033.1100 Rogers, James H./82: Telegram
The Ambassador in Japan (Grew) to the Secretary of State
[Received July 11—8:25 a.m.]
155. For Morgenthau from Rogers. Your cable 116, July 9, 2 p.m.21 Silver drain from Shanghai small but persistent. Effect to date is apparently negligible except that resulting rumors of silver embargo, higher silver export tax or Chinese dollar devaluation have added to the uncertainties created by the recent indefinite silver price-rising program in United States and have had slightly unsettling effect on Chinese trade. So far am unable to ascertain significance gold export but apparently not serious.
In Japan effects are nil.
From conversations with Finance Minister Kung in Peiping June 27 I think immediate protective action by Nanking Government is unlikely unless silver outflow increases considerably but if drain persists eventual increase in silver export tax is not improbable in spite of resulting enhanced smuggling difficulties foreseen.
Because of practical impossibility of enforcement, silver embargo by Nanking Government will be avoided if possible although provincial embargoes may increase. Also silver dollar devaluation rumors here unfounded. In a chaotic money system like that of China the difficulties would be very great and are appreciated by the Finance Minister.
Increased silver outflows from China seem to me probable if price is further raised and not unlikely if present price is maintained. Yesterday’s rates in Shanghai yielded 6 percent profit on shipments to New York after export tax and further early shipments were tentatively in prospect.
Apparently the very favorable reception of President’s silver message and ensuing legislation which brought temporary stability to Chinese exchange at a rate considered constructive by leading Chinese business and banking interests has been considerably tempered by recent rises in silver price, wider exchange fluctuations and more persistent silver outflow. [Rogers.]
- Not printed.↩