893.51/7700: Telegram

The Chargé in China ( Atcheson ) to the Secretary of State

1184. I have been informed in confidence by an official of Cabinet rank that the average monthly rate of currency expansion for the current year (which in China closely reflects the rate of inflation) has reached over 3 billion Chinese dollars, that is, expansion is now at the rate of approximately 40 billion Chinese dollars per annum as compared with an average monthly rate of a million [billion?] and a half or slightly over 19 billion dollars annually for 1942. This represents an increase of some 50 percent and exceeds the budget estimate of 1943 of 36 odd billion dollars expenditure.

If the 1943 estimate of receipts of 23 odd billion dollars were correct, the increase in note issue should more than cover the budgetary deficit even with the continuing general rate of the rise in costs of materials, food and services of approximately 10 percent a month. However, according to several sources, the revenues for this year will not exceed 15 billion dollars and while the preliminary budget estimate for the 1944 calendar year contemplates no greater revenues the estimated expenditures will possibly be about double those for 1943 or some 73 billion dollars. The gap between revenues and expenditures in 1944 may accordingly be expected to increase by 200%. Incidentally Kunming reported that during May and June NB bank notes having a face value of $5,001,200,000. [and?] $4,424,000 respectively were imported into China.