conditions in China are still by no means chaotic.
"It is sincerely hoped," the "Financial News" concludes, "that a way will be found round the difficulty, for the tone of Japanese comments leaves little doubt that any withdrawal at the very moment of the Tokyo negotiations would be interpreted as a sign of British weakness."—Reuter.
The first issue of the bond priced at $52.80 showed a decrease of $4.50 while the second issue registered a drop of $3 being quoted at $44.40 The other three issues priced at $43.05, $42, and $43.35 showed a decrease of $3.40, $3.90 and $2.65 respectively.
No official report has come from Chungking in regard to the moratorium but reports asserted that the Chinese Government had decided to declare a moratorium on the bond.
Although the reports could not be substantiated locally, there were indications that such a policy might be followed by Chungking. The fact that the branches of the four Chinese banks in Shanghai have promised to receive the bonds as objects of "mortgages" indicated that Chungking would not pay the capital and interest of the "Consolidated Bond" which are due on July 31.
Informed Chinese circles stated that since Chungking had declared a partial moratorium on foreign debts secured on the Customs income and since that the Consolidated Bond" was secured on the "Kwang Vu" or the left-over of the Customs fund it was very likely that a moratorium should be declared on the Government bond.
As a result of the changes in the foreign exchange market here on Tuesday, Government bonds registered drops between 80 cents and more than $1, but yesterday's drop took many unaware as only a few days ago it was reported that the capital and interest of the "Consolidated Bond" would be paid at the end of this month, The price of the 10-ounce gold bar again jumped yesterday to $3,460, showing a difference of more than $300 as compared with the previous day's figure. It is also unprecedented. It was also a record that for each $1,000 Wei Wah note the banks here yesterday took away $185 in order to allow it to be cashed. The usual rate was $50.
Chungking's Statement The Chungking Government's view of the currency situation was given in a United Press message from the capital yesterday in which a statement by a spokesman of the Ministry of Finance was given declaring that the drop in the dollar "need not seriously affect China's economy as a whole."
The spokesman went on to say however, that it was regrettable that conditions created by the Japanese invasion of China and speculative operations had caused a fall in the exchange rate. He added that the increasing difficulty in obtaining imported goods and conditions which depressed the exchange rate might be only temporary.
The spokesman said that 20 years ago the United States dollar was worth less than the Chinese dollar, and the pound sterling was worth (Continued on page 8)
Text read from the printed page and cleaned; old type leaves the occasional error.