Foreign Relations of the United States: Diplomatic Papers, 1944, China, Volume VI

893.515/11–2944: Telegram

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

Chungking, November 29, 1944—8 a.m.
[Received 2:48 p.m.]

1918. Chungking financial market reacted violently during week ending November 25 to continued Chinese defeats in South China with open market quotations for U. S. and Indian currency notes, Chinese Government U. S. dollar savings certificates and bonds, and gold bullion temporarily rising to unprecedented heights. Some degree of confidence was regained by week’s end, allegedly because of reassuring statement by General Wedemeyer²² that great effort would be made to hold Kunming, but several Chinese bankers anticipate that further reverses might cause repetition of what they termed a panic.

Factors for sudden rise in rates for U. S. currency notes (peak CN dollars 680 to U. S. dollars 1) and for gold bullion (peak CN dollars 36,000 selling per ounce ⅟₃₂ kilogram) were said by bankers to include:

(a) Desire of local wealthy Chinese to convert fapi into more stable and portable media for hoarding and possible evacuation;

(b) large-scale operations by speculators who have recently lost interest in financing hoarding of commodities owing to stability in prices;

(c) heavy demand from occupied areas; and

(d) continued purchases by Chinese proceeding abroad.

Foregoing also said responsible for increased demand at higher prices of Chinese Government U. S. dollar savings certificates and bonds.

Factors causing decline in quotations by week’s end said by bankers to include:

(a) General Wedemeyer’s reassuring statement;

(b) false reports circulated, assumably by large speculators, of American landings on China coast and

(c) tightness of money market caused in part by losses sustained by speculators attempting to cover forward positions.

Flurry in financial market did not affect commodity price structure; for rice, beef and pork remained stable while eggs advanced, but this attributed to shortage. Prices for local commodities purchased by U. S. Army showed no marked change during week. Dehoarding during week resulted in increase in variety and quantity of consumer goods offered for retail sale. Prices for American vitamins and sulfa drugs declined moderately.

In spite of decline in rates for U. S. currency notes November 20 to 27 (from 540 to 470 for large denomination notes and 528 to 450 for small notes), quotations for rupees remained unchanged at 150 to 156. Quotations for Chinese Government U. S. dollar savings certificates dropped slightly from 385 to 1 on November 20 to 350 to 360 November 27, while quotations for large (500–1,000) Chinese Government U. S. dollar bonds held firm at about 240 to U. S. dollars 1.

United Clearing Board reportedly attempted last week obtain fapi at 370 per U. S. dollars 1 but transactions were said limited because rate deemed too high.

Rise in gold bullion open market selling price attributed to speculative buying, partly for hoarding, resale to occupied areas and to rumors of new advance in official selling price. While latter remained at CN dollars 24,000 (including 20% surcharge in form of compulsory purchase rural welfare savings certificates), open market selling quotation increased from CN dollars 31,500 November 20 to 34,000 November 27.

Tightness Chungking money market said by Chinese bankers responsible in part for decline in present demand or [for?] U. S. and Indian currency notes and slack demand for above-mentioned U. S. dollar savings certificates and bonds. Interest rate for short term commercial loans advanced from 8.4% per month November 20 to 9% November 27.

Local press reported developments in financial market factually, and urged increasing official gold selling price to curb speculation by absorbing floating capital.

Atcheson

22. Maj. Gen. Albert C. Wedemeyer, Commanding General, U. S. Forces in China Theater, and concurrently Chief of Staff of China Theater.