HANGHAI yesterday faced another financial difficulty, comparable to the period of the introduction of "Wei Wah" cheques in 1937, when, acting on instructions from the Ministry of Finance in Chungking, local Chinese banks declared a partial moratorium and announced that henceforth no sums exceeding $500 in cash weekly will be paid to depositors.
Sums exceeding this amount will be paid in "Wei Wah" cheques circulated among the banks for clearing accounts.
The purpose of this order, it was stated, is to discourage people from buying foreign exchange and to prevent the flight of capital.
As a result of this order, which affects the Chinese banks only, there was considerable reaction on the foreign exchange market, and wide fluctuations. The interbank market was thrown into a state of intense excitement, and some banks, having bought cash to cover yesterday's commitments, were slightly e barrassed by non-payment by Chinese clients and had to sell for cash.
This caused a sharp movement in foreign exchange quotation and business was done for' cash at 7d. m sterling and 13% in USS. forward rates following at sth sterling and U.S.$. discount for June and about sterling and % U.S.$. further discount for July. After the cash position for the day was adjusted, there was a sharp decline and the market closed with sellers at:—6}i sterling and 1234 U.S.$. cash.
In some quarters Great Britain was blamed for the conditions which sent. The previous order provided that money deposited with banks prior to the outbreak of hostilities could be taken out only in weekly instalments of $150 each.
Chinese bankers held two more meetings in the morning at 9 and 11.30 o'clock, Apart from deciding to carry out the ministerial order in full they resolved upon a number of questions mostly affecting Chinese business men. It was decided that cheques issued by Chinese banks here before yesterday will be cashed according to the new order, but that those who deposited money yesterday would not be affected by it. A cable was sent by the bankers to the Ministry explaining that although bankers here would faithfully carry out the new order they cabled to Chungking expressing the hope that they would be adequately supplied with enough legal tender notes for circulation. gave rise to the necessity for the Chinese banks' action, but it pointed out that lock up of capit in commodities and the heavy purchases of foreign currency are the real causes. The Chungking order caused great uneasiness in Chinese circles, but during the day when the situation became more clarified it was stated that the new order will help China's war-time finances, and will bring the foreign exchange situation more in favour of China by restricting the circulation of Chinese national currency.
Text read from the printed page and cleaned; old type leaves the occasional error.