Confidence in the Chinese currency, when I referred to the matter a year ago, had already been undermined by the restrictions placed upon the sale of sterling and other foreign currencies by the Chinese authorities consequent upon the establishment of the Federal Reserve Bank of China in Peiping and Tientsin, and the issue by that bank of a new currency in North China. In spite of generous allotments of foreign exchange for some months, the Shanghai-London rate rapidly declined from 1s, 2⁄4d. to around 8d, at which it has been maintained with moderate fluctuations since June last year until the present.
Although receiving no direct support from the Chinese Government, the Chinese national currency in North China, after an initial uncertain period, maintained its external value close to the Shanghai equivalent. Successive decrees by the provisional Government of Peiping that the national currency would circulate at increasingly heavy discounts as compared with the notes of the Federal Reserve Bank were ineffective, and the national currency remains at a premium. Considerable uncertainty has been caused, however, by a further decree prohibiting, as from March 11, the export of certain goods, which together constitute a large proportion of the total shipments from North China, unless financed through the Yokohama Specie Bank, Ltd. on the basis of 1s. 2d. against Federal Reserve Bank notes. Exporters have been allowed up to April 10 to complete existing contracts on the old basis, but there can be little doubt that the strict enforcement of the decree will bring about a complete stoppage of foreign trade in North China, which, if long continued, could only result in the closing down of many foreign concerns in Tientsin and other northern ports.
The maintenance of a stable currency in China is of the utmost importance to British trade, and the announcement made in Parliament on March 8 by the Chancellor of the Exchequer regarding the formation of a Currency Stabilization Fund of £10,000,000, in which this Bank will participate under the guarantee of H.M. Treasury, will doubtless be welcomed as a means toward this end. Unfortunately, this fund will not influence, except indirectly, the position in North China which, Í understand, forms the subject of vigorous protests addressed to Japan by the Governments of this country and of the Jnited States of America and France, The fact that, as already stated, the rate of exchange in the Shanghai market has been maintained on a relatively stable basis since June last, with only moderate and intermittent support, gives reason to hope that, in spite of the many uncertainties of the the Stabilization Fund will prove successful.
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Text read from the printed page and cleaned; old type leaves the occasional error.