An explanation of the withdrawal of support for the Chinese National dollar by the Anglo-Chinese Stabilization Fund was given by authoritative circles to Reuter today. The explanation is—"As is generally known, during the past few weeks there, has been no pressure on the- Stabilization Fund, and confidence in the National currency remains unshaken, "The Control, however, temporarily withdrew its support on Wednesda, to allow the exchange value of the dollar to' be adjusted to a better economic level, and thereby bring the balance of trade into equilibriuro.
"As will be remembered, a similar step was taken in June, 1998, ana, when the level of 8d. was found, it was successfully maintained for a period of twelve months.
"It is confidently believed that a new level has now been found, and can be strongly maintained.
"Many goods previously" imported are now being made at home' A favourable harvest is foreshadowed by reports which will also contribute to reduced imports.
"Arrangements have been completed so that Government requirements of foreign exchange for munitions and other supplies can be taken care of and will not come on to the exchange market.
Finally, as the stabilization fund is strengthened, and further efforts to broaden the basis of this fund have been successful, the ability of the authorities to maintain exchange will not be questioned, "It is further emphasized that, despite the present adjustment of the exchange level, the national currency will continue of retain the confidence of the people because its free convertibility gt all times is assured."—Reuter "The Times" Comment London, June 7.
Commenting on the ' Chinese Stabilization Fund's withdrawal of support of the Chinese dollar at the rate of 8X. "The Times," under City Notes, ridicules the rumours that the fund has lost the, greater part of. its sterling resources.
However, "The Times" goes on, it has clearly been found that the demand for foreign exchange against dollars, at the recent rate of 8%d., has been too large to be met indefinitely, and it seems that the fund, rather than lower the rate by a fixed amount, has decided to withdraw from the market temporarily and allow the rate to find its own level.
In due course, the journal adds. the fund doubtless will step in and fix a new peg at a lower rate and, in the meantime, operate as may be necessary in order to prevent any excess sively violent fluctuation.
However, in the case of a country like China, "The Times" concludes, the value of a definitely fixed rate is naturally considerable, and it is likely that the peg will be reintroduced as soon as possible.
Text read from the printed page and cleaned; old type leaves the occasional error.