893.5151/10–446: Telegram
The Ambassador in China (Stuart) to the Secretary of State
Nanking, October 4,
1946—9 a.m.
[Received 8:30 p.m.]
[Received 8:30 p.m.]
1588. From Adler for Secretary of Treasury. Left for Shanghai September 28. Returned October 2.
- 1.
- In long talk with me on September 30 Pei expressed his profound concern over exchange and financial situation. See also Embtel 1445 of September 10. Central Bank in last 7 months has provided market with US dollars 159 million net of exchange cover and the Government [Page 1011] with US dollars 41 million to finance its purchases and expenditures abroad. In addition it has sold well over 1 million ounces of gold, so that its net loss of foreign exchange and gold since beginning of March is close to US dollars 250 million. Since adjustment in exchange rate on August 19 Central Bank has lost US dollars 50 million in provision of exchange cover to market, US dollars 16 million in exchange granted to government agencies, and over US dollars 20 million in sale of gold to public. Pei confessed that rate of deterioration rapid and that basic lack of confidence in Chinese currency cannot be remedied in existing fiscal situation, which is of course immediately dependent on military-political situation.
- 2.
- Sterling, which until mid-September was being traded in at cross-rate of 3.50 to 3.60, is now approximately at par with US dollar. There were rumors in Shanghai market that British were going to appreciate sterling before meeting of Board of Governors of International Monetary Fund, but Pei believes main factor in improvement of sterling in Shanghai market is speculator’s flight into foreign currencies, including sterling. [Adler.]
Stuart