102.1/9–1747: Telegram
The Ambassador in China (Stuart) to the Secretary of State
[Received September 16—11:29 p.m.]
1942. To State and Treasury from Adler. Foreign exchange assets of Central Bank middle of last week around U. S. $260 million. While Central Bank has gained a little foreign exchange since introduction of new exchange regulations, amount involved so far quite small and much less than gains in comparable period after introduction of emergency regulations in mid-February. Both in Shanghai and Tientsin which I recently visited there was a movement of goods which had been accumulated for export in anticipation of exchange adjustment, but there is little sign of restoration of export trade to anything like normal basis. In Tientsin black market rate already over 20 percent above open market rate; this spread is greater in Tientsin than in Shanghai due partly to 7 percent remittance charge on funds between Tientsin and Shanghai, partly to greater political insecurity of North China, and partly to fact that Tientsin, Peiping and Tsingtao more overtly on U. S. dollar basis than Shanghai as a result of previous presence of U. S. armed forces in Tientsin and Peiping and presence of U. S. Navy in Tsingtao. Prices of export goods, which have moved up substantially since exchange adjustment, generally tend to move with black market rate.
- 2.
- Inward remittances in last few years have been diverted from regular banking into black market channels, and as a consequence impact of exchange adjustment on appointed banks receipts of overseas remittances will take some time even if spread between open market and black market rates remains narrow. Central Bank hopes to divert remittances from black market in Hong Kong and Canton by agreements with Hong Kong authorities and by abolishing remittance charges on funds between Shanghai and Canton.
- 3.
- Current sharp upward contra-seasonal movement of prices is due partly to fact that stabilizing influence of Wedemeyer Mission’s presence acted as a brake on prices during July and August, partly to [Page 1190] reported military requisitioning of food supplies becoming available from current crop, and to rumors in connection with Liu Po-cheng’s raid toward the middle Yangtze valley. [Adler.]